Spain has pledged $300m towards the reconstruction of Iraq - one of the largest offerings by any nation or organisation.
Much of Iraq's economic infrastructure is in ruins
The aid, to be given in grants and loans spread over several years, comes ahead of next week's donor conference for Iraq in the Spanish capital, Madrid.
It adds to the $231m pledged by the European Union, $1.5bn by Japan and about $835m from Britain.
Spain was a staunch supporter of the US throughout the Iraq conflict and currently has around 1,300 troops in the country.
The funds will provide a much-needed boost to George Bush's administration's attempts to gather funds for the costly rebuilding of Iraq.
US efforts suffered a blow on Thursday when the US Senate defied President Bush by voting to convert half of a $20bn aid package into a loan.
IRAQ RECONSTRUCTION NEEDS UNTIL 2007
World Bank/UN estimate - $36bn: Covers administration, health, education, employment, infrastructure, water agriculture
US estimate - $19bn: Covers security, oil industry, foreign affairs, culture and religious affairs, environment
Total needs $55bn
The Republican-run chamber voted 51-47 for a proposal to make $10bn a loan - to be converted to a grant if other countries agree to waive debts owed to them by the former regime.
Hours earlier, France, Germany and Russia - opponents of the recent Iraq conflict - said concerns about the text of a UN resolution on Iraq meant they would not contribute troops or funds to aid efforts.
This was despite the three states voting in favour of the resolution, which preserved a dominant role for the US-led administration in Iraq but called upon it to transfer sovereignty and government back to the Iraqi people "as soon as practicable".
French Foreign Minister Dominique de Villepin said the resolution was merely "a stage, a first step" in negotiations with the US over Iraq's future, which France "[would] like to believe will be followed by others".
US Secretary of State Colin Powell said he hoped the countries would reconsider their stances in order to support the people of Iraq.
"This is not a matter of supporting the United States or the coalition, this is a matter of helping people who are in need," he said.
Analysts say the US Senate's decision to defy the President Bush over his Iraq funding proposals shows lawmakers' concerns at the vast spending plans on foreign aid at a time of record deficits at home - with elections just more than a year away.
The Bush administration had argued against the decision, saying loans would worsen Iraq's foreign debt and exacerbate Arab suspicions about US intentions in the country.
There will be further discussions with the US House of Representatives to agree a final measure before the Madrid donor conference.
The $10bn loan could be converted by President Bush to a grant if France, Russia, Saudi Arabia and other creditors forgive at least 90% of Iraq's debt, roughly set at $130bn.