US curbing pace of Iraq reforms before transfer

Washington has restricted the pace of reforms needed to get Iraq's economy back on its feet, fearing social unrest during the transfer of power this year, a senior official in the US-led administration said on Saturday.
Marek Belka, who heads economic policy for Iraq's ruling Coalition Provisional Authority, said changes have focused on revamping institutions such as the tax authorities and the central bank, not the introduction of basic market reforms such as price liberalisation.
The US and its allies are to hand over control of Iraq on June 30 to a governing council they appointed after toppling Saddam Hussein's regime early last year.
"Reforms which could potentially increase the risk of social tensions in the run-up to the transfer of power are not getting the green light from America," Belka told Reuters in an interview during a brief visit to his native Poland.
"Undoubtedly it will be harder, not easier, to introduce these reforms as time goes by. But we have to remember that in Iraq the social costs of reforms are counted in additional deaths, not more strikes."
Washington is under pressure to quickly relinquish power to the Iraqis who face bitter political and ethnic disputes as well as huge unemployment, estimated by a United Nations/World Bank report at 50 percent of the 26 million population.
"Unemployment is the top problem and requires creating an economy based on healthy entrepreneurship," Belka said, adding that Iraq's vast oil reserves alone would not rescue the economy.
"Nobody should hope the oil sector will miraculously create enough new jobs," said Belka, a two-time Polish finance minister who helped transform the post-communist state from an economic basket case in 1989 to a European Union member as of May 2004.
Belka said ending the food-rationing process would also help foster Iraq's ailing economy.
"Changing the scheme to a sort of cash subsidy would have a very positive impact on Iraq's farmers and food traders - it would give them a market."
Belka said Iraq's central bank has begun controlling the economy's liquidity, while commercial banks are learning how to operate in a market environment. An import tariff has been set as the one of the first elements of fiscal reform. Belka said an estimated $120 billion worth of foreign debt incurred by Saddam's regime also weighed heavily upon Iraq but said the US would remain a leading player in debt talks even if they last beyond the transition of power.
He did not elaborate on the reportedly tough early discussions on the restructuring of Iraq's $45 billion debt to other Gulf states.
US presidential envoy James Baker is due to shortly visit Iraq's neighbours to discuss the subject.