The United States has written off one-hundred percent of Iraq's debt to the U.S. -- over four-billion dollars. Secretary of State Colin Powell said, "Lifting the crushing burden of the old regime's debt is one of the most important contributions we can make to Iraq's new beginning."
Iraqi Finance Minister Adil Abd al-Mahdi said that Iraq had been a donor nation in the early 1970s. But, he said, "Over two decades, all the fortune and wealth of Iraq were destroyed. Instead of having billions of reserves, Iraq was left with billions in debt." Mr. al-Mahdi blamed the former regime of Saddam Hussein for wasting Iraq's wealth in wars with its neighbors.
U.S. Treasury Secretary John Snow said, "The situation that Iraq faces is unprecedented, and the response of the world community needed to be unprecedented as well." He said debt relief is necessary if Iraq is to reintegrate itself into the world economy.
The agreement to write off Iraq's debt to the U.S. follows a decision by the Paris Club of creditor nations to forgive eighty percent of Iraq's debts –- a total of about thirty–two billion dollars. The Paris Club includes the U.S., Japan, Russia, and other European countries.
The lifting of the debt burden will enable Iraq to use its oil revenues to rebuild infrastructure. Omar Arafat is with Baghdad's Economic Administration Institute. He says economic growth will bring political stability:
"The chaos -- and I think the security issue -- is not the first issue. I think the economic issue is the first and then the security. Poverty makes you think, let's say, not in a good way. Always, if you have someone without a job, without money in his hand to pay for the schools, to pay for his children, he'll go the other way, the way of violence. But I think the economic issue is the first issue. They have to resolve it." Iraq's signing of a debt relief agreement with the U.S. and others is only part of the process of rebuilding. As Secretary of State Powell said, "In the coming months and years, the United States will continue to stand by the people of Iraq and the elected government that will soon speak on their behalf after the elections next month."