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Iraq: Funds Falling Short of Donor Pledges

by Steven R. WeismanNew York Times
December 7th, 2003

WASHINGTON Six weeks after organizers of an international donors conference in Madrid said that more than $3 billion in grants had been pledged to help Iraq with immediate needs, a new World Bank tally verifies grants of only $685 million for 2004.

The vast gap seems to have occurred largely for two reasons: some countries, like Japan, changed the nature of their commitment after the conference from immediate aid to slower, long-term help; and some that had left their intentions unclear were incorrectly assumed to be giving immediate aid.

Many experts also say that donation pledges often do not materialize in the end, or come in the harder-to-tally form of credits for the purchase of commodities.

The grant money for immediate needs was part of a total $13 billion that organizers said was raised at the conference.

The Bush administration does not dispute the gap, but officials say it is too early for an accurate count, asserting that the number of grants will probably grow.

Some United Nations officials concur. "We know the Japanese are rethinking what they're going to do," said Julia Taft, director of the Bureau of Crisis Prevention and Recovery at the United Nations Development Fund. "But once we get our trust funds up and running, about 15 donors will come forward. It's like, the money is in the bank, but the bank doesn't exist yet."

An independent trust fund was promised at the Madrid conference and is due to be set up next week.

Aid officials acknowledge that it is not yet clear how much money will end up going to Iraq outside the American contribution of $18.7 billion in the next year.

The World Bank's new calculation is that of the total pledged for Iraq, $3.7 billion would be in grants and the rest in loans. But those totals are for the period ending in 2007.

The Bush administration had hoped that the bulk of the aid would be available immediately. But there have been delays with loan money, too.

International law allows only a sovereign government to incur debt, legal experts say. Current plans call for a transfer of power to an Iraqi government by the middle of next year, and there are some fears that that schedule might be optimistic. In addition, those plans were not announced until Nov. 15, several weeks after the Madrid conference.

The largest portion of the loans pledged in Iraq were from the World Bank and the International Monetary Fund. But aid experts say the monetary fund loans, at least, will not be available until Iraq's debt restructuring is worked out.

On Friday, President Bush appointed former Secretary of State James A. Baker III to lead the effort to renegotiate Iraq's debt, estimated at $100 billion to $120 billion. Iraq also owes $100 billion in reparations.

Some aid officials suggested that it was not only practical reasons that caused the gap.

"Some of it has to do with people's budget cycles, and their reluctance to make long-term commitments," said an aid official. But he said there had also been an effort by the United States and other organizers to make the Madrid total look as big as possible without concern for specifics.

The World Bank's new tally of aid was released without publicity on the bank's Web site on Thursday night. A press release accompanying the material stated that Madrid had totaled $32 billion, and that $22 billion was in the form of grants. But this included the American grants.

The more specific breakdowns showing the $685 million for next year were contained in a chart accompanying the press release on the Web site, but the bank did not call attention to it.

In the case of Japan, a promise of large upfront cash grants shifted to the possibility of spending the money over several years. "The Japanese were looking at $1.5 billion in Madrid, but now they've decided to leave it unspecified as to which year the money is coming," an administration official said.

Saudi Arabia pledged $1.5 billion in Madrid but left unclear what form it would take; it turned out that half was to be in credits to import goods from Saudi Arabia.

Some countries similarly changed plans because of growing concerns about the political stability and the security of Iraq; some say they will donate money once the trust fund is set up; some, intent on seeing a greater United Nations role in Iraq, are reluctant to make grants during the American-led occupation.

"The problem with cash is that you don't know where it's going to end up," said an official with a donor country. "Who gets to draw this money down? The only contracts awarded for Iraq so far have been awarded by the Pentagon."

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