November 30, 2005

The World Bank has approved a $100m loan to build schools and reform the educational system in Iraq. This is the first installment of a longstanding offer of up to $500m loans. While Jubilee Iraq does not oppose loan financing for restoring Iraq, particularly when offered at concessional rates, there would be no need to borrow this money if Iraq were not paying more than $100m a month in reperations and with a huge odious debt burden still un-cancelled from the Saddam era.

November 21, 2005

Bulgaria's Finance Minister Plamen Oresharki told Parliament that he has clear strategy on how to "protect the country's interest" as regards the Iraqi debt. Bulgaria, whose current account deficit stands at 10% of GDP despite an IMF imposed fiscal austerity policy, has until now refused to follow the Paris Club agreement.

The IMF Civil Society newsletter reports on IMF Managing Director Rodrigo de Rato's meeting with Jubilee Iraq representative Maysa Ibrahim in the fringes of the Autumn Meetings in September. The IMF account of the meeting is:

"At the Annual Meetings Townhall with civil society organizations (see article), Jubilee Iraq representative Maysa Ibrahim raised questions related to conditions that might be attached to a future IMF arrangement with Iraq—especially the question of fuel subsidies. After responding during the gathering, IMF Managing Director Rodrigo de Rato invited Ibrahim to discuss the issue with him at a follow-up meeting. At the September 26 meeting with de Rato and Iraq mission chief Adam Bennett, Ibrahim asked about the possible removal of Iraq's oil subsidies and how such a step could be reconciled with the democratic process. De Rato acknowledged that conditions in Iraq are extremely difficult. However, he said that the IMF's financial help since September 2004 (under the Emergency Post Conflict Assistance facility) has helped the economy. The IMF will start working on a stand-by arrangement with Iraq, and even though the details have not been worked out yet, he said that there are three priorities. The first is that the Iraqi authorities will need to continue improving the economic data they provide to the IMF. The second is an audit of the Central Bank. The third is a shift from a policy of broad subsidies to a policy focusing government support on the needy. Iraq spends the equivalent of 25 percent of GDP on oil subsidies, or about US$8 billion a year. The major beneficiaries of these subsidies are people who take the oil from Iraq, where gasoline sells for 2 cents a liter, and sell it in Jordan for 50 cents. The current subsidies are not targeted at the poor, but benefit those who are better off, including speculators. De Rato said that the IMF is not asking the Iraqi Government to immediately eliminate the subsidies, but to have a plan to reduce them and use those resources for social policy. Ibrahim argued that oil subsidies were the only means of distributing wealth in Iraq. De Rato said that he was generally very happy to hear criticism on the issue of wealth distribution and encouraged Jubilee Iraq to call on the Iraqi government to devote resources from the subsidies to social programs. Ibrahim said that until now Jubilee Iraq has seen no viable alternative to the subsidies. The group makes the case to communicate to Iraqis what needs to be done in the country and to try to bring the disenfranchised into this process. This buy-in is crucial, Ibrahim said, as the current government is only transitional. If this government pushes reforms through without buy-in, she added, the IMF might be seen as a vehicle of economic occupation. The Managing Director emphasized that the IMF is not asking to change the subsidy system because of budgetary pressures, but to use it for social purposes and in a more direct and targeted way."

November 07, 2005

Iraq has signed bilateral agreements, imprementing hte November 2004 Paris Club agreement, with Belgium and Japan. Belgium has claims of $390m and Japan $7.3bn (690bn Yen) which should be reduced by 80% over 3 years if Iraq meets the IMF economic conditions required by the Paris Club. Jubilee Iraq wonders why it has taken these creditors a year to implement their PC agreement and urges them to cut the debt more deeply, quickly and unconditionally.

November 06, 2005

The UN's watchdog, the International Advisory and Monitoring Board said, after auditing the work done by Halliburton subsidary KBR under the CPA in 2003-04, that the work had been either overpriced or insufficiently documented and the US should reimburse Iraq up to $208m. The IAMB said that the US government should "seek resolution with the Iraqi government concerning the use of resources of the DFI (the Development Fund for Iraq) which might be in contradiction with UN Security Council Resolution 1483".