UNITED NATIONS, 3 October 2003 — Some $35 billion will be needed to rebuild Iraq over the next four years, UN sources said on Wednesday, but this month’s international donors conference in Madrid could end up with only $1 billion to $2 billion in pledges, organizers fear.
The $35 billion figure is based on an assessment of reconstruction needs prepared by the World Bank, the International Monetary Fund and the United Nations in anticipation of the Oct. 23-24 meeting in Madrid, the UN sources said, speaking on condition of anonymity.
The assessment is expected to be unveiled privately in Madrid at a meeting of governments and international agencies preparing for the donors meeting, which is being sponsored by Spain, the United States and the United Arab Emirates. In the audience in Madrid will be representatives of governments that have provided aid for post-war Iraq in the past or expressed an interest in doing so in the future.
But officials stressed the conference was taking only a first stab at raising reconstruction money and that not all the needed money would have to come from other governments. The United States has already pledged to contribute $20 billion toward rebuilding Iraq over 18 months, much of which overlaps with the $35 billion needs assessment. Other money could come from Iraqi oil sales, Iraqi tax revenues and private investment, the officials said.
Nonetheless, a senior European aid official, who asked not to be identified, said he would be surprised if the rest of the world, including Europe, Japan and Arab states combined, came up with $2 billion for the initial one-year period.
The European Union on Wednesday defended its planned offer of just 200 million euros ($234 million) through 2004 as “no drop in the ocean,” arguing that there was a limit to both its own funds and Iraq’s current ability to absorb outside money.
“If we take into account the figures mentioned by (US) President (George W.) Bush, of $87 billion (for reconstruction plus military costs), or $20 billion directly for reconstruction, any figure will probably appear to come up short,” said Foreign Minister Ana Palacio of Spain, which is hosting the Madrid meeting. But she said there would be a high level of participation in the conference and the key message was to show “that the reconstruction of Iraq concerns all of us.” Donors said a big problem, in addition to funds being tight, was the US decision to invade Iraq without UN approval and then run the reconstruction program on its own, depriving governments of a say in how the money will be spent. The UN Security Council is currently weighing a US offer to give the United Nations a broader role in the reconstruction, which could make governments more generous.
Another key question is how much money to expect from Iraqi oil sales.
While production has been crippled by sabotage and civil disorder since the ouster of Saddam Hussein, the White House expects to contribute some $5 billion a year in Iraqi oil revenues toward reconstruction costs, starting in 2005, thereby providing roughly $15 billion through 2007 for reconstruction.