Iraq plans to issue letters of credit (L/Cs) to partially finance the costs of two giant electricity contracts.

The L/Cs under the contracts signed with Germany's Siemens and General Electric (GE) of the US are seen as a better choice of financing tool than a treasury bond.

Speedy delivery

According to an Iraqi government spokesman, the aim of the L/Cs is to speed the delivery of much needed power projects.

Iraq suffers huge electricity shortages and last year signed a 1.5 billion euro deal with Siemens for 16 gas turbines and a US$3 billion deal with GE for 56 turbines

L/Cs preferred

An L/C for Siemens would be for 890 million euros while L/Cs for GE would be for 576 million euros and US$248 million dollars.

Iraq chose L/Cs to partially finance the projects after the central bank expressed reservations about using a treasury bond to raise funds for the gas turbines.

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