As it prepares for privatisation, Iraq's largest bank says it is not responsible for millions of US dollars worth of unsettled letters of credit (L/Cs) run up by Saddam Hussain's administration.

State-owned Al-Rafideen bank had a virtual monopoly of the government's banking business before the US-led coalition took over in Iraq last year and it carries an estimated one-sixth of the country's foreign debt, estimated at around US$120 billion.

No liability

Bankers say the former Iraqi government opened L/Cs that were never settled, and it appears that over US$20 billion of Iraq's debt was accumulated through Al-Rafideen. These debts are technically classified as the bank's liability, but Al-Rafideen's chairman Daya al-Khayoun says the bank should not be held responsible.

"These were owed by the Iraqi state. They should not be regarded as debts of Al-Rafideen," says Khayoun, who reckons the bank that still accounts for 75 per cent of Iraq's deposit base is reforming itself.

"We have started to move toward becoming a for-profit bank after providing free services to the state for years," he says.

Timetable

According to al-Khayoun, the bank will probably be privatised some time during 2005, although he says this is not a certainty.

The US-led coalition running Iraq has said it will not sell off state assets and does not expect this process to begin until 2005, when a new constitution is due to be in place.

Privatisation however looks very likely since there is apparently agreement between coalition and Iraqi officials running the economy that large enterprises should not remain in the hands of the state.

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