- The Washington Times - Friday, October 24, 2003

From combined dispatches

MADRID — Internatioanal donors yesterday pledged at least $13 billion in aid and loans over the next four years to help rebuild war-ravaged Iraq as the response to a U.S.-led drive for funds far outstripped expectations.

This is in addition to $20 billion already pledged by the United States.

Spanish Economy Minister Rodrigo Rato said the combined offer — made at a gathering of more than 70 nations in Madrid — was equivalent to twice Iraq’s annual national income and was a global vote of confidence in the country’s future.

“If you take the American contribution — which is, hopefully, totally a grant — then we have at least $33 billion, of which $25 billion is grants,” said Marek Belka, a former Polish finance minister who is spearheading the fund-raising efforts of the U.S.-led Coalition Provisional Authority.

“All in all, we are overwhelmed, we are very happy. It surpasses all expectations,” Mr. Belka told Reuters.

Secretary of State Colin L. Powell and Treasury Secretary John W. Snow promised to immediately campaign to convert the loans into outright grants.

“The United States will work with other nations to get the level down,” Mr. Snow said at a news conference, while Mr. Powell acknowledged the contributions were solicited so arduously it was not clear how many were in loans and how many were grants.

The Bush administration wants the U.S. pledge to be all in grants, but several congressional leaders want part of it to be in loans.

Mr. Belka said the figure took the lowest likely contribution from the International Monetary Fund and World Bank and excluded trade finance and grants in kind.

The highest estimate for pledges from non-U.S. donors came from the Iraqis themselves. Planning Minister Mahdi Hafez told reporters they had matched Washington’s promise of $20 billion.

That is on top of $20 billion promised by Washington and is far in excess of what had been expected a few weeks ago, when political divisions threatened the existence of the meeting.

“A little over six months ago, Iraq was the black sheep of the international community,” Iraq Governing Council President Iyad Allawi told a news conference. “Today, I am again proud to be Iraqi.”

But elation was clouded by the treacherous security situation in Iraq, from which aid agencies and international organizations have pulled out or cut staffing to a minimum.

Two U.S. soldiers were killed in a mortar attack yesterday, bringing to 108 the number of U.S. soldiers killed in Iraq since Washington declared major combat operations over.

“Security is not going to be a permanent hindrance to reconstruction,” Mr. Powell said. “It is making it a little harder now, but … it will improve.”

European Union External Affairs Commissioner Chris Patten cautioned that experience had shown there was often a huge lag between promises and delivery of aid. “We need to get the money out of the bank and into Iraq as quickly as possible,” he said.

The aid conference had struggled against skepticism from critics of the war. Indeed, international fault lines that were opened by the conflict were still apparent in Madrid, with France, Germany and Russia bringing no new aid.

The $33 billion falls short of the $56 billion the World Bank and United Nations have said is needed over four years to rebuild an economy torn apart by war and sanctions, but future oil revenues, foreign direct investment and a refund on the oil-for-food program could narrow the gap.

Pledges from governments and agencies came in a confusing mixture, including humanitarian and reconstruction aid, export credits and project finance, and covered up to five years.

The World Bank said it would make between $3 billion and $5 billion available up to 2008, while the IMF promised support of up to $4.25 billion over four years.

Japan made the largest offer after the United States, offering $1.5 billion in grants for 2004 and pledging a further $3.5 billion in medium-term loans for 2005-2007 to bring its total promised aid to $5 billion.

Saudi Arabia announced a $1 billion financing package and said half of it would be in loans through 2007 and the rest would be in export credits. The richest country in the Arab world also promised to look at reducing Iraq’s debt burden, estimated at a total of $120 billion and $24 billion to Saudi Arabia, within a wider framework of debt forgiveness.

A State Department official said Washington had wanted as much of the assistance to be in the form of grants, rather than loans, but declined to criticize any of the countries — like Saudi Arabia — that chose to offer loans.

“Obviously, we would prefer the maximum amount in grants, but every country has to make [the] decision of what it can afford,” he said.

The EU said its combined aid for Iraq in 2004 had risen to some $826 million, overtaking its contribution to Afghanistan last year.

Total pledges from the EU budget and member states from now until 2007 stand at $1.53 billion.

Iraq received a wide-ranging offer of help from former enemy Iran, against which former Iraqi strongman Saddam Hussein fought a war between 1980 and 1988.

Tehran promised a credit facility of up to $300 million, offered cross-border electricity and gas supplies and said it would let Iraq export oil through Iranian terminals.

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