Iraq's inflation rate has dropped by half over the past three months, but crucial foreign aid is still being stifled by the continued fighting and US-led occupation, a minister said Sunday.
"Inflation is now 28 percent, and has been around that rate for the last three months. Before that, it was around 50 percent," interim planning minister Mehdi Hafez told AFP after a press briefing.
Hafez told reporters Iraq's economy was steadily improving a year after the US-led invasion which toppled the regime of Saddam Hussein and ended more than a dozen years of international sanctions and decades of inefficiency.
"Consumer prices went down by 5.3 percent in February compared with the previous month," Hafez said.
"And that came despite the large improvement in the Iraqi citizen's purchasing power... which reflected the reactivation of demand in many economic sectors," he said.
Hafez said the fall in prices was due to new economic openness, tax breaks, the introduction of new bank-notes that strengthened the currency, better distribution of oil and gas, and higher trade.
But he noted that international donors have been reluctant to fulfill their pledges of help because of the deplorable security situation and the continued presence of the US-led occupation.
"The issue of Iraq's sovereignty is a matter of primary importance for the rebuilding process," he said.
"Some of the donors believe that the presence of a government with international legitimacy can guarantee commitments made to donors in line with international laws," he explained.
Donors "believe that the current (interim government) cannot do this because there is a foreign occupation authority in the country," he said.
US overseer Paul Bremer handed over the keys of the first of Iraq's 25 ministries to the country's interim leadership Sunday in a ceremony aimed at highlighting the gradual handover of power by June 30.
The US Congress has earmarked 18.4 billion dollars for reconstruction in Iraq, more than a third of the 55 billion dollars that the World Bank estimates will be necessary to get the war-torn country back on its feet. Adding to Iraq's new consumer spending power, people's once pitiful wages have started to increase as the economy slowly recovers.
Consumption sky-rocketed after taxes and import duties stopped, slashing the price of foreign goods in stores.
The International Monetary Fund last year put the unemployment rate in Iraq at 60 percent, but recent studies quoted by the US-led coalition say the proportion of people out of work has fallen to 25 percent.