Switzerland has joined other creditor nations in cancelling 80 per cent of the debt it is owed by Iraq in a bid to help reconstruction efforts in the country.

Iraq has run up total debts of $120 billion (SFr139 billion) over the past few decades.

The State Secretariat for Economic Affairs (Seco) said Switzerland had agreed to write off SFr264 million ($227 million) in debts dating back to the 1970s and 1980s.

After the first Gulf War in 1990 and the imposition of a United Nations embargo, Switzerland ceased trade with Iraq.

The partial debt waiver, details of which will be set in a bilateral treaty between Switzerland and Iraq, is expected to be ready late next year, according to a Seco spokeswoman.

The economics ministry welcomed the agreement by the 19-nation Paris Club of creditor nations to reduce Iraq’s debt as a step towards removing the financial obstacles to rebuilding the country’s economy.

Debt plus interest

Iraq owes Switzerland SFr330 million, including SFr130 million in interest payments.

Officials said the Swiss authorities were considering introducing a state guarantee for exports to Iraq.

Sunday’s compromise agreement by the Paris Club brings to an end a dispute between the United States and France, Russia and Germany.

The US had been pushing for a 95 per cent reduction, while France initially argued for a 50 per cent waiver.

Iraq owes the Paris Club of creditor nations about SFr46.5 billion, which is about a third of its total debt.

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