Iraq's Odious Debts

IMF approves first loan to help in rebuilding Iraq

Martin Crutsinger
The Boston Globe
September 29, 2004

Washington: The International Monetary Fund on Wednesday approved an emergency loan of $436.7 million for Iraq, the first assistance it has provided to help the country rebuild its wartorn economy.

The loan was approved by the IMF’s 24-member executive board and came under the lending agency’s “emergency post-conflict assistance” program designed to help countries emerging from war.

IMF Deputy Managing Director Takatoshi Kato called the initial IMF assistance “a crucial step toward putting Iraq back on the path to economic stability and strong, sustainable growth.”

Kato acknowledged that “the fund is making these resources available to Iraq at a difficult time in terms of security, but also at a critical time as Iraq strives to rebuild its economy and prepare for elections next year.”

He said it was hoped the money would serve as a catalyst to support from other countries and help Iraq obtain debt relief.

The Bush administration hopes to make progress in its campaign to grant Iraq debt relief at the upcoming weekend meetings in Washington of the IMF and its sister lending agency, the World Bank.

At recent meetings in Paris, the United States and 18 other wealthy countries reported they had moved closer to a debt relief deal involving the more than $42 billion in loans and interest that these nations are owed by the government of Iraq.

The issue of granting Iraq debt relief was expected to be a top priority of talks Friday among the world’s seven leading industrial countries the United States, Japan, Germany, France, Britain, Italy and Canada which will be led by Treasury Secretary John Snow and Federal Reserve Chairman Alan Greenspan. Those discussions will set the stage for the IMF and World Bank meetings.

The United States is seeking the cancellation of at least 90 percent of the debt Iraq owes to wealthy countries, but France is arguing that Iraq, with its vast oil reserves, should not get better treatment in the area of debt relief than the world’s poorest nations.

In an effort to improve the prospects for Iraq debt relief, the administration is advancing a proposal to grant greater debt relief to at least 27 of the world’s poorest countries, including Uganda, Bolivia and Ethiopia.

The $436.7 million IMF loan approval comes after Iraq last week cleared up $81 million in arrears it had built up during the years of Saddam Hussein’s government, when the country stopped participating in IMF activities.

At an international donor’s conference last October, IMF officials indicated Iraq could receive between $2.5 billion and $4.25 billion in loans from the IMF over the next three years. At the same conference, the World Bank indicated it was prepared to lend between $3 billion and $5 billion over the next five years.

The Bush administration is counting on both agencies to provide significant amounts to help rebuild the country. The donor conference last October in Madrid raised $33 billion for reconstruction, including $20 billion pledged by the United States.

In addition to direct loans, the IMF is providing extensive technical assistance to Iraq in the areas of tax policy, budget preparation and central banking.

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