Iraq: Funds Falling Short of Donor Pledges

Publisher Name: 
New York Times

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

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

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

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."

AMP Section Name:War & Disaster Profiteering