Since 2003, the Iraqi government has sought to address the issue of Iraq’s external debts inherited from the former regime, which at that time were estimated at more than 130 billion U.S. dollars. The Ministry of Finance and the Central Bank of Iraq were tasked with this mission and took upon themselves the responsibility of finding ways to reduce the size of these debts and their direct impact on the state’s general budget.

To succeed in this effort, the Ministry had to rely on international financial institutions (the International Monetary Fund and the World Bank) and the expertise of external advisors (financial, legal, and accounting) to develop the necessary legal, financial, and accounting mechanisms for settling these debts. It also sought to leverage the sympathy of the international community with Iraq, especially after it emerged from its ordeal in 2003, by engaging in efforts to rebuild infrastructure and repair the destruction caused by the war.

This policy bore fruit through negotiations with the International Monetary Fund and the signing of several support agreements designed for post-conflict states. These agreements helped pave the way for negotiations with the Secretariat of the Paris Club and ultimately enabled the Iraqi government, through its negotiating delegation, to sign the Paris Club Agreement with its member states. The agreement granted Iraq an 80% reduction (write-off) of its debts.

In parallel, at the Madrid Conference, Iraq secured assistance from a number of countries in the form of loans and grants as part of their contribution to and participation in Iraq’s reconstruction.

The signing of the Paris Club Agreement on 21/11/2004, along with Iraq’s receipt of a number of loans and grants during the Madrid Conference, led this Ministry to establish an independent directorate tasked specifically with following up on the Paris Club Agreement, settling amounts arising from bilateral agreements signed with other countries, entering debt information into a database, and ensuring its continuous update.

The directorate was also assigned the responsibility of monitoring the implementation of loan and grant agreements and obtaining the proper legal approvals for their ratification.

In addition, it was charged with scheduling and repaying both old and new domestic debts, issuing treasury bills, and handling all legal matters related to the settlement of Iraq’s external debts, including presenting legal defenses against lawsuits filed abroad against the Iraqi government concerning external debt.

Activities of the Public Debt Directorate During 2017

In implementation of the General Budget Law for the fiscal year 2017, particularly in the area of financing the budget deficit, the Public Debt Directorate undertook borrowing from domestic and external sources, including cash loans to support the budget and project financing loans. Below is a summary of the most important financing sources for 2017:

– Cash Loans: This includes both domestic and external cash loans, detailed as follows:

Domestic Loans

Issued national bonds worth 1,000 billion Iraqi dinars at an interest rate of 8%.

Issued contractor bonds worth 1,180 billion Iraqi dinars at an interest rate of 5%.

Issued treasury bills through commercial banks worth 2,356 billion Iraqi dinars, distributed across 11 auctions during 2017.

External Loans

Obtained budget support loans from the IMF worth 858 million USD on 3/8/2017, from the Japan International Cooperation Agency (JICA) worth 277 million USD, and from France worth 452 million USD.

Issued external bonds in two tranches: the first worth 1 billion USD on 18/1/2017 at an interest rate of 2.14% guaranteed by USAID, and the second worth 1 billion USD on 3/8/2017 at an interest rate of 6.75% without guarantee.

– Project Loans: These include loan agreements signed to finance projects for various ministries, particularly infrastructure. Such loans are characterized by concessional terms regarding maturity and interest rates. Most agreements were signed with countries and international institutions during 2017, including:

1- JBIC Loan: Signed on 27/3/2017, valued at 500 million USD, for electricity projects.

2- JICA Loan: Signed on 5/8/2017 to rehabilitate the Hartha Thermal Power Station, along with an agreement for the Third Phase of the Electricity Rehabilitation Project.

3- KfW Loan: Framework agreement signed on 14/2/2017 for 500 million euros, with the first loan worth 45 million euros signed on 23/11/2017 for the Ministry of Electricity.

4- Swedish Loan: Framework agreement signed on 13/12/2017 for 500 million USD; six loan agreements signed on 31/12/2017 worth 123 million USD for Ministry of Electricity projects.

5- Italian Loan: Signed on 14/8/2017 for 100 million euros to rehabilitate the Mosul Dam.

6- World Bank Loan: Signed in December 2017 for 400 million USD to reconstruct liberated areas.

7- UK Export Bank Loan: Signed on 29/12/2017 for 230 million USD for the Ministry of Electricity.

8- SACE (Italy Export Credit Agency) Loan: Signed on 29/12/2017 for 199 million USD for the Ministry of Electricity.

– Public Debt Management Section

1- Prepared the Public Debt Bulletin for 2016 and published it on the Ministry of Finance website.

2- Developed the Public Debt Strategy in cooperation with JICA and published it on the Ministry’s website.

3- Coordinated with international credit rating agencies (Fitch and Standard & Poor’s), resulting in Iraq receiving a credit rating of B- with a stable outlook.

– External Debt Section

1- Reached a settlement with Brazil’s Petrobras by repurchasing debt at 10.25% of its total claims of 113 million USD.

2- Reached an agreement to reschedule Iraq’s obligations to the Arab Fund for Economic and Social Development totaling 140 million USD.

3- Reached debt settlement agreements with Morocco and Pakistan, pending approval by both governments.