Congress ironed out the financing of Iraqi reconstruction as US officials hopefully awaited the Madrid donors conference, reports Khaled Dawoud from Washington
Differences between the Senate and the House of Representatives over the final draft of a $20.3 billion bill requested by US President Bush for Iraq's reconstruction defied the hopes of administration officials that it would be approved ahead of a donors conference due to open in Madrid today.
The approval of the bill would have strengthened the US position to request nearly $15 billion from international donors in Madrid. But the Bush administration said it remained hopeful of receiving substantial funding after several parties, mainly Japan and Europe, announced their donations would exceed original expectations.
After heated debates in which several Republican senators and representatives sided with the Democratic opposition over certain aspects of the bill, Congress provided initial approval on Friday for Bush's request. The opposition considers the bill extravagant at a time when the US budget deficit has reached unprecedented levels.
While the House of Representatives approved the administration's request that the money take the form of grants, the Senate decided that half of the $20.3 billion should be dispersed in loans, to be repaid by the Iraqis at a later date.
The House voted 303 to 125 in favour of a $86.9 billion bill for military spending and reconstruction, but deducted $1.7 billion from the original $20.3 billion requested for the reconstruction of Iraq. The deleted items included a maternity hospital, two maximum-security prisons and 40 garbage trucks.
Meanwhile, the Senate passed a $86.4 billion bill that included the House cuts, but, more important, insisted that almost half the aid for the reconstruction of Iraq be granted in the form of loans. Senate members said they would reverse their decision if Iraq's foreign creditors agreed to erase up to 90 per cent of loans granted to the former Iraqi government.
The White House insisted that it would not accept any major changes to its request, particularly the Senate's proposal for granting half the sum in loans. World Bank and International Monetary Fund officials estimate Iraq's foreign debts to be around $130 billion. Adding another $10 billion would only hamper the country's attempts to revive its economy.
While no opposition was expressed to most of the $87 billion bill, speakers of the House and the Senate said they were particularly cautious about approving reconstruction money. They said the Bush administration request defied promises made before the war that the reconstruction would be financed mainly from its oil wealth, and that the US occupation of Iraq would be short.
Illinois Republican Ray LaHood, a representative, said that, "this is a difficult period for us. It's such an enormous amount of money, and it's not going quite the way we thought it would."
Senator Chuck Hagel, a Republican from Nebraska, said Congressmen were particularly careful in approving any new money for Iraq as the administration had not been open in the past about the cost of the US occupation. "The American people are smart," Hagel said. "If you tell them the truth, they can handle it. But when you lay out expectations that can't be fulfilled, you always run into trouble."
The House and Senate deducted funds earmarked for creating ZIP codes, updating Iraq's telephone numbering system, recuperating marshes drained by the former Iraqi government and building seven new communities, but added $1.3 billion for US veterans' health care benefits.
Republican Senate Majority Leader Bill Frist of Tennessee said he would "fight very hard" to remove the loan stipulation from the draft before presenting it to the US president.
The Senate bill also added $409 million to increase the ranks of US army by 10,000, a measure strongly opposed by US Defence Secretary Donald Rumsfeld, who has been criticised for failing to send enough troops to Iraq to achieve rapid stability after the fall of the Ba'athist regime.
US officials, meanwhile, said they were hoping the Madrid conference would generate generous reconstruction aid, especially after the UN Security Council last week unanimously approved a US resolution calling upon the international community to contribute funds and troops to Iraq.
Officials said they were particularly looking forward to contributions from oil-rich Gulf countries, but admitted they expected little from countries that strongly opposed the war, namely France and Russia. The officials were particularly pleased with Japan's intention to donate $1.5 billion in 2004, with more to come in subsequent years. Britain has offered US$800 million, Spain nearly $300 million and Canada $260 million.
In statements made on Tuesday, Secretary of State Colin Powell also expressed hope that the US would be able to secure more funds for Iraq at the Madrid meeting. "I hope they will come in a generous [spirit] to help the people of Iraq, to make a statement to the Iraqi people that the international community is there with them and for them," Powell told business leaders on the sidelines of the annual Asia-Pacific Economic Cooperation Forum in Bangkok, Thailand.