The World Bank and the International Monetary Fund are to pull their staff out of Iraq after the devastating bomb attack on the UN headquarters in Baghdad, a US official said on Wednesday.
Both organisations are key players in efforts by the US-led coalition running Iraq to rebuild its shattered economy.
The institutions, which had sent assessment teams to Iraq to start the process, are expected to lend billions of dollars to help kickstart the country's banking system and get the economy functioning again.
The attack has sent shockwaves around the Middle East and Asia, further disrupting US efforts to recruit more foreign peacekeepers, diplomats said on Wednesday. Some countries that had been considering sending peacekeeping troops to Iraq — such as India and Pakistan — might heighten their reluctance after the bomb blast, analysts said.
Government leaders in several countries approached by the US to contribute troops have sought a UN resolution authorising troop deployments. But some US officials have speculated that such requests are delaying tactics, as potential participants assess the security situation.
The US on Wednesday sought to play down the attack's impact on security in Iraq. "The security problem now has got a terrorist dimension, which is new, but the rest of the security is basically in better shape than it was three months ago," said Paul Bremer, the US administrator.
"It is true that we're taking some casualties among the coalition forces, but that's largely coming from a small group of bitter-enders," Mr Bremer told CBS.
Kofi Annan, the UN secretary general, also sought to present a determined front on Wednesday, saying the UN would continue its work in Iraq despite the loss of several of its staff in the explosion, including Sergio Vieira de Mello, its top representative there. "We will not be intimidated," he said in Stockholm.
The bombing could have the most political impact on General Pervez Musharraf, Pakistan's pro-US military ruler, who has decided to seek a parliamentary vote on whether to send about 12,000 troops to Iraq.
Pakistani officials said the decision to refer the matter to parliament, rather than simply order peacekeepers in, is a shift for Gen Musharraf, who faces growing pressure to rebuff US requests.
However, Tayyip Erdogan, Turkey's prime minister, remains committed to pushing approval for a peacekeeping force of up to 30,000 troops through parliament.
Jack Straw, the British foreign secretary who is travelling to the UN headquarters in New York today, said the US and UK were "open-minded" about a new resolution expanding the UN's mandate. US officials, however, have indicated that they are not enthusiastic about handing security operations over to the UN.
Additional reporting by Metin Munir in Istanbul and Edward Luce in New Delhi.news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&ciE-mail this article