Overview Of Saddams Debt

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• OverviewOf Saddams Debt

Berlin, 16th March 2004 Justin Alexander, Jubilee
Iraq
www.jubileeiraq.orgjustin_at_jubileeiraq.org44
7813 137171
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The eight key questions

• The debt
• How much is claimed?
• What are its origins?
• How much is legitimate?
• What are the interest rates?
• How will tackling debt affect Iraqs future
  creditworthiness?
• The economic context
• How big will Iraqs budget be?
• What are its domestic needs?
• What are its other external obligations?

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Claims and uncertainties

• Key figures
• 42.1bn (ex-Gulf, ex-interest) presented to UN by
  Iraq in 1990.
• 65bn Gulf (30bn Saudi, 27bn Kuwait, 4bn
  Qatar, 4bn UAE)
• 100bn Iranian reparation claim.
• Uncertainties in figures quoted
• Dollar fluctuations.
• Just principal or including interest?
• Undeclared creditors (Egypt?).

IMF report 8 months overdue
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Origins of claims

• Iran-Iraq war (1980-88)
• Guns and Butter policy
• 1981-85 oil revenues 48bn,
• but military spending 120bn

• Sanctions (1990-2003)
• No debt service ? interest and arrears
• 351bn of reparations claims
• 18bn paid from Oil-for-Food

1980
1990
2000

• Saddam invades Kuwait
• 3bn annual debt service
• One reason for the invasion

• Saddam overthrown
• 1.45bn reparations paid
• Creditors press claims
• Search for a solution

• Saddam President
• 36bn assets in 1979
• no long term debt

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Regional and international comparisons
2004 GDP 19.5bn (WB estimates 17-22bn) 2004
Exports 12bn (Iraqi Finance Ministry)
Regional
Best (Paris Club)case is still bad
International
2007 GDP 40bn (JA) 2007 Exports
19.3bn (Iraqi Finance Ministry) 66 Debt
reduction
But are these reallyIraqs peers?
Source for other country data EIU, Country
Report 2003/2004
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Regional and international comparisons
Best case GDP40bn Exports19bn Debt -66
Best case (in Paris Club)is still very bad
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The context
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The social and economic context

• Health (children under 5yrs)
• Mortality 131 per 1000 (compared to 50 in 1990)
  so over 100,000 die annually, 70 from
  preventable disease such as diarrhea and
  respiratory infections.
• 7.7 had acute malnutrition (actually wasting
  away) in May 03, compared with 4 in Feb 02.
• 32 chronically malnourished (only slightly
  lower than Ethiopia)

Source UNICEF

• Economic
• Reconstruction needs 55bn (WB/CPA), 90bn
  (McKinsey)
• Unemployment 50
• Living below the poverty line 60

Source MEES, Jan 03
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Cash flow
The worst-case scenarios - total obligations of
more than 40 billion at 9 interest - leave no
funds in the Iraqi budget for capital investment
and produce substantial shortfalls in the
government's ability to meet its day-to-day
operating expenses (Congressional Budget
Office , Jan 04)

• Budget (2004)
• Health budget 947m
• Education budget 544m
• Reparations 5 oil revenue, 600m
• Total expenditure 13.4bn
• Debt service
• Allowance in Iraqi (2004-07) budget only 200m
  per year
• After 66 reduction in Paris Club interest is
  1.4 - 4.1bn (depending on whether interest rate
  3 - 9) plus 2.3bn principal

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Whats our target?
any plan that does not include reparations, and
that results in Iraq owing more than 35bn
overall, is unwise (CSIS)
Iraq's debt stock would need to fall by 90 to
14bn for its interest service burden to compare
with the median for sovereigns rated B (James
McCormack, Fitch Ratings)
Best case Paris Club
90 of Iraq's potential, virtual debt is
war-related (Marek Belka, former Polish Finance
Minister, organiser of Madrid donor conference)
15bn
25bn
35bn
Odious debttribunal
45bn