The hope for billion-dollar contributions to the Iraq reconstruction effort is fading rapidly as industrialized nations release preliminary payment figures ahead of the Madrid Donor Conference set for later this month.
Iraq needs some $36 billion for reconstruction for the years 2004 to 2007, according to the findings of by the United Nations Development Group (UNDG) and the World Bank Group with assistance from the International Monetary Fund (IMF).
The Donor Conference in Madrid on October 23-24, 2003, will seek funding from the donor community to address priority reconstruction and rehabilitation needs, focusing on both urgent and medium-term needs for supporting sustainable development.
The EU has suggested putting up $250 million, Canada has made an offer of $200 million and Japan is expected to offer something in the range of one billion dollars. In the case of the United States, the Bush administration has requested from Congress a $20 billion budget for Iraqi assistance for 2004, reported NY Times.
The assessment estimates the overall stock of reconstruction needs in fourteen priority sectors. In addition, the occupying Coalition Provisional Authority (CPA) has separately estimated that there are some $20 billion needed in critical sectors not covered by the World Bank/UN assessment, including security and oil.
While the figures in the assessment reflect the best estimates of the likely needs for the immediate and medium-term, the actual disbursement – that is, the expenditure – of funds is much harder to predict, because it depends on the security situation, the capacity of Iraqi institutions to plan and implement projects, and the state of infrastructure and energy services.
Experience by the World Bank in other post-conflict countries shows that constraints to reconstruction are often not due to a lack of funds, but rather to difficulties in developing and implementing time-bound investment programs according to established international procedures. Given the massive size and scope of the reconstruction needs in Iraq, it can be expected that initial disbursement rates will be low while local capacity is built, but will increase rapidly over time as institutions are developed and experience is gained.
In addition, the assessment notes that not all of the identified needs may require external financing. Already in 2004, about one billion dollars of these needs are covered by ongoing contracts under the UN oil-for-food program.
Beyond 2004, it is expected that more of the investments could be covered by Iraqi government oil and tax revenues or private sector financing, diminishing the need for external donor support. This is based on the assumption that, in a stable environment, oil productivity and output will increase with the investment that takes place, general economic recovery will result in increasing direct and indirect tax revenues, and an improved investment climate will result in significant financing from both domestic and international private investors.
Finally, the assessment notes that it is currently not possible to predict offsetting expenditures on principal and interest payments on Iraq’s very sizeable external debt. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
