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Pledges for rebuilding Iraq fall short of expected needs

MADRID, Spain _The nations of the world pledged at least $13 billion Friday to rebuild an Iraq that's ravaged by misrule, sanctions and war.

The pledges gathered at the international donors' conference in Spain were larger than expected just weeks ago and will join the $20 billion that President Bush is seeking from Congress.

But even the total of $33 billion will not meet Iraq's vast reconstruction needs over the next four years.

Roughly two-thirds of the donations announced at the two-day conference were in the form of loans and credits—not cash—potentially saddling debt-strapped Iraq with new burdens.

The United Nations and World Bank estimate that the reconstruction of Iraq will cost more than $55 billion between now and 2007. U.S. officials and aid experts say the shortfall will be funded later by rejuvenated Iraqi oil exports and, they hope, more international aid.

Iyad Alawi, president of the Iraqi Governing Council, heaped thanks upon the gathering for the offers of support.

"The pledges made today will help us get back on our feet," Alawi said. "We are a proud people who want nothing more than to stand on our feet again."

The funds will help rebuild Iraq's ruined infrastructure, from roads and water supplies to health care and schools.

The tally represented a partial victory for the United States.

Secretary of State Colin Powell and other top U.S. officials lobbied vigorously to raise money and prevent an outcome that seemed destined to be disappointing as recently as 10 days ago.

The Bush administration hopes the pledges will not only accelerate the rebuilding of Iraq, but also finally cement international backing for its postwar plans. Many nations opposed the war and now want the United States to turn over power to Iraqis more rapidly.

"A strong showing of support from this conference will speed reconstruction and hasten the day when Iraqis can assume full responsibility for their nation," Powell told the representatives from more than 70 countries and international financial institutions.

"We did not come here to Madrid to raise $55 billion or $56 billion dollars in one conference," he said. "But this donors' conference is an important step toward meeting that goal."

That much of the contributions were loans could cause political problems for Bush, who fought vigorously to prevent the Senate from converting some of his $20 billion request from grants to loans.

While precise figures were not immediately available, it appeared that only between $3 billion and $4 billion of the donations announced Friday represented hard cash.

Some lawmakers may argue that if other countries are making loans to Iraq, which has the world's second-largest known oil reserves, the United States should, too.

Mark Malloch Brown, director of the U.N. Development Program, warned against a change in the American approach.

"For the U.S. to convert its generosity to a tied loan would surely risk terrible resentment and opposition in Iraq in today's circumstances," he said.

Two of the biggest pledges made Friday—at least $3 billion from the World Bank and at least $2.5 billion from the International Monetary Fund—are loans.

Iraq already has $125 billion in foreign debt from Saddam Hussein's rule and owes tens of billions more in reparations for the 1990-1991 Gulf War. International discussions are under way about reducing and restructuring that debt.

Malloch Brown said Iraq needs $9 billion in grants for 2004, in addition to the U.S. funds.

After that, he said, other types of financing will be needed, in part because such huge figures will draw limited foreign aid away from other desperate regions of the world.

Chris Patten, the European Union's external affairs commissioner, stressed the need for donors to quickly make good on their pledges.

A similar conference was held for Afghanistan in January 2002, and some of the promised money still hasn't arrived.

"We need to get the money out of the bank and into Iraq as quickly as possible," Patten said.

Contributions from the Gulf Arab states were relatively small, despite an intense U.S. lobbying effort.

Saudi Arabia offered $1 billion, but most or all of it appeared to be loans and export credits. The United Arab Emirates announced a $215 million pledge.

Kuwait pledged $500 million, on top of the nearly $1 billion it says it already has spent in Iraq since the end of the war.

Iran, which fought an eight-year war with Iraq in the 1980s, offered $300 million in credits.

After the United States, Japan was the biggest contributor. Tokyo, which had already announced $1.5 billion in grants for 2004 to rebuild Iraq, added $3.5 billion in medium-term loans for 2005-2007.

France, Germany and Russia, which led opposition to the war, did not announce new pledges. Collectively, the European Union kicked in about $1 billion for 2004, an amount that U.S. officials called disappointing.

Even smaller countries pitched in. Vietnam pledged $500,000 in humanitarian help—in the form of rice.

Some of the pledges "announced" on Friday included funds that already had been committed and, in some cases, are in the process of being spent.

Andrew Natsios, administrator of the U.S. Agency for International Development, said the conference was important not just because of the numbers. Aid agencies worldwide will now be fully involved in Iraq and coordinating their efforts, he said.

"We haven't entirely had that until now," Natsios said. "There is a sense that this is a turning of the corner."


(c) 2003, Knight Ridder/Tribune Information Services.

GRAPHIC (from KRT Graphics, 202-383-6064): 20031024 USIRAQ DONORS