Independent agency to control Iraqi aid spending in bid to attract donors

AN independent agency will decide how to spend billions of dollars in aid for Iraq in a bid to attract more money from international donors, it was confirmed yesterday.

The United States is said to have taken the decision after many countries refused to give money if Iraq's reconstruction spending was dictated by America.

The new agency will be controlled by the World Bank and the United Nations, according to a report quoting Bush administration and international aid officials in the New York Times.

The move is expected to be announced at a donor conference in Madrid later this week.

It comes after the US resisted giving a significant amount of control over Iraq to other countries in last week's new UN resolution.

It is supported by the head of Iraq's American administration, Paul Bremer, who is overseeing the reconstruction of the war-battered nation from Baghdad.

According to a Bush administration official, Mr Bremer said: "I need the money so bad we have to move off our principled opposition to the international community being in charge."

The move comes amid more troop deaths in recent days. Two US soldiers were killed in an ambush in Kirkuk over the weekend and another was reported killed near Fallujah yesterday.

A World Bank official told the newspaper that European countries were concerned that the Coalition Provisional Authority (CPA) was the "decision-making authority in Iraq".

The official said: "For political reasons, they don't want their funds to be perceived as being commingled with funds controlled by the CPA. They want their own say over how the money is spent."

The new agency could offer reconstruction contracts to companies worldwide.

This would avoid controversy like that seen when Halliburton, with links to US Vice President Dick Cheney, was awarded a major contract in Iraq.

Donor countries could also specify that their own companies carry out work.

So far the World Bank is considering loans of €450m for Iraq in each of the next two years.

The European Union has committed €200m and Canada about €180m.

President Bush is seeking over €80m in American money for Iraq.