IMF: Rebuilding Iraq must be global effort

WASHINGTON, April 10 (UPI) -- The international community must work closely together to rebuild Iraq and not leave it solely up to the United States and Britain, the head of the International Monetary Fund said Thursday.

Speaking ahead of the spring meetings of the IMF and World Bank this weekend, IMF Managing Director Horst Koehler said it was in the interest of global security to ensure the prosperity of Iraq as it emerges from decades of a dictatorship. At the same time, he acknowledged that reconstruction would not be easy.

For one thing, little is known about Iraq's financial status.

"There needs to be stock-taking ... what are its debts, what are its assets, what are its liabilities," Koehler said.

Indeed, the IMF has not had the opportunity to conduct a full review of the country's financial situation since 1980, and no staff economist has been to Iraq since 1983. Thus, it's near impossible to assess Iraq's financial condition and the new government will struggle to manage the budget, set up a viable currency system and create a fair, effective tax system.

Although Iraq has remained an IMF and World Bank member, it's failed to repay debts to these institutions. It has also racked up hundreds of billions of dollars in foreign debt over the years. That debt could hamper any efforts by a new government to gain credit from the international community, since countries need to show a solid plan to handle their debts before they can get more loans from the IMF and World Bank.

"We have to lend to somebody who is willing to repay," World Bank President James Wolfensohn told reporters.

There is already speculation that some of the world's richest countries might be prepared to forgive at least some of Iraq's debt accumulated under Saddam Hussein.

U.S. Treasury Secretary John Snow said Thursday that the Group of Seven industrialized nations (France, Germany, Italy, Britain, Canada, Japan and the United States) that Iraqis should not be responsible for the debts incurred by Saddam's regime.

"Certainly the people of Iraq shouldn't be saddled with those debts incurred through the regime of the dictator who's now gone," Snow said in a television interview, adding that the G7- should consider offering some debt relief to the country.

G-7 finance ministers and central bankers meet Friday evening and Saturday morning, ahead of the IMF conference.

The Bush administration has made clear that Iraqis would by and large be financially responsible for their reconstruction, namely through sales of their oil. The country's natural resources would make the process of rebuilding considerably different from other post-conflict nations such as Afghanistan, which has depended solely on international financial contributions to get back on its feet after the retreat of the Taliban.

There's no consensus yet on how Iraq's oil reserves, the second-largest in the world after Saudi Arabia, will be controlled and distributed.

But it's clear that the new government must have full support from the United Nations before international financial agencies resume lending to the country.

"We are limited to dealing with recognized governments and that is a decision for the United Nations to take," Wolfensohn said.

Koehler suggested that diplomatic disputes such as the U.S.-led war on Iraq and how best to help the Iraqi economy recover could be resolved.

"The spirit of cooperation (among nations) is intact and strong," he said, adding given the urgency of the situation, it would be necessary for the international community to work together closely and quickly.