The Bush administration says it will lobby the US Congress and donor nations against including loans in aid packages for Iraq, saying the country can not afford more debt.
"My attitude has been and still is that the money we provide Iraq ought to be in the form of a grant," US President George W. Bush told reporters. "We want to make sure that the constraints on the Iraqi people are limited, so that they can flourish and become a free and prosperous society."
Mr Bush gave no sign of backing off a White House threat last week to veto legislation including loans rather than outright grants, despite support in Congress for making loans part of a pending $20 billion (€17 billion) aid package.
The White House also said it would press other countries to reconsider grants rather than loans for Iraq, after loans comprised a substantial share of $13 billion in aid offered at an international donors conference last week.
Iraq's $100 billion in debt is already the world's highest per-capita. The United States is working separately with other creditors to restructure the debt, the White House said.
Backers of loan provisions say the United States has pressing economic needs of its own and Iraq should repay the costs of its reconstruction with its oil revenues.
The White House position was undercut last Friday, when international financial institutions and donor nations meeting in Madrid included some $8 billion in loans in their pledges for at least $13 billion in aid.
The total aid of $33 billion - including Washington's $20 billion pledge - fell short of the $56 billion the World Bank and United Nations say Iraq needs over the next four years.