Global pledges mask real cost of recovery

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Indy Politics

Prodded by the United States, international donors pledged billions of dollars to rebuild Iraq, but the final figures make it impossible to estimate the real cost of recovery.

Countries yesterday promised a liquorice allsorts of grants, loans, export credits and gifts in kind. Theyoften meant more to the commercial interests of the "donors" than the development needs of Iraq.

European officials said the figures were "a big mess". Japan and Saudi Arabia pledged more than expected, but much of it was loans and credits that will weigh further on deeply indebted Iraq. The US's pledge of $20bn (£12bn) covers the period to 2007.

What Iraq urgently needs is $9.3bn for 2004 in the form of non-returnable grants, according to the UN and the World Bank. It cannot borrow because it is not creditworthy, and is not expected to have oil revenues until then.

The urgency of cash now without strings was spelt out by the head of the UN's development programme, Mark Malloch Brown, who saud: "Our needs assessment ... tells the story of a country brought down from a per capita income of $3,600 25 years ago to less than $600 today. "We estimated... that $9bn would ideally be needed for the first year."

The UN and the World Bank estimate that Iraq needs a capital injection of $56bn to get its oil economy and security services operational. But funds to cover that should, development experts say, be raised in ways other than grant aid.

"If we raised $56bn worth of grants for Iraq that would be disaster for the world," Mr Malloch Brown said. "There'd be none left for ... other crises."

So the success of the conference hangs not on the total figure but the balance between cash now and funds-with-strings later.

There are concerns about how the cash will be spent, particularly that offered by the US which is not keen on using a specially-established trust fund.

Bilateral aid, often tied to specific contractors, was a mistake, an EU official said because it risked "duplication and concentration on priorities of the donors rather than Iraq".