— By Mark Egan
WASHINGTON (Reuters) - The International Monetary Fund's
policy-setting committee said on Saturday the fund and World Bank
will help in the reconstruction of war-ravaged Iraq once a United
Nations resolution gives them a mandate.
The two Washington-based lenders have firmly resolved in recent
days against being dragged into a political wrangle over who would
lead a rebuilding effort and whether it would be done under a UN
Some countries, particularly France and Germany, had been
concerned that the United States -- as the lenders' largest
shareholder -- would use the institutions to bypass the UN while
still claiming multilateralism.
But the IMF and the bank, holding meetings here, said they would
help only if all their shareholders were on board.
"The IMF and World Bank stand ready to play their normal role in
Iraq's redevelopment at the appropriate time," a communique issued
after the meeting of the IMF's policy-setting committee in
Washington said. "We support a further U.N. Security Council
resolution," it added.
Committee leaders appeared relieved at the willingness of finance
chiefs to agree on the need for a UN resolution.
"It's an enormously positive step forward," said British finance
minister Gordon Brown, who is also chairman of the International
Monetary and Financial Committee (IMFC).
IMF Managing Director Horst Koehler called the decision "a
Koehler said with the three-week war in Iraq apparently near an
end and Saddam Hussein's regime defunct, he was more optimistic
about the global economy's prospects that just two or three weeks
And, raising the possibility of restructuring or forgiving some
of Iraq's debt to give the oil-rich but crippled country a boost,
the IMFC said: "It is important to address the debt issue, and we
look forward to early engagement of the Paris Club (group of
creditor nations)." Germany, France and Russia are Iraq's three
The U.S.-UN relationship has been strained since the United
States and Britain went into Iraq without UN backing. America had
wanted the World Bank and IMF to take the top role in the
rebuilding. European nations, including Germany, France, Russia and
Britain, wanted the UN in charge.
Muslim countries including Iran, Pakistan, Egypt and Syria, said
in a statement earlier in the week that they too wanted the UN to
lead the rebuilding effort.
Tensions eased when finance leaders opted for a united front,
realizing that public bickering over how to handle the
reconstruction when the Iraqi people sorely need aid would set a bad
tone for further talks on all aspects of post-war Iraq, an official
at the IMFC meeting this weekend told Reuters.
Earlier on Saturday, the Group of Seven finance ministers agreed
at a session on the fringes of the IMF and World Bank gatherings
that the framework for rebuilding Iraq should be based on a new UN
Security Council resolution. The 184-strong IMF membership backed
that view unanimously.
IMF experts have been working for weeks to develop plans for an
Iraqi currency and ways to reestablish commerce in the country after
The idea of some sort of debt forgiveness for Iraq was raised
earlier this week by U.S. Treasury Secretary John Snow who said
Iraqis should not be saddled with debts run up by a dictator. Should
those debts be forgiven or written down, it would set an intriguing
precedent for many other nations who saw their national debts
balloon under despots.
Debt forgiveness advocate Oxfam on Saturday said Snow's call for
writing down Iraqi debts should be extended to African nations, who
it said were "undermined by crippling debts often incurred in
previous decades by undemocratic regimes and dictators who have now
REASON FOR HOPE
With the Iraq leadership crushed after weeks of pounding by
U.S.-led forces, Koehler expressed hope the global economy could
resume stronger growth.
"I am much more optimistic now than I had been two or three weeks
before," the IMF chief told a news conference. "Not only because of
news that the war will be short, but also because of the
confirmation that the (IMF) spirit of cooperation is strong and
intact. This gives me a lot of confidence."
The war build-up, which lasted months longer than expected due to
rows between the United States and Europe over how to proceed,
landed hard on an already bruised global economy.
That "fog of war" was one reason the IMF this week cut its
forecasts for global economic growth this year to 3.2 percent from
the 3.7 percent the lender forecast just last September.
But while Koehler may now be more upbeat, IMF Chief Economist
Kenneth Rogoff has warned against excessive optimism because risks
to the global outlook are still high.
He said the "insidious effects" of the ongoing terror threat may
linger and curb activity for decades.
The Iraq war badly strained the transatlantic alliance with
America and Britain, who led the attack, opposed by France, Germany
and Russia. As the debate grew up over who should lead the
rebuilding effort, Britain crucially decided not to stand behind the
Bush administration position.
One burning question is the creation of a new currency to help
the Iraqi people get back to normal life and Koehler said that, "the
IMF can contribute to this issue, to the plan and the concept, to
build up a solid currency."
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