IMF approves $685m loan for Iraq
(AP)
Updated: 2005-12-24 11:13

The International Monetary Fund approved a new $685 million (euro577.62 million) loan for Iraq, giving the country a critical endorsement of its economic performance.

The loan, approved Friday by the lending institution's 24-member executive board, represents the IMF's seal of approval that the Iraq government is taking the proper approach to reviving its wartorn economy. The loan should open the door to more funding from countries that want to participate in Iraq's reconstruction.

"The Iraqi authorities were successful in promoting macroeconomic stability in 2005, despite the extremely difficult security environment," IMF Deputy Managing Director Takatoshi Kato said in a statement announcing the agreement.

The $685 million (euro577.6 million) loan will cover a 15-month period and was awarded under regular IMF procedures to provide assistance to nation's facing economic difficulties. It followed a $436.3 million (euro367.9 million) emergency post-conflict loan that the IMF awarded Iraq in September 2004.

The Bush administration, which is counting on the IMF and World Bank to supply a significant portion of the funds needed for Iraq reconstruction, applauded the IMF loan deal.

"This arrangment will underpin economic stability and help lay the foundation for an open and prosperous economy in Iraq," Treasury Secretary John Snow said in an announcement.

The loan deal was achieved after months of bargining between the IMF and the Iraqi government.

It clears the way for wealthy creditor countries to begin implementing a debt relief program for Iraq that would reduce by 80 percent Iraq's $38.9 billion (euro32.8 billion) in foreign debt held by members of the Paris Club.

In September 2004, the Paris Club, the umbrella group of wealthy countries including the United States that bargains with debtor nations, had announced the debt relief agreement, but it could not go into effect until Iraq and the IMF reached agreement on a loan program.

The Bush administration last year announced it would forgive 100 percent of the $4.1 billion (euro3.5 billion) in debt Iraq owed the United States.

The IMF statement said that the Iraqi government planned to allocate resources in 2006 to expanding oil production as part of an economic program aimed at getting the economy into better shape by boosting growth and restraining inflation.

US President George W. Bush has been giving a series of speeches on Iraq to bolster sagging support for the U.S.-led effort which has had to confront widespread insurgent attacks.

Private economists have said that the new government will have little prospect of achieving its economic goals until the security situation is brought under control.