Donors Offer Georgia $4.5Bln

ReutersBernard Kouchner talking as Gurgenidze listens Wednesday in Brussels.
BRUSSELS -- International donors pledged a higher-than-expected $4.55 billion Wednesday to help Georgia recover from its war with Russia, and Washington called it an extraordinary sign of solidarity at a time of financial turmoil.

The European Commission said the sum pledged at a one-day conference in Brussels included $3.7 billion in public loans and grants and $850 million from the private sector.

"Four-and-a-half billion dollars far exceeds the expectations we had. ... At a time like this, to show such support is something that no Georgian will ever forget," Georgian Prime Minister Lado Gurgenidze told a news briefing.

The head of the U.S. government aid agency said it was a great show of support.

"The message economically and politically is very strong for Georgia. At a time of financial turmoil, this is extraordinarily strong," USAID administrator Henrietta Fore said.

The United Nations and the World Bank had estimated that Georgia, a key energy transit route, would need $3.25 billion over the next three years to help tens of thousands of people forced from their homes and to repair and develop infrastructure.

Russia sent in troops in August after Georgia tried to retake the breakaway, pro-Russian region of South Ossetia. Moscow has since withdrawn soldiers from Georgia proper, but the West accused Moscow of a disproportionate use of force.

Russian bombing raids hit mainly military targets, but Tbilisi also reported damage to civilian infrastructure and risks to its economic growth and investment.

The United States has offered at least $1 billion for rebuilding.

The European Commission, the European Union's executive body, promised up to 500 million euros ($642.8 million) through 2010. It said pledges from the EU's 27 member states and the European Investment Bank brought the EU total to some 863 million euros ($1.1 billion).

The European Investment Bank said it was allocating more than 200 million euros ($256.8 million) for loans to infrastructure projects for 2009 and 2010, including energy projects, rehabilitation of railways and reconstruction of the runway at Tbilisi airport.

Japan's parliamentary vice minister for foreign affairs, Yasutoshi Nishimura, said Japan would provide $200 million.

Tbilisi said that last month international institutions had pledged a loan package of about $1 billion to help soften the impact of the conflict on the banking sector.

Georgia had to scale down foreign investment forecasts, and last month the IMF approved a $750 million program aimed at rebuilding currency reserves and restoring investor confidence.

European Commission President Jose Manuel Barroso said there was a moral imperative to help a neighbor in need, but it was also in the EU's interest.

"Any conflict on Europe's borders clearly has implications for European security and stability," he said. "This particular conflict also has potential costs for Europe in terms of our energy security and our diversification strategy."

Barroso noted that all of Georgia's main energy transit routes had been disrupted during the conflict.

Gurgenidze said about $2 billion of the pledges were in grants and $2.5 billion in loans.

He said the long-term, low-interest loans were easily supportable given Georgia's relatively low public debt.