Sofia settles Iraq debt

SOFIA – Bulgaria will get from Iraq $360 million of the $1.86 billion it is owed in a cash settlement by June next year, Finance Minister Plamen Oresharski told reporters yesterday. «Bulgaria is the first country to achieve a debt settlement (with Iraq) through a one-off payment in cash,» he said at a news conference. «The payment should be carried out in the first half of 2008.» Oresharski said the agreement was reached after two years of negotiations aimed at recovering 20 percent of the debt owed by Iraq and forgiving the rest. The new European Union member said the agreement was in line with the arrangement by the Paris Club of rich creditor states to write off 80 percent of the $39 billion Iraq owed its members. Oresharski said no other country has managed to recoup more than 20 percent of Iraqi debt and most have agreed to payments in 23-year government bonds with a six-year grace period. «I believe we chose the best option and hedged the risks arising from the bonds themselves, as 23 years is too long a period,» Oresharski said. For the purposes of the settlement, the Iraqi authorities agreed that its debt to Bulgaria be $3.51 billion, while Bulgaria accepted a direct payment of 10.25 cents per $1, Oresharski said. «In effect, the Iraqi side agreed to higher interest because of the delays. We could say we are getting one-third of the principal, which is $1.259 billion,» he said. Oresharski said that the debt, accumulated in the 1980s, has not been serviced since 1992 when the United Nations imposed sanctions on Iraq for its invasion of Kuwait. Bulgaria, like other ex-communist Eastern European countries, supplied Iraq with arms and other goods in return for oil during the 1980-88 Iran-Iraq war. In late 2005, Bulgaria’s northern neighbor Romania wrote off $2 billion of the $2.5 billion it was owed by Iraq and appealed to countries outside the Paris Club to follow suit.