Iraq said on Saturday it had won initial assurances for a 60 percent cut in the US$120 billion it owes and urged the world community to back its recovery with US$4 billion in funding for key projects over the next 12 months.

　　"In principle, we have a 60 percent reduction in our debts," Iraqi Planning Minister Mehdi al-Hafedh told reporters at an Abu Dhabi meeting of donor countries that had pledged last year around US$15 billion for the country's reconstruction.

　　One Western official close to the Iraq debt talks said Hafedh's assessment of donor response may have been "too rosy."

　　However, Hafedh, in a later brief interview with Reuters, said that creditor countries had indicated willingness to reduce the debt by 60 percent, even though they had not yet committed themselves or taken any action to wipe out the obligations.

　　Iraq's debt burden has been the subject of sustained lobbying by the United States, which sent special envoy James Baker last year to countries like France, Russia, China, Saudi Arabia and Japan to ask for a reduction.

　　Subsequently, France, Britain, Germany and Japan all promised a substantial cut in debt to Iraq, which is trying to reach a debt reduction deal before a moratorium on payments runs out at the end of the year.

　　Russia, owed US$8 billion in principal and interest, has said it was willing to forgive two-thirds of the amount as long as the cut comes within the framework of the Paris Club of mainly Western creditor nations.

　　Paris Club officials recently said no debt deal can be finalized until there is an internationally recognized leadership in Iraq that can sign legal debt relief papers.

　　Several Gulf Arab countries, who are not members of the Paris Club and are owed about US$45 billion, have said they would consider either a write-off or reduction after an Iraqi government takes power.

　　With US presidential elections in November, the administration of President Bush says it will stick to a June 30 deadline for the handover of power to Iraqis.

　　Iraq's most revered Shi'ite cleric, who opposes the plans to grant sovereignty to an unelected body, has insisted elections take place and said polls should be held by the end of this year.

　　Hafedh asked delegates from 27 donor nations and several aid groups that had pledged about US$15 billion in non-US funds at a Madrid conference in October to consider about 700 projects, including infrastructure, health, and education costing US$4 billion of this money.

　　Donors responded well to Iraq's presentation, Hafedh said at the close of the first session of the two-day conference.

　　"We are truly satisfied with the results of the meeting," Hafedh said, adding that all arrangements governing two trust funds supervised by the World Bank and the United Nations to channel donor money had been agreed.

　　The United States, which has pledged US$18.6 billion in additional funds, made a separate presentation to donors explaining where it was going to spend that amount in Iraq.

　　Admiral David Nash, head of the US agency in charge of disbursing US funds and contracts in Iraq said that by the time a new Iraqi government takes over on July 1 some US$10 billion in US funds will have been committed to specific contracts.

　　The US$4 billion list of projects Iraq presented donors included US$1.8 billion for infrastructure, US$800 million for education, health and job creation.

　　Hafedh called creating employment, "the most essential need."

　　(Reuters)