Nadim Kawach
Gulf News
January 15, 2004

Abu Dhabi: The Arab Monetary Fund (AMF) said yesterday it would try to help in the reconstruction of Iraq but stressed the conflict-hit country must pay its swelling debt which caused its suspension from the Fund 12 years ago.

Iraq’s Finance Minister Kamel Al Kilani discussed post-war rebuilding needs with AMF Chairman Jassim Al Manai during a visit to Abu Dhabi where he also explained the domestic situation at a three-day conference on the Gulf.

“Manai said the AMF is keen to see Iraq restoring its active role in the Fund and to contribute to the reconstruction of that country by resuming its lending activity to Iraq,” the AMF said in a statement after the meeting.

“But the Chairman also stressed that the AMF must stick to the mechanism of its activities as defined by its Governing Board . . . this means the AMF must reach a settlement with Iraq to pay its outstanding debt to the Fund.”

Iraq has become the biggest debtor to the AMF because of its failure to pay back loans over the past 15 years due to the 1980-1988 war against Iran, the 1990 invasion of neighbouring Kuwait and the ensuing UN economic sanctions.

AMF figures showed Iraq’s arrears to the Abu Dhabi-based Fund stood at 97 million Arab Accounting Dinars ($368.6 million) at the end of 2001. They include 47.2 million dinars ($179.3 million) in interest and the rest as the principal loan.

The two other main debtors are cash-strapped Sudan and Somalia, which have also been unable to repay debt because of internal conflicts.

The AMF, the Arab League’s main financial institution, put total arrears by the three Arab countries at around 158.2 million dinars ($601 million), accounting for almost half its paid-up capital of 324 million dinars ($1.23 billion).

In 1992, the AMF decided to freeze Iraq’s membership because of its inability to repay debt and this deprived that country of any financial assistance from the Fund, which was created in 1975. But it continued to extend technical assistance, including advising on fiscal and economic policy and providing training programmes to Iraqi government employees.

The swelling debt owed by those countries and flawed economic policies by some members has prompted the AMF to tighten its loan terms by linking them to reforms and progress in economic performance.

“The meeting also covered the AMF’s role in the rebuilding and development of Iraq’s economic and financial institutions,” the AMF said.

“The two sides also agreed on expanding AMF technical assistance to Iraq . . . in this respect, the Fund is taking measures in coordination with the International Monetary Fund to organise a training programme for at least 30 Iraqi government employees in March . . . it is also considering Iraq’s request to benefit from credit facilities by the Arab Trade Fund Programme.”