Iraq has agreed to forgive 80 percent of the loans it made to Madagascar in the era of ousted dictator Saddam Hussein, the government said on Wednesday.
Madagascar will still have to pay about $47 million out of a total of $234.5 million, in twice-yearly installments over seven years, the government said in a statement on its website.
Debt deals by cash-strapped Iraq since the 2003 U.S. invasion have more usually involved money it owed to other countries or foreign creditors.
Over the past five years, about $66.5 billion of Iraq's overall $120.2 billion foreign debt has been forgiven. The Paris Club informal gathering of foreign creditor countries canceled $42.3 billion, including Russia's $12 billion.
In November the Iraqi government sealed a deal to slash its $8.47 billion debt to China by 80 percent.
Iraq is also trying to persuade Gulf neighbours to forgive its debts, including billions still owed in reparations to Kuwait for Saddam's 1990 invasion of Iraq's small neighbour.
Iraq sits on the world's third largest crude reserves, but decades of war, international sanctions and economic decline have starved it of money when it desperately needs to rebuild after years of sectarian bloodshed set off after the invasion.