IMF will monitor use of its loan by Iraq: Rato

The International Monetary Fund, which has just approved a 436-million-dollar emergency loan to Iraq, said Thursday it would now work with the government there on a possible longer term credit arrangement.
"We will be working with the Iraqi government," IMF Managing Director Rodrigo Rato told a press briefing here.
"And we will start looking at the possibility of a standby program," he said, referring to an IMF arrangement under which funds are made available to governments that commit themselves to economic reform projects and targets.
Rato also said the Fund would "monitor" the use of the 436-million-dollar "emergency post-conflict assistance" that was approved by its executive board for Iraq on Wednesday.
But he stressed there was nothing unusual in such vigilance, which is applied in all such cases. Iraq's current interim government is un-elected, its members having been appointed by the United Nations ahead of national elections scheduled for January.
The assistance became available after Iraq on September 22 paid off its overdue financial obligations to the Fund, which totalled 81 million dollars.
The IMF executive board said in a statement Thursday the emergency aid was "a sign of support for Iraq's economic reconstruction efforts through 2005" and was also aimed at helping "catalyse additional international support, including debt relief."
IMF experts have estimated that Iraq could eventually be eligible for around 850 million dollars in emergency reconstruction assistance from the Fund.
Negotiations to secure the loan approved Wednesday took place outside Iraq because of the breakdown in security there and IMF officials say there are no current plans to send Fund staff to Baghdad.
Earlier this month, financial sources in the French capital said the Paris Club of creditor nations had agreed in principle to a major reduction of Iraq's outstanding debt, with a final announcement expected before the end of this year.
Officials from the Paris Club's 19 members, including the United States, France, Russia, Germany and Japan, had met and agreed to cut Iraq's estimated 120-billion-dollar debt by at least 50 percent, one source said.
Paris Club members hold about 47 billion euros of Iraq's debt including interest, with most held by countries in the Middle East. Saudi Arabia is Iraq's largest foreign creditor.
Prospects for alleviating Iraq's debt burden are likely to be discussed on Friday at a meeting here of finance ministers and central bankers grouped in the G7 - Britain, Canada, France, Germany, Italy, Japan and the United States.