- The Washington Times - Thursday, October 23, 2003

MADRID — U.S. and World Bank officials said yesterday that Iraq was headed for a reconstruction-aid bonanza as money started to flow in earnest on the eve of a deadline for formal pledges.

“If you look at the commitments coming, there is plenty of money to kick-start this reconstruction process,” said Nick Krafft, the World Bank’s Iraq country manager. “If you compare them to anywhere else in the world, it’s staggering.”

But there was no word on how much wealthy Arab states would pledge at the Madrid conference, and there were questions as to how much aid would be in the form of loans and whether the process had any meaning without addressing Iraq’s massive debts.

So far $2 billion to $3 billion has been pledged in addition to the $20 billion Washington plans to contribute over 18 months.

“Tomorrow, I think we will surprise some in the press when the size of the outpouring of support is made visible,” Treasury Secretary John W. Snow said at a meeting with investors.

The World Bank will make about $4 billion available, and the International Monetary Fund will also provide financial support.

The total falls well short of the estimated $56 billion needed over the next four years to rebuild a nation torn by years of war, sanctions and neglect. But it will come within the $17.5 billion required to get the process going next year.

“Every time we have had discussions, they have exceeded expectations,” a senior U.S. official said. “Japan, Canada, Spain and Britain came back with higher” pledges.

Kyodo news agency said Japan, whose contribution is the second-largest after the United States, would add $700 million to $800 million to the $1.5 billion in grants it has already offered. A Japanese spokeswoman in Madrid said no decision had been made.

As some 70 countries and organizations gathered for the two-day meeting, U.N. Secretary-General Kofi Annan and the Iraqi Governing Council called on donors to dig deep.

“We inherited a ruined country … that starts from well below zero,” Iraqi Governing Council representative Mowaffak al-Rubaie told a news conference. “People who help us in this difficult time are going to be rewarded in one way or another.”

Iraqi officials sought to persuade more than 300 companies and business groups gathered alongside the politicians that Iraq, which has the second-largest oil reserves in the world, could be prosperous again with investment.

The World Health Organization, highlighting damage to Iraq’s health care system by war and looting, said the country would need $1.6 billion between 2004 and 2007 — $14 per person a year — to put it back on track.

But the immediate focus was on the final pledges for reconstruction, which will be announced today.

Ahead of the meeting, Mr. Annan and Secretary of State Colin Powell sought to lower expectations that Washington would come away with the entire amount it wants ? $35.8 billion through 2007.

One European official said there was a risk that there would a “classic pledging-conference trick” of adding anything and everything together to create a global figure, but without a guarantee that all of the money would actually be in the collective pot.

“It is apples and pears, grants, loans, aid in kind — it is a … mess,” said a senior European finance official, whose country opposed the U.S.-led war that toppled Saddam Hussein.

An Arab official said oil-rich Persian Gulf states — including Kuwait — were set to offer project funding as well as cash and were also ready to discuss partial debt forgiveness or rescheduling Iraq’s obligations to their countries.

Iraq’s $100 billion-plus debt, about a third of which is owed to Gulf states, was not supposed to be on the Madrid agenda but has emerged as one of the main hindrances to fund raising.

Officials and analysts said that without rescheduling debts, there would be no investment in Iraq, which would then become just another aid-dependent state.

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