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Japan has sealed a deal with Iraq to forgive about US$6.1bn or 80% of the debt it is owed by the war-ravaged country in line with an international accord reached in 2004.

Iraq is saddled with foreign debt estimated at US$120bn, excluding reparations it owes Kuwait for the 1990 invasion and 1991 Gulf War, according to a report by the International Monetary Fund.

The Paris Club of 19 creditor countries, including the US, Japan, Russia and European Union nations, agreed in November 2004 to write off 80% of the money it was owed by Iraq over three years.