Egypt and Iraq move to settle debt

Egypt may be nearing an accord with Iraq on hundreds of millions of dollars of debt built up during the reign of the Iraqi leader Saddam Hussein.

The two countries still have widely divergent estimates of what Egypt is owed by Iraq - Egypt says it is more than US$1.5 billion (Dh 5.5bn), while Iraq estimates it to be about $800 million - but an Egyptian official says the two sides are inching closer a resolution.

Numerous countries, including the UAE, have forgiven debt accumulated during Saddam Hussein's 24-year tenure as Iraq's president.

He was ousted after the US-led invasion of the country in 2003.

"We have indications that there is confirmed intention [by Iraq] to resolve this issue, and we hope to reach a quick settlement," Ahmed Aboul Gheit, Egypt's foreign minister, who is visiting Iraq, said at a news conference with the Iraqi foreign minister, Hoshyar Zebari.

Mufid Shehab, Egypt's minister for parliamentary and legal affairs, said in 2007 that Iraq owed almost $1.6bn - $553m to the Cairo government, $222m to Egyptian private firms and $784m in damages to Egyptian workers, while Bayan Jabr Solagh, Iraq's finance minister, put the figure at $800m.

The claims for damages stem from Saddam Hussein's expulsion of hundreds of thousands of Egyptians after Cairo supported the US-led coalition that ousted Iraqi forces from Kuwait in the 1991 Gulf War.

Mr Aboul Gheit also referred to military debt as an outstanding issue but did not provide further details.

Nuri al Maliki, Iraq's prime minister, is "very interested in resolving this significant issue and to close this file", Mr Zebari said of the debt, adding that to do so would take "a political decision".

Mr al Maliki's priority is the compensation owed to Egyptian workers as it was "a humanitarian file", he said, adding that two joint committees were working to resolve the debt issue.

Mr Aboul Gheit congratulated Baghdad on its new government, which parliament approved last Tuesday after more than nine months of political deadlock.

During his visit to Iraq, the Egyptian minister is due to inaugurate Egyptian consulates in Erbil, an Iraqi-Kurdish region in northern Iraq, and in the southern port city of Basra.

As it works to resolve the debt issue with Iraq, Egypt's government is struggling to control prices investors pay for its own debt.

The country's central bank has cancelled an auction of 91-day Treasury bills that it originally planned to issue tomorrow.

The central bank gave no reason for the cancellation, which is not uncommon, but Treasury dealers said they believed offers for the paper might have come in too high.

"They didn't come into the range [the bank wanted]," one dealer said.

* with agencies