Gulf Daily News
September 29, 2004

Washington: Iraq cleared $81 million in debt it owed the International Monetary Fund late last week, fund sources said yesterday, opening the way for the first aid to flow from the global lender to Iraq, as soon as this week.

The payment comes as the IMF’s board of shareholder governments prepares to meet on Wednesday to discuss lending to Iraq following months of talks, added the sources, who requested anonymity.

The sources said the IMF’s board was expected to approve around $800m in financing for Iraq under a facility for countries affected by conflict. The assistance typically comes with less economic conditions than regular IMF programmes.

The emergency assistance helps countries with urgent balance of payments financing needs and is designed to be disbursed quickly and supported by policy advice, and in many cases, technical assistance.

Lending under emergency assistance has typically been limited to 25 per cent of a member’s quota in the IMF, although amounts of up to 50pc of quota can be provided.

The IMF’s cash injection should boost Iraq’s stagnant economy that has been battered by three wars and three decades of dictatorship.

Lack of jobs in Iraq is feeding instability and chaos, Iraq’s interim Prime Minister Iyad Allawi said last week, as he prepares the country for elections early next year.

Discussions between the IMF and Iraq have taken place outside the country, after global institutions withdrew their workers from Iraq in August last year after the bombing of the UN headquarters in Baghdad amid deteriorating security.

The IMF sources said approval of IMF lending for Iraq “will help” talks among the Paris Club of 19 industrial nations over cancellation of Iraq’s estimated $120 billion in foreign debt.