IMF and World Bank pledge help in Iraq rebuilding, U.S. seeks debt relief
April 11, 2003
WASHINGTON — Leaders of the International Monetary Fund and the World Bank pledged on Thursday to help provide billions of dollars to rebuild Iraq. But first, they plan to send fact-finding missions to uncover the mysteries of an economy that has been shrouded in secrecy for more than two decades.
A day after U.S.-led forces swept through Baghdad, the Bush administration moved quickly to demonstrate that the Iraqi people stand to gain substantial economic benefits from the toppling of Saddam Hussein’s government.
Treasury Secretary John Snow said he would use the spring meetings of the 184-nation IMF, which specializes in helping crisis countries, and the World Bank, the largest source of development loans, to begin gathering the resources needed to rebuild Iraq.
Preliminary estimates of the cost of that effort have ranged from $20 billion per year for the first several years to as much as $600 billion over a decade.
Snow and Federal Reserve Chairman Alan Greenspan will lead discussions on Friday among the finance officials from the world’s seven richest industrial countries — the United States, Japan, Germany, France, Britain, Italy and Canada.
In addition to lining up initial commitments from the IMF and World Bank, Snow said he would seek support among the G-7 countries for forgiving a part of Iraq’s massive foreign debt, estimated to be as high as $200 billion.
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However, the G-7 discussions could prove contentious given that two of the nations — France and Germany — actively opposed the U.S.-led war effort. They have also insisted that the United Nations take the lead in the reconstruction effort, an approach that is opposed by the United States, which is ready to install its own interim administration headed by retired U.S. Lt. Gen. Jay Garner.
World Bank President James Wolfensohn said Thursday some members of the World Bank’s board have taken the position that the United Nations must vote to modify its economic sanctions against Iraq before the World Bank would be able to begin helping Iraq, even with technical assistance.
“We have come up with a very simple solution,” Wolfensohn said. “We will put this matter to our board for a decision as to what we can and cannot do.”
Snow told reporters at a separate news conference later Thursday that he was “baffled” and “puzzled” by Wolfensohn’s position that a board vote was necessary even to undertake preliminary assessment studies.
He said he planned to lobby Wolfensohn to rethink that position on grounds it was urgent to get on with the task of rebuilding Iraq after “25 years of economic misrule and mismanagement.”
Wolfensohn and IMF Managing Director Horst Koehler both said that their boards, which include the United States and the other G-7 nations, would have to approve any new loan programs. That means the United States will need to resolve any disagreements over the reconstruction effort before it will be able to achieve IMF and World Bank backing.
Wolfensohn and Koehler said before new loans began flowing, the two institutions would join to send fact-finding missions to Iraq to gather data on Iraq’s economy, which represents a major enigma to the outside world because of the secrecy imposed by Saddam Hussein’s regime.
While Iraq is a member of the 184-nation IMF and World Bank, it has not borrowed from the World Bank since 1973 and it hasn’t allowed the IMF to send in financial teams to review the country’s economic data since 1983.
“The reality is that we don’t know what is the statistical environment regarding economics and financial,” Koehler told reporters Thursday, saying the fact-finding teams would look for clues from Iraq’s finance ministry and central bank.
The U.S. Treasury Department already has a team in Washington, headed by Undersecretary John Taylor, that is working on plans to set up a functioning banking and currency system for the country. To fill in needed data, Treasury has turned to the Central Intelligence Agency for help.
In addition to Treasury, the administration has officials from the department’s of Transportation, Commerce and Agriculture working on reconstruction issues in their areas of expertise such as highways, economic development and farming as well as using the resources of the State Department and Defense Department.
The administration has also seized some $1.65 billion in Iraqi government assets that have been frozen in U.S. banks since the first Persian Gulf War in 1990, money it plans to use to help in the rebuilding effort.
On the Net:
Treasury Department: http://www.ustreas.gov/
International Monetary Fund: http://www.imf.org
World Bank: http://www.worldbank.org