updated 2/8/2006 6:32:50 PM ET 2006-02-08T23:32:50

Afghanistan on Wednesday hailed decisions to cancel the impoverished country's debts to the United States, Russia and Germany, but the country likely will remain dependent on foreign aid as it recovers from decades of war.

Afghanistan owed $108 million to the United States and $44 million to Germany from loans before the 1979 Soviet invasion. Russia claimed it was owed about $10 billion from loans to a puppet communist government in the early 1990s.

"After 30 years of devastation, we are starting from nothing and any move such as this helps the reconstruction of Afghanistan," said Khaleeq Ahmed, a spokesman for President Hamid Karzai.

The Bush administration said Tuesday it will forgive the entire debt, following a similar pledge from Russia on Monday and from Germany at a donors conference last week.

Even with the loans forgiven, Afghanistan looks set to remain reliant on years of foreign aid. More than 90 percent of the government's $4.75 billion budget in 2005 was financed by international donors, and Karzai has said his government will need propping up for about a decade.

The International Monetary Fund's representative in Afghanistan, Joshua Charap, said that even by 2010, Afghan government revenues are expected to cover less than two-thirds of total expenditures.

Charap said the removal of the foreign debt would allow Kabul to "normalize its credit rating," paving the way for new loans.

Nearly a third of government spending this fiscal year has been on its new army and police amid rising crime and the Taliban-led insurgency. The hard-line Islamic militia was ousted from power in 2001 by a U.S.-led invasion.

More than 1,600 people have died in the past year as militants have stepped up attacks. About 20 suicide attacks have been reported across Afghanistan in the past four months.

"The government and people of Afghanistan are working diligently to build a sustainable market economy despite many challenges," State Department spokesman Sean McCormack said Tuesday.

The United States plans to give $1.1 billion in aid next year. There also are about 19,000 American troops in Afghanistan, but President Bush has said he plans to cut that force to 16,500 this year as a NATO force expands.

Russia said it would write off $10 billion it says is owed by Afghanistan if the country fulfills the requirements of a World Bank program aimed at reducing poverty and takes steps to develop economic and trade ties with creditor nations.

Karzai's government has not recognized the debt to Russia, which dates back to the Soviet era.

The Soviet Union had close ties with Afghanistan and invaded the country in 1979, installing a pro-Moscow Communist government. The decade-long occupation ended with a withdrawal of Soviet forces in 1989 under relentless pressure by U.S.-backed anti-communist mujahedeen rebels.

The German announcement came at a conference last week in London where nearly 70 nations and international bodies pledged $10.5 billion to help Afghanistan fight poverty, improve security and crack down on the drug trade.

The nation is the source of nearly 90 percent of the world's opium and heroin.

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