Iraq's Odious Debts

Iraq on fast track for debt relief

Larry Elliott
The Guardian
April 14, 2003

British-brokered pact enables IMF and World Bank to lead recovery programme

Iraq is to be put on a fast track for debt relief as part of a package to rebuild its shattered economy agreed after the world’s leading nations stepped back from the brink of a damaging row over post-war economic reconstruction at the weekend.

In a deal brokered by Britain, the International Monetary Fund and the World Bank will spearhead an emergency economic programme once Iraq has been made secure and the United Nations has passed a fresh resolution.

The two Washington-based institutions were fearful that they would be dragged into a political wrangle between the United States and Europe over who would lead the attempt to revive the Iraqi economy and whether the work would be done under the banner of the UN.

But, with the US stressing that it favoured a multilateral approach, a fraught meeting of the IMF’s policy-making committee ended with an agreement that the fund and the bank would play a full part in any recovery plan.

“The IMF and World Bank stand ready to play their normal role in Iraq’s redevelopment at the appropriate time,” the IMF said. “We support a further UN Security Council resolution,” it added.

Finance ministers were relieved at the outcome; there were signs ahead of the meeting that the poisonous atmosphere at the security council in New York would affect the atmosphere at the two Bretton Woods institutions, turning the bank and the IMF into organisations riven by political differences.

“It’s an enormously positive step forward,” said Gordon Brown, who chaired the meeting of the IMF’s international monetary and financial com mittee, and spent the weekend urging countries to cooperate over Iraq.

The IMF’s managing director, Horst Koehler, called the decision “a wonderful outcome”, adding that the swift end to the war increased the chances of a recovery in the global economy in the second half of this year.

“I am much more optimistic now than I had been two or three weeks before,” he said. “Not only because of news that the war will be short, but also because of the confirmation that the [IMF] spirit of cooperation is strong and intact. This gives me a lot of confidence.”

IMF experts have been working for weeks to develop plans for an Iraqi currency and ways to re-establish commerce in the country, seen as the first steps in any reconstruction strategy.

Sir Eddie George, governor of the Bank of England, said the decline in oil prices was evidence of greater confidence in the future.

In its communiqu–π, the IMF said the involvement of the Bretton Wood organisations would be “essential for sustained economic, social and political developments in Iraq”.

It added that the Bank and the IMF stood ready to “play their normal role at the appropriate time”, and the international community wanted action on Iraq’s massive debts – estimated at at least $100bn, six or seven times its annual exports – to be taken at an early stage by the Paris club of creditor nations.

John Snow, the US treasury secretary, said: “It is important for the international community to cooperate in providing humanitarian relief to the Iraqi people and laying the groundwork for reconstruction and economic recovery.”

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