The US was planning to step up its pressure on the G7 industrial nations yesterday to agree to a generous package of debt relief for Iraq after the decision by the IMF to grant its first loan to the conflict-ravaged country.
Urged on by the US, the IMF agreed to an emergency US$436.3 million loan to help the new Iraqi government rebuild the economy and "catalyze additional international support, including debt relief."
PHOTO: EPA
Finance ministers from the G7 were to meet in Washington last night amid what the fund's managing director, Rodrigo de Rato, called a "very difficult situation." Iraq has debts of US$120 billion but the G7 has been split on how much should be written off. The US and Canada are looking for a 90 percent write-off, while Germany and France are in favor of only a 50 percent reduction.
The fund said it was important to reduce Iraq's debts -- built up under former Iraqi president Saddam Hussein -- to a sustainable level but France and Germany have yet to be convinced that Iraq should be treated differently from other countries that suffered from tyrannical rulers.
Takatoshi Kato, the IMF's deputy managing director, said: "The emergency post-conflict assistance to Iraq is a crucial step toward putting Iraq back on the path to economic stability and strong, sustainable growth."
World Bank president James Wolfensohn said the security situation in Iraq was still too dangerous for his staff to work on reconstruction projects. The bank is operating from an office in Amman, Jordan. "We don't believe we are able to send people in. The fundamental difficulty is that we would be sending people who might be on the front page after being kidnapped," he said.
Security is also an issue facing the Bush administration as it presses wealthy countries to come up with money to help fill the gap created by its decision to divert US$3.5 billion in US reconstruction funds for Iraq into security and job creation, administration officials said.
The drive to make up the difference in funds comes ahead of a meeting of international donors, scheduled for Tokyo on Oct. 13-14, to take stock of what some acknowledge to have been a disappointing effort to raise money in Europe and the Arab world to rebuild Iraq.
At the first international donors conference on Iraq reconstruction, a year ago in Madrid, Spain, Secretary of State Colin Powell returned with pledges of US$13 billion to be delivered over four years. At the time, US officials said they wanted as much money as possible to be handed out in the first year in an attempt to stabilize Iraq.
Only US$1.3 billion of the pledged money has been provided so far, however, more than half of that from Britain and Japan, officials said.
One issue American officials expect they will have to address in Tokyo, however, is how little of the US reconstruction money has been delivered. Of the US$18.4 billion Congress approved last year for Iraq, little more than US$1 billion has been spent.
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