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Last Updated: Tuesday, 3 January 2006, 14:30 GMT
Iraq returns to financial markets
Workers at an Iraqi oil facility
Oil exports fell almost 5% in 2005
Iraq is preparing to borrow money to repay some of its creditors.

A $2bn (1.16bn) bond issue would mark Iraq's return to the global financial markets after years of sanctions.

Banks and foreign groups have agreed to cancel between 80% and 87.5% of the $20bn debts owed them in return for partial repayments.

The bond would "extinguish the claims of most large private sector creditors on Iraq", finance minister Ali Allawi told Reuters.

"It will fulfil a major goal of the interim government," he said.

The return on the 20-year bond will be 5.8% a year, Mr Allawi said, adding that it would be traded in Europe.

Weak oil revenues

Much of Iraq's debts date from the 1980s, when the country's war with Iran drained its oil rich economy.

That economy is now on the mend, though the country's crude oil exports fell 4.7% during 2005, compared with 2004, an oil official who asked not to be named for security reasons told Dow Jones.

A potent cocktail of bad weather, power cuts and technical problems, as well as inadequate investment and extensive sabotage, have hampered Iraq's efforts to quickly bring oil revenues back to levels seen prior to March 2003.

In December 2005, the country's daily exports of 1.1 million barrels of oil per day was just half its pre-war level of 2.2 million barrels a day.

In 2005 as a whole the country exported on average 1.41 million barrels a day, down from 1.48 million barrels a day in 2004 and well below expectations of 1.7 million barrels a day.

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