Cry for Me, Baghdad.(Iraq's foreign debt)

Back in the late 1970s, Iraq was on a short list of the world's most successful developing countries. Baghdad cafes were bustling with a well-educated professional class that presided over a thriving economy, which has since shrunk from $100 billion to (best guess) perhaps $25 billion. Now Iraq emerges from the war at the top of another list--that of the biggest emerging-market meltdowns ever. It has a debt-to-GDP ratio of 15 to 1, or several times that of Argentina or Brazil at the height of their troubles last year. Like Russia after the Soviet Union, Iraq faces the challenge of turning a corrupt dictatorship into a free- market economy. "Iraq's situation is very, very complicated," says Ian Bannon, head of conflict prevention and reconstruction at the World Bank. "We haven't seen anything quite like it."

In every recent emerging-market crisis, from Thailand to Argentina, the rescue has been hampered by issues of "transparency," which is banker jargon for the tendency of debtors to hide their assets and dodge their obligations. Next to Iraq, however, the other emerging markets are open books. Believable numbers on everything from wages to GDP are as hard to locate as Saddam himself. The World Bank stopped lending to Iraq in 1973, and the IMF did its last economic analysis of the country in 1983. Most nations that default scramble to renegotiate payments, and restore their credibility, in a matter of weeks or months; Saddam had not made a debt payment to creditors in 12 years. "The first thing to understand when talking about the Iraqi economy is that any numbers that are thrown out must be treated with caution," says Jan Randolph, head of economics at London's World Markets Research Centre. That said, the most credible current estimate of Iraqi government debts is $383 billion, dwarfing even Brazil's massive 2001 debt of $226 billion.

The $383 billion estimate comes from a recent report by the Center for International Strategic Studies, a Washington think tank. Coauthor Bathsheba Crocker says Iraq's debt burden is "off the charts. It's fair to say these financial obligations are the largest we've seen." Over half the total comes from ...