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Donations to rebuild Iraq fall short of $56 billion goal

Saturday, October 25, 2003

MADRID, Spain -- Iraq's postwar reconstruction received a boost Friday as nations from Japan to Saudi Arabia pledged $13 billion in new aid on top of more than $20 billion from the United States. But the figure fell well short of the estimated $56 billion needed to rebuild the country, and much came in the form of loans that could saddle Iraq with new debts.

Secretary of State Colin Powell and U.S. Treasury Secretary John Snow promised to immediately campaign to convert the loans into outright grants.

"The United States will work with other nations to get the level down," Snow said at a news conference, while Powell acknowledged the contributions were solicited so arduously it was not clear how many were in loans and how many grants.

Iraq already has a debt of $120 billion, with annual servicing charges of $7 billion to $8 billion. The Bush administration, mindful of the burden, planned all U.S. aid to be in grant form, but Congress is still weighing that approach. Some U.S. lawmakers favor loans based on the prospect that Iraq will be oil-rich in a few years and able to pay its debts with oil revenue.

After the conference closed, Spanish Finance Minister Rodrigo Rato said it raised $33 billion in pledges, including the American money, a figure that did not include export credits, technical assistance or other non-cash aid.

'As soon as possible'

European Union official Chris Patten noted that past fund-raisers have experienced long delays in making good on pledges. "We need to get the money out of the banks and into Iraq as soon as possible," he said.

The pledges were drawn from Asia and, far less so, from Europe. Japan offered the second-biggest pledge: $1.5 billion in grants for 2004 and $3.5 billion in loans for 2005-07.

Saudi Arabia pledged $1 billion. The richest country in the Arab world said half would be in loans through 2007 and the rest would be in export credits.

However, the kingdom also hinted at supporting a U.S. push to relieve some of Iraq's debt. Prince Saud Al-Faisal, the foreign minister, said Saudi Arabia was ready to reduce some of the $24 billion it was owed by Iraq, but he did not give specifics.

In an interview with European newspapers published Friday, Powell expressed regret that France and Germany weren't pledging new aid. The two leading opponents of the U.S.-led war in Iraq are holding back to show their disapproval of the U.S. blueprint for restoring Iraqi sovereignty.

Some of the pledges were unusual. Vietnam offered rice to Iraq, and Sri Lanka gave tea.

China pledged $24.2 million. Poorer countries chipped in too, like Slovakia with $290,000. Bulgaria and Egypt offered technical assistance but no money.

Iran, which fought Iraq from 1980-88 in a war that claimed 1 million lives, said it would let Iraq export oil through Iranian ports and supply its neighbor with electricity and gas.

Ayad Allawi, interim Iraqi president, called the donors conference "a historic occasion for my country, which a little over six months ago was the black sheep of the international community."

"Today, I am again proud to be an Iraqi," he told reporters. "The pledges made today will help us get back on our feet."

Much of the $13 billion came from international lending institutions: $4 billion from the International Monetary Fund and $3 billion from the World Bank. While the bank might provide up to $5 billion, the lower figure was used in the calculations.

The bank had estimated Iraq would need about $55 billion in the next four years, far above what the conference raised in pledges. Powell called that an "ultimate goal," and the bank has said much will likely be covered by Iraq's oil revenues, private investment and other resources, rather than donations.

"These have been two wonderful days in the life of Iraq and the world," Adel Abdul-Mahdi, a member of the Iraqi Governing Council, told the closing session. "Iraqis are shedding tears. Humanity has stood beside them."

In all, the European Union is giving $812 million next year, said Italian Foreign Minister Franco Frattini, whose country holds the EU presidency.

That's less than the $931 million the 15-nation bloc offered to Afghanistan last year, reflecting the absence of France and Germany.

However, Germany's deputy minister for economic cooperation, Erich Stather, said Berlin might offer export credits and would play a "constructive role ... in finding a solution of Iraq's debts."

French Trade Minister Francois Loos said his country is "willing to envisage and adapt its treatment of Iraq's debt compatible with the country's finance capacity."


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