Iraq is heading for economic meltdown under the weight of its $ 310 billion international debt and reparations bill.
Attempts by the International Monetary Fund to reduce it are insufficient and will block Iraq's long-term reconstruction. Financial meltdown could come despite increased oil revenues.
The stark warning comes from Jubilee Iraq, an offshoot of the Jubilee Debt Campaign. It says Iraq owes $ 135bn in loans dating back to its war against Iran in the 1980s. The country owes another $ 175bn in reparation payments for damage inflicted on neighbouring countries during its 1990 invasion of Kuwait.
'Even with the best deal rich countries are likely to offer Iraq, its debt will still exceed the country's health and education budget and will devastate a country that is desperately poor and in danger of civil war,' said Justin Alexander of Jubilee Iraq. 'Quite apart from the injustice of requiring Iraqis to pay debts incurred by Saddam it is economically crazy to expect the repayment of so much because it will send the country into a tailspin.'
The IMF is due to publish a debt plan for Iraq next month. It is expected to demand widescale privatisation of Iraq's energy industry and public services in return for write-offs.