"The total package we are trying to commit by 30 June, which is our target, is over half a billion dollars which is a reasonable chunk of money," John Speakman, the World Bank's senior private sector development specialist, Middle East and North Africa, said in Dubai on Wednesday.

Security problems, the fact Iraq is still occupied and the need to ensure the huge sums were not misspent meant the disbursement had to be limited, Speakman said before Saturday's donor meeting in Abu Dhabi, organised by the UAE finance ministry on behalf of the bank, IMF and other agencies.

"We are talking about very huge sums of money and there is a huge danger that these sums will be misallocated, misspent or not dealt with in a transparent way and that could undermine all future attempts to reform the Iraqi economy because it would set things up in the wrong way."

In Baghdad, Iraq's interim minister of planning and development cooperation, Mahdi al-Hafidh, said last week he hoped $3.5 billion would be allocated this year for reconstruction.

At the Madrid donor conference last October, Iraq secured pledges of $33 billion in loans and grants, which included $18.6 billion promised beforehand by the US.

But the amount fell short of an estimated $56 billion which Iraq needs through to 2007.

Spending priorities

"We are talking about huge sums of money and there is a huge danger that these sums will be misallocated, misspent or not dealt with in a transparent way and that could undermine all future attempts to reform the Iraqi economy"

John Speakman
World Bank official

Iraq has been asked to present the Abu Dhabi conference with a list of priorities on spending.

"Some of those needs on that list are not ones that can be dealt with immediately or short term," Speakman said on the sidelines of a Dubai Chamber of Commerce meeting to guide local companies interested in reconstruction projects in Iraq.

"We have identified in the needs assessment significant sums of money that will be required to manage state enterprise reforms," he said as an example, "but because you have an occupying power you are not able to address that now.

"You have to wait until you have a sovereign government."

He estimated the needs for enterprise reform at about $2 billion.

"You have to be building the capacity for the Iraqi side to absorb that and that is the key focus that we have."

Speakman explained an internal money management system had to be set up in Iraq and rules of procurement made clear.