WB and IMF say they are ready to rebuild Iraq

Staff Report

WASHINGTON: The World Bank and the International Monetary Fund (IMF) both affirmed Thursday their readiness to take what steps were necessary for the economic reconstruction of Iraq as soon as they were duly authorised to do so by their governing boards.

In separate news conferences at IMF headquarters, World Bank president James Wolfensohn and IMF managing director Horst Koehler said that they “stood ready” to make their contributions to the reconstruction of Iraq.

Most of the questions asked of the heads of the twin institutions by American and foreign journalists who are here for the annual Spring meetings of the two development financing giants related to Iraq.

Wolfensohn, whose press conference took place first, said that the Bank was ready and it would go into the task, once an “authorising environment” was available with vigour, putting to use its extensive experience in rebuilding postwar economies, such as that of Kosovo. He said the Bank would like to work with the UN again. However, what it would first have to establish is the size and nature of the effort. As soon as authorised by his Board, the World Bank chief said, he would send a fact-finding mission to Iraq. Since the Bank could only lend to recognised states and governments, it would need to be assured that there was a government in place in Iraq. The United Nations would appear to be the agency to make that determination, he suggested. He pointed out that the situation in Iraq was “complicated” by the existence of Security Council resolution 661 on the basis of which sanctions were originally imposed against Iraq. He said he would be approaching his Board for the necessary instructions.

IMF managing director Horst Koehler told the press that the UMF was ready to help Iraq, but would need to be authorised. He hoped that the international community would take a cohesive position on the issue of Iraq’s reconstruction. He said the IMF would have to do a careful stocktaking. He expressed the hope that the war would be short. He said all responsible actors should bear in mind that the most important thing in the present situation was the welfare of the people of Iraq. That must come first. He said the IMF was equipped to deal with the task ahead and would hope to be engaged on it in association with the World Bank. First of all, he said, the IMF would have to know what was at stake and what was required to be done. He added that as soon as “physical security” could be guaranteed, the Fund would send a fact-finding mission to Iraq. It would also be ready to provide technical assistance.

Koehler said the last consultations under Article IV of the IMF charter with Iraq were held in 1980 and the last IMF mission to Iraq was sent in 1983. This should show that the Fund was not really aware of the ground realities in Iraq. “We don’t know what the situation is, but we would like to team up with the Bank and obtain reliable data, complete a stocktaking exercise, so to speak,” he added. He said, “For Iraq, I urge the international community to reach cohesiveness on the necessary framework for the rehabilitation of Iraq. As part of this, the IMF stands ready to contribute in its areas of competence.”

Wolfensohn who answered questions after a short orally delivered statement said it was impossible to determine without going there how much damage Iraq had suffered. “It depends on which television channel you watch,” he added, a reference to the disparity between what has been seen of the war on American television and how it has been projected on Arab and other TV channels. In answer to a question, he said that Iraq owed the Bank $82 million but he was confident that once the Bank got involved with the situation, a mechanism would be found to get this problem out of the way, given Iraq’s “significant cash flows.” He confirmed that Iraq was not on the agenda of the weekend meeting, but left little doubt that it would form an important part of the discussions.

Wolfensohn said we should not lose sight of “the other war” focused as we were on the one raging in Iraq. The “other war,” he added was the war on global poverty. The issue of poverty was a fundamental one and simply could not be put aside. It would figure prominently at the meeting of finance ministers gathered here for the Development Committee meeting. He made reference to the grave situation arising out of the spread of HIV/AIDS and worsening health, hunger and sanitation issues in many countries of the world. He added that there was an emerging consensus in the Bank’s governing board that the presence of the Bank must be strengthened in Africa where there were only single offices dealing with a large number of countries.

Wolfensohn said developing countries had been affected by the global downturn of the last 10 years. Consumer and investor confidence was low, as was economic activity. He said one of the Bank’s concern was international trade which had run into “procedural setbacks” following Monterey and Doha. Reacting to a newsman’s observation that every year the Bank made the same well-intentioned statements about alleviating poverty without any real change coming about, he said that was not entirely true because there has been some success on this front in East and South Asia and “substantial advances” had been made in the last decade. South Asia, in particular, had made good progress and India had shown a growth in its GDP. The situation in “adjacent countries” has also shown “slow improvement.” He agreed that the situation in Africa was dire, characterised by the rampaging HIV/AIDS epidemic and Latin America had not shown any economic growth. “The World Bank cannot do it alone,” he added. He also reiterated the Bank’s commitment to Afghanistan and praised the leadership of President Hamid Karzai and his finance minister whom he had met earlier in the morning.

The IMF chief Horst Koehler said the Spring meetings were taking place at a “difficult time” and there was need to take stock of the world economy and jointly define the way forward. “Nobody can estimate with any precision the lasting costs of the war in Iraq. But so far, the risks of the war for the global economy have remained contained, and in particular the concerns about rising oil prices have not materialised,” he added. He said economic recovery was going to reassert itself in the second half of this year. There was need to restore the confidence of the consumers and investors worldwide. This could only be done through the “credible demonstration of international cooperation.”

Koehler said advanced countries would need to gear up their policies vigorously towards growth. The international community would need to reinforce the collaboration that has served it so well in the past. The development agenda would have to be strengthened as the most “appropriate antidote” to the risk of fragmentation among nations. He added that the Fund was ready to contribute to a broad-based effort to restore confidence and growth to the global economy. He noted that of the 184 member countries of the Fund, many had strengthened their economic fundamentals in recent years and were now better equipped to handle external shocks. “Our financial position, evidenced by a one-year forward commitment capacity of over $80 billion, is strong, and our existing facilities and instruments are sufficiently flexible to deal with the most conceivable eventualities,” he added.

He concluded by asserting that “the spirit of cooperation among the 184 members of the IMF was intact and strong. The greater the uncertainty, the greater the need to collaborate. Now more than ever is the time for the international community to draw on its strong record of cooperation. We have policy options. Let’s seize them. The Fund is committed to do its part.”

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