Thursday, May 10, 2007

 

Iraqi government to settle debt with Turkish bank

Turkey, Finance
(Zaman) - The Iraqi government has taken a constructive step in efforts to settle its YTL 2 billion ($1.5 billion) in debt to Turkey's Central Bank, nominating US accounting and consulting firm Ernst & Young to negotiate its amount outstanding with the Turkish Treasury. As the central bank's biggest partner, the Treasury is dealing with the collection problem in the name of the bank and has also enlisted the help of the UN towards this goal.
The debt began accumulating before the US invaded Iraq in 1991. In accordance with commercial agreements between the two countries before the first Gulf war, the Turkish Central Bank was proceeding with payments to Turkish exporters and contractors that do business in Iraq. The funds expended were later collected from the Iraqi government. The system was working smoothly until it broke down after the US invaded Iraq 16 years ago. Iraq has been unable to pay the remaining debt since then due to internal disorder created after the war.
The Iraqis’ debt to the Turkish Central Bank is equal to 31 percent of the bank’s annual expenditures. Although the bank is making allowances to hedge the risk for bad debts, it has not made any provision for receivables from Iraq since 2002, when it adopted international accounting standards.
The state-owned Turkish Pipeline Company (BOTAق) is also owed a significant sum by Iraq, totaling as much as $900 million. This debt stems from transportation costs through the Kirkuk-Yumurtal‎k oil pipeline. BOTAق officials say they are waiting for the Iraqi government to settle its debt with the government since there is no appropriate authority to deal with the problem.

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