World leaders at the Group of Eight summit have failed to agree over how much Iraqi debt they should write off.
Paying off debt may hamper Iraq's rebuilding efforts
However, reports from the meeting in Georgia indicate that at least 50% of Iraq's $120bn (£65.6bn) debt burden will eventually be forgiven.
The G8 said in a statement that cutting the amount of money owed was key to rebuilding the war-torn country.
It will now be up the Paris Club of creditors, which includes Russia and France, to work out the details.
"Debt reduction is critical if the Iraqi people are to have the opportunity to build a free and prosperous nation," the G8 said.
"We will work with each other, within the Paris Club, and with non-Paris Club creditors, to achieve that objective in 2004."
The US, it was reported, had been pushing for almost all of the outstanding money to be written off.
Other countries, including France and Russia, have been more reluctant, saying that Iraq's oil revenues make it more able to repay money than some other countries that are also seeking debt relief.
According to a Canadian official quoted by the Reuters news agency, "a compromise" will be reached.
"The question is whether it's going to be 67% or 95%," the unidentified official said.
On Thursday, the summit's focus will shift to Africa and further discussion of debt relief.
The G8 is made up of the UK, Canada, France, Germany, Italy, Japan, Russia and the US.