Nations pledge additional $13bn to help rebuild Iraq

An international conference in Madrid held to raise funds for the reconstruction of Iraq ended yesterday with donors pledging $33bn (£19bn). The sum includes $20bn already promised by the United States.

But $13bn takes the form of loans. This will further burden the Iraqi economy, which is already about $120bn in debt.

The US Secretary of State, Colin Powell, said: "We will be sensitive to the new debt burden."

Ana Palacio, the Spanish Foreign Minister, hailed the outcome of the conference as "a great success". Rodrigo Rato, the Spanish Deputy Prime Minister, said: "We have a total pledge of $33bn."

The total falls short of the $56bn ($32bn) the World Bank and Washington believe Iraq requires. But Bill Orme, the UN development spokesman, said that funds essential for Iraq's immediate needs "had been achieved".

After the US, Japan was the biggest donor, pledging $1.5bn for grants for 2004 and $3.5bn in loans up to 2007, followed by Saudi Arabia offering $1bn in loans and export credits. The kingdom hinted that it might waive some of the $24bn it is owed by Iraq. Kuwait, which was invaded by Iraq in 1991, an act that triggered the Gulf War, offered an extra $500m on top of $1bn already spent.

Spain pledged $300m and Italy $200m. In all, the EU was to give ¤700m (£488m) next year, said the Italian Foreign Minister, Franco Frattini, on behalf of the EU presidency.

France, Germany and Russia criticised Washington's reluctance to set a clear timetable for handing power to Iraqis and did not pledge additional funding.

Britain has circulated two figures for what it was contributing in two different currencies: ¤375m over two years (2004 and 2005), and £550m over three years including contributions to the EU package.

Mr Powell expressed regret that France and Germany declined to put up new funds, but added that it "would not means it is a disaster" if the conference failed to raise the amount the World Bank was hoping for. The US is to administer its own package of aid, which prompted claims that it would favour American companies.

Funds pledged yesterday will be only a starting point in the reconstruction of Iraq, Kofi Annan, the UN secretary general, said. "We should not judge the success of Iraqi reconstruction by the contributions announced today. This is only the beginning of a process," Mr Annan said.

He recognised that "security was a constraint and we need to do something about that issue".

But Iraq will not be in a position to use the loans and other tied contributions for at least a year, meanwhile sinking further into debt.