[stop-imf] Jubilee Iraq: Lobbying for Iraq at IMF/Bank meetings

[robert weissman]

From: 	Justin Alexander <justin@jubileeiraq.org>
Sent: 10/1/04

This Jubilee Iraq update is coming from the belly of the IMF in
Washington, where we are lobbying at the World Bank and IMF Autumn
meetings. We've posed questions on Saddam's odious debt in public to UK
Chancellor Gordon Brown among others, and also had a number of informal
discussions with Bank and Fund officials and Paris Club ministers. We've
been briefing the press and have met with the Interim Iraqi Government
delegation here led by Governor Sinan Al Shabibi. Two major developments
in recent days are the approval of the $437m IMF loan and Kuwait's
rebuttal of Richard Armitage's suggestion they provided grants not loans
to Saddam.

Media wishing to contact Jubilee Iraq in Washington call +44 7813 137171
or reply to this email.

Brown refuse to respond to Allawi's charge on odious debt
At a dialogue with civil society at the IMF/WB Autumn Meetings, Jubilee
Iraq asked British Chancellor Gordon Brown whether he accepted Interim
Prime Minister Iyad Allawi's assertion that the vast majority of
Saddam's debt is odious. Brown refused to answer, but did say "We
support, and I hope that there will be soon a consensus ... that a vast
majority of the debt of Iraq is wiped out, at least 80%." (webcast of
meeting, Jubilee Iraq question at 38th minute followed by responses,
transcript below).

South African Finance Minister Trevor Manuel engaged with the issue of
odiousness: "It's a very tough call. Who will be the determiner of
whether debt is relieved? Who would be the arbiter? If that should
happen in Iraq why should it not happen in the Democratic Republic of
Congo?" Jubilee Iraq agrees and supports a fair arbitration process for
all countries which may have some odious debt. The "determiner" should
be a panel of arbitrers from the debtor and creditors along with mutual
agreed neutrals. There is considerably case law on arbitration such as
the US-Iran Claims Tribunal, and indeed the Taft Arbitration on British
loans to former Costa Rican Dictator Tinicoco.

James Wolfenson (World Bank) and Rodrigo de Rato (IMF) did not comment
on Iraq.

Full transcript:
"This is tying in with corruption. I'm Justin Alexander from Jubilee
Iraq, which is a coalition of Iraq economists and Western NGOs. I think
all four of our speakers have spoken in the recent past about the need
for debt cancellation for Iraq. However, the basis has always been that
of debt sustainability, whereas Iraqis unanimously argue that--and I
quote Ayad Allawi, the current interim prime minister, in The
Independent a few weeks ago--the vast majority of this debt is odious.
This funded Saddam's suppression and his corruption. And we have talked
personally with over 30 Iraqi political parties who agree with this. And
now can I ask this, particularly of Mr. Brown and Mr. de Rato, but
others can answer. Do you think it is important that the origins of
these loans are taken into account, because if they are n! ot, there is
moral hazard for lenders in the future to regimes similar to Saddam's."

Trevor Manuel: "On the--let me deal with the issue of debt cancellation
and odious debt. It's a very tough call. Who will be the determiner of
when a debt is odious? Why should particular countries in instances be
treated in a particular way? If that should happen in Iraq, why should
it not happen in the Democratic Republic of the Congo under Mobutu Sese
Seko? And if that be the case, how do you begin to draw the line? Who
would be the arbiter? Would it be one country--the largest shareholder
in the World Bank and IMF who would be the arbiter of these kinds of
things? I think that we must have rules that are equally applied in all
aspects of the work of the Bank and Fund and only in that way would we
be able to deal with issues that support development, that don't in
fact, as you correctly point out, create moral hazard."

"On Iraq, can I say that we support--and I hope there could be sooner
consensus on what was being asked for--that the vast majority of the
debt of Iraq is wiped up. The IMF analysis suggests that 80 percent at
least wiped out is essential, but of course the issue in Iraq is
bilateral debt, and only if I'm right, half a billion of $124 billion of
debt is multilateral debt."

Kuwait rebuffs Armitage on loan/grants question
Kuwait's foreign minister Sheikh Mohammad has dismissed a suggestion by
US Deputy Secretary of State Richard Armitage that the Gulf funds to
Iraq were grants to help Saddam in the Iran-Iraq war. "That's his own
belief ... but we consider them to be debts," Sheikh Mohammad told
reporters at Kuwait airport on Thursday upon his return from the UN
General Assembly.

He continued: "Armitage's demand for the countries of the world to drop
Iraq's debts is the position of the United States. On the other hand,
there's a French-Russian position not to drop the Iraq debts but to
reschedule them instead. Also, there are a lot of countries in the
middle of the road between those two positions as they want ... dropping
part of the debts and rescheduling another part." Of the Gulf war
reparations, he said: "This is not robbery, it's about rights ... There
are committees and a mechanism to estimate the losses for those who have
documents."

Iraq's Foreign Minister Hoshiyar Zebari was quoted by Kuwaiti daily
al-Rai al-Aam as saying Baghdad was sure of Kuwait's generosity on the
debts. Asked if he raised the issue in New York with his Kuwaiti
counterpart, Zebari said: "Frankly, I did not because we're confident
Kuwait's contribution will be generous, either at the donor nations
conference in Tokyo or pertaining to its commitment to what will be
decided by the Paris Club."

Congress approves FOS bill
Late this evening US Congress approved the Foreign Operations Spending
Bill, which included a diversion of $360m, from the $18bn appropriated
last year for Iraqi reconstruction, to pay for Iraqi debts to the US (or
finance debt relief, which ever way you choose to look at it).

IMF approves $437m loan
The IMF shareholders met today and approved an $436.7m loan for Iraq
under its ''emergency post-conflict assistance'' program, which
represents 25% of Iraq's IMF Quota of SDR 1.19bn (about $1.75bn). IMF
Deputy Managing Director Takatoshi Kato called the initial IMF
assistance ''a crucial step toward putting Iraq back on the path to
economic stability and strong, sustainable growth.'' He said it was
hoped the money would serve as a catalyst to support from other
countries and help Iraq obtain debt relief. At an international donor's
conference last October, IMF officials indicated Iraq could receive
between $2.5-4.25bn in loans from the IMF over the next three years. At
the same conference, the World Bank indicated it was prepared to lend
$3-5bn over the ! next five years. Treasury Secretary John Snow said
"This action is an essential step on the way to resolve the Iraqi debt
by the end of 2004."

While Iraq certainly needs resources to finance reconstruction, the
devil is in the details and Jubilee Iraq is very concerned about the
"conditionalities" which will come with this loan which could have a
negative social impact and reduce Iraqi sovereignty. The IMF's press
release explains that Iraq must have "a prudent fiscal policy that aims
to limit spending to provid[e] the minimum adequate level of social
support." It insists on: "The implementation of key structural reforms
to transform Iraq into a market economy.. in which progress must be made
in 2005... including tax reform, financial sector reform, restructuring
of state-owned enterprises."