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Last Updated: Friday, 11 April, 2003, 00:17 GMT 01:17 UK
US urges World Bank to aid Iraq

By Steve Schifferes
BBC News Online at the IMF/World Bank spring meeting in Washington

Damage in Baghdad
How far will international aid contribute to rebuilding?
The US is urging the World Bank and IMF to help aid the reconstruction of Iraq, and suggesting that major industrial countries write off some of its debts.

US Treasury Secretary John Snow said that he would be urging the world's major countries to "work together to help the Iraqi people - not just from 25 days of conflict, but 25 years of economic misrule."

Mr Snow will meet fellow finance ministers from the world's richest nations at the sidelines of the IMF/World Bank spring meeting on Friday and Saturday.

He says that they should "begin to review" the question of Iraq's debt - although he admits that no one knows the exact size of the debt burden.

Both France and Russia are believed to have substantial debts owed by Iraq - although a small part of a total which could be between $100bn and $300bn.

"It is a debt that is very large relative to the economic condition the country finds itself in," Mr Snow said.

World Bank role

The treasury secretary said that the international institutions would have a "vital role to play in the reconstruction of Iraq".

He urged the IMF and World Bank to "be prepared to offer their expertise and technical assistance as soon as possible".

But both the IMF and World Bank expressed caution about how quickly they would be able to get involved in Iraq.

World Bank president James Wolfensohn said he would want to take any request to provide technical assistance to Iraq to his board before agreeing to such a step - a point of view which seemed to both surprise and dismay Mr Snow.

And he said that the World Bank would not be able to lend money to Iraq until it had a legitimate government that was recognised by international institutions like the United Nations.

IMF Managing Director Horst Koehler told the BBC that it was time for the world's political leaders "to stop squabbling" and agree a political framework for Iraq in order to get on with the task of helping its people to rebuild.

And he said that there was a need for the world to demonstrate to the rest of the Middle East - which was feeling frustrated and humiliated - that they are appreciated by speeding development in the region as a whole.

Mr Koehler said that the IMF had experience in post-conflict situations, and could help stabilise Iraq's currency, manage its external debt, and help manage its tax system.

Prospects for co-operation

The IMF boss said that the uncertainty in the world economy - which was hurting investment and growth - should be met by renewed collaboration on trade issues and strengthening of the development agenda.

But one key proposal from the IMF which aimed to make it easier to resolve financial crises, has been rejected by the US treasury secretary.

The IMF had proposed that countries could be allowed to go bankrupt if their debts were too big, and then work out a plan to pay them off in an orderly fashion.

But the United States - which had initially supported the idea - now says it is "neither necessary nor feasible".

It now favours a more limited reform, a special "collective action" clause that would be issued when a country borrows money on international bond markets to make it clearer what would happen in the case of a default.




WATCH AND LISTEN
The BBC's Andrew Walker
"The war in Iraq has contributed to a period of economic weakness"



SEE ALSO:
IMF warns of weak world economy
09 Apr 03  |  Business
Saddam's currency under threat
04 Apr 03  |  Business
Iraq in the red
10 Apr 03  |  Business
Tough rebuilding ahead in Iraq
03 Apr 03  |  Business


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