Iraqi officials and their creditors talked up efforts to rebuild the strife-torn economy in Singapore on Tuesday, while recognising the need to tackle ills ranging from corruption to inflation.
Efforts to stabilize the economy, and to promote the United Nations-supported International Compact on Iraq (ICI), are this week taking place simultaneously in Singapore and New York, after preparatory talks in Abu Dhabi on 10 September.
In New York, UN general secretary Kofi Annan warned ahead of the UN General Assembly that Iraq is in danger of sliding into “full-scale civil war”.
In Singapore, World Bank president Paul Wolfowitz – one of the architects of the 2003 US-led invasion that toppled Saddam – said: “The compact will support essential socio-economic reforms that can transform Iraq and enable it to fully integrate into the regional and global economy.
“Ultimately, the success of the Compact will be measured in terms of the government’s ability to meet the needs of Iraq’s people through sustained development and fiscal self-sufficiency.”
Iraq’s finance minister, Baker Jabr al-Zubaidy, briefed donor governments and organisations on tackling the country’s Saddam Hussein-era debt, while Russian finance minister Alexei Kudrin said Moscow would formalise the cancellation of $10 billion-worth of Iraqi debt within “a few months”.
Officials were still working out details, Kudrin said after talks with Jabr al-Zubaidy – but once concluded Baghdad would owe Russia only $1 billion, including interest, he said.
Al-Zubaidy, who travelled to Singapore with Central Bank of Iraq governor Sinan Al-Shabibi, said: “We are determined to conclude the settlement of debts [to Paris Club governments] in coming months.” He hoped the Compact could be agreed at an international donor conference as early as November.
US Treasury Secretary Hank Paulson sought to drum up support for the ICI, whose lead backers also include Canada, the United Kingdom and European Commission. He used the Singapore platform to call on Iraq’s neighbours to provide strong support – as Saudi Arabia and Kuwait have done from Lebanon after its midsummer war. “This compact won’t be done without the support of the Gulf,” Paulson told the group.
The EC said it was prepared to discuss a new trade and co-operation agreement with Iraq’s elected government.
In a statement issued in Singapore, the Iraqi delegation promoted a “vision [that] seeks to build a secure, unified, federal and democratic nation, founded on the principles of freedom and equality and providing peace and equality for all its people.”
Al-Shabibi adopted a realistic tone in comments to donors gathered in the Suntec centre. His “first concern” was to maintain confidence in our national currency, and…take any and all measures necessary to curb inflation, in an appropriate manner and at an appropriate time.”
Al-Shabibi added: “Unfortunately, a number of factors, including disruptions in the supply of key commodities, the continuing security challenge, and the problems the real sector faces in producing enough output to absorb money entering the Iraqi economy have driven up prices in the last year.”
The prices of all goods used to measure inflation – including food, fuel, medicines and transport – have spiralled upwards as the country has remained in security crisis, and amid widespread criticism of mismanagement and corruption. The Iraqi statement said Jabr al-Zubaidy “expressed strong commitments to tackling corruption and building effective national institutions, and encouraging domestic and foreign investment.”
Al-Shabibi “made clear that Iraq takes seriously the inflation threat and will move to address it firmly.”
One recent estimate put consumer price inflation at around 70%. Iraq is the only country listed in the IMF’s World Economic Outlook for which no inflation figure is given. The central bank raised interest rates to 12% from 8% in July, and began bi-weekly auctions of securities in August in efforts to reduce excess liquidity, the governor said.
“But because the recent data suggests that measures taken thus far have not been sufficient to counter inflation, both stronger monetary actions are being actively considered, and efforts to expand our range of monetary tools are being pursued,” Al-Shabibi concluded.
Baghdad is also working with the IMF and World Bank to restructure “moribund state-owned banks”, he observed.