BBC News
September 30, 2004

The International Monetary Fund (IMF) has approved an emergency loan of $436m (£232m) to Iraq, the first from an international organisation. The IMF hopes the loan will act as a catalyst for more international economic aid, including debt relief.

Deputy IMF managing director Takatoshi Kato said Iraq’s foreign debt needed to be brought down to a “sustainable level”.

The Paris Club of creditor nations are due to discuss debt relief for Iraq.

The US wants 90% of Iraq’s $120bn overseas debt wiped off, but Russia and France have insisted on a 50% limit.

They say this is sufficient for such an oil-rich nation.

Security pressures

Despite the disagreement, the IMF said all Iraq’s main overseas creditors had agreed to defer Iraq’s debt repayments until the end of 2005.

This is the first time the IMF has given Iraq a loan of any sort, and comes under its emergency assistance program.

Under this scheme loans are designed to be disbursed quickly, supported by policy advice, and, in many case, provided alongside technical assistance.

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

Iraq’s goal is to stabilise the economy and lay the groundwork for reforms such as state enterprise restructuring and greater transparency in the oil sector, said Mr Kato.

Security problems have hampered Iraq’s economic recovery from more than a decade of UN sanctions, followed by war and looting.

Kidnappings of foreign contractors have hindered projects to restore infrastructure, while attacks on oil pipelines have hurt exports.