Iraq's Odious Debts

Jousting With Debt

Washington Post
April 12, 2003

“THE PURPOSE of these meetings is to retain attention on the other war which is going on, the war against poverty.” That is how World Bank President James D. Wolfensohn describes this weekend’s meetings of the bank and the International Monetary Fund — and we hope he means it. Or rather, we hope he means it in the largest possible sense. The World Bank and the IMF exist in large part to fight poverty: poverty in Africa, Latin America — and Iraq. The World Bank and IMF meetings should not become political occasions — a chance for international factions to push their vision of the post-Saddam Hussein Middle East. Nor should aid policy become a weapon to fight the political battles of the moment.

There are signs, unfortunately, that some hope to make it exactly that. Some in the Bretton Woods institutions have begun arguing, legalistically, that they need U.N. approval for the Iraqi transition regime before they can even send advisers to Iraq, a country whose finances have not been assessed by the IMF for more than 20 years. Some believe that Russian and French diplomats will use their power in the U.N. Security Council to block U.N. recognition and to prevent Iraq’s oil from flowing.

At the same time, both U.S. Treasury Secretary John W. Snow and Deputy Defense Secretary Paul D. Wolfowitz have called on France, Russia and Germany to forgive the debt that Iraq owes them, which may total as much as $20 billion. Their fundamental point is correct: Over the past decade, Saddam Hussein was able to build several dozen palaces and keep his security apparatus intact thanks largely to foreign loans, and it seems grossly unfair for France, Russia and Germany to make a new regime pay. Mr. Wolfowitz and Mr. Snow would be wrong, however, if they were to declare unilaterally that Iraq will not pay back its loans. After the Soviet collapse, Russia was made to take on the Soviet Union’s debt; Germany’s loans were forgiven after World War II, but in the context of international consensus. Iraq’s loans could be forgiven in a similar context in exchange for Iraqi economic cooperation and reform, but this decision shouldn’t be taken now simply to score political points.

Finally, it would be tragic if, amid all the political bluster, the rest of the world’s poor were forgotten. One of the items on the official agenda this weekend is an examination of the progress of the Millennium Challenge, a set of goals for the developing world laid out with great fanfare three years ago. To put it bluntly, the world’s poorest countries are not on track to meet them, and there seems to be little enthusiasm for helping them do so. Despite talk of debt forgiveness for Iraq, there is not much enthusiasm for broadening or deepening debt forgiveness for the world’s poorest countries, most of whose debt was also incurred by unpleasant, undemocratic regimes. Despite the enthusiasm for helping rebuild Iraq, an initiative designed to bring universal education to such countries as Nicaragua and Burkina Faso also has stalled, largely because rich-country donors haven’t come up with funding that was promised in exchange for carefully designed programs. It isn’t a good omen: The bureaucratic delays and donor reluctance that have hampered attempts to improve the lives of the world’s poorest hardly bode well for the future of Iraq.

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