sional Authority (CPA), a leading UK aid agency has calculated.

But only a fifth of those development funds have been accounted for, figures unearthed by Christian Aid show.

And that missing four billion dollar "black hole" will double by the end of the year unless the CPA’s accounts are made public.

The allegations emerged as British aid agencies claimed millions of pounds of government aid cash will have to be diverted from poor countries in South America, Eastern and Central Asia to rebuilding Iraq.

And they threaten to undermine a conference in Spain, where the United Nations and World Bank hopes to raise £20 billion to pay for the reconstruction of the country following the toppling of Saddam Hussein.

Prime Minister Tony Blair was today challenged by the charities to account for the missing $5bn, mainly from oil revenue, as donors conference involving 60 countries got under way in Madrid.

A spokesman for the CPA denied that the money had been lost or misused and promised that all the cash would be fully accounted for.

The Mr Blair and US President George Bush last week won a new UN resolution calling for international contributions of money and troops.The donations will go into a new fund overseen by the UN and the World Bank.

But failure to show where the existing cash has gone will fuel suspicion among Iraqis that large amounts are being creamed off by US firms given contracts to rebuild the country, Christian Aid said.

One senior European diplomat told the charity: "We have absolutely no idea how the money has been spent.

"I wish I knew, but we just don’t know. We have absolutely no idea."

Roger Riddell, Christian Aid’s international director, called the situation "little short of scandalous". He said: "The British Government must use its position of second in command of the CPA to demand full disclosure of this money and its proper allocation in the future.

"This is Iraqi money. The people of Iraq must know where it is going and it should be used for the benefit of all the country’s people - particularly the poorest."

The UN transferred $1 billion from its old Oil for Food Programme to the new Development Fund For Iraq earlier this year.

The same UN resolution was supposed to set up an International Advisory and Monitoring Board to oversee the accounts.

It has not materialised and the only funds accounted for so far are one billion dollars spent by the Programme Review Board.

However, the CPA has received $2.5bn in assets seized from Saddam Hussein’s regime in Iraq and abroad, Christian Aid reveals.

And it calculates oil revenue has contributed at least another $1.5bn since the war.

Officials in Madrid admit that the latest allegations will make it even more difficult to raise the £20bn needed to rebuild Iraq and fuel potential donor countries’ suspicions that the main beneficiaries of the reconstruction programme are big US firms.

They expect little more that £3 billion to be raised.

And further concerns have been voiced over the news that the UK is reducing overseas aid to South American, Eastern European and central Asian countries because of the cost of rebuilding Iraq.

A group of UK overseas aid charities said at least £100 million would have to be diverted to help pay for Britain’s commitment to provide £267 million over the next two years to deal with the aftermath of the Gulf War.

International Development Secretary Hillary Benn admitted the shift in resources today but said that Iraq now qualified as a low income country.

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Wealthy Donors Asked to Dig Deep for Iraq Rebuild

By Alexander Smith

Reuters

Thursday 23 October 2003

MADRID - The United Nations and Iraq's governing council appealed to wealthy nations on Thursday to dig deeper in their pockets to raise the $55 billion needed to rebuild a country torn by years of war, sanctions and neglect.

U.N. Secretary-General Kofi Annan opened a two-day donors' meeting with a call for more cash and a warning that wrangling between the United States and its critics over a timetable for handing sovereignty back to Iraqis could lead to more suffering.

Hours earlier, a leading British aid agency accused Iraq's U.S. and British administrators of failing to account for at least $4 billion meant to go toward rebuilding the country.

"I appeal to donors to give and to give generously and for those contributions to be provided in addition to existing commitments," Annan told the Madrid meeting.

"We all look forward to the earliest possible establishment of a sovereign Iraqi government but a start on reconstruction cannot be deferred until that day," he added.

Conference sponsors have been careful not to set a target, but behind the scenes delegates spoke of arm-twisting of countries reluctant to stump up the billions Iraq needs.

So far $2-3 billion has been pledged in addition to the $20 billion the United States plans to contribute over 18 months.

Some countries that opposed the U.S.-led invasion of Iraq are reluctant to pay with France, Germany and Russia promising no money beyond what they already have pledged.

"There have been last-minute attempts to ramp up the money and all the pressure has been on the European Union," said a senior official accompanying the Iraqi delegation.

British Prime Minister Tony Blair, one of the main backers of the Iraq war, added his voice to the calls for funds.

But a German official at the meeting said more money would not be forthcoming until Berlin could be sure its aid would be properly accounted for.

AID GROUP SAYS $4 BILLION MISSING

Britain's Christian Aid said the U.S.-led Coalition Provisional Authority (CPA) had not publicly detailed cash flows since ousting Saddam Hussein in April.

All but $1 billion of more than $5 billion of Iraqi funds had disappeared into a "financial black hole." It said the figures were a conservative estimate of oil revenues collected by the CPA since the war, prewar oil revenues from the U.N. "oil-for-food" account and seized assets of Saddam's government.

The U.S.-led CPA has denied it has failed to account for the money.

Christian Aid said failure to account for the money would fuel suspicion that funds were going to U.S. firms given contracts to rebuild the country.

Iraqis did their best to persuade more than 300 companies and business groups gathered alongside the politicians that Iraq could be prosperous once again, if given help.

"I don't want to depict a gloomy picture. But we need a kickstart, we need to be given a helping hand," said Mowaffak al-Rubaie, a representative of the Iraqi Governing Council.

Thousands of Iraq's 26 million people lack everything from access to clean water to basic security, he said.

Help would allow a country with the world's second largest oil reserves to restructure into a lucrative market for entrepreneurs, Iraqi Trade Minister Ali Allawi said, adding Iraq could be self-sustaining in five to eight years.

The World Bank and United Nations studied 14 sectors of Iraq's economy and estimated they need $36 billion over four years. A report by the CPA found an additional $19.4 billion is needed to rebuild sectors not covered in the World Bank report.

For the EU External Relations Commissioner, the conference was an opportunity to bring Iraq back into the developed world.

"In the early 80s Iraq had a GDP per head the same as Australia's. Two decades of Saddam Hussein then reduced it to the same sort of figure as the Congo. So it just indicates the potential resources of Iraq...," Chris Patten said.

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