A destroyed house outside Tskhinvali testifies to the magnitude of the reconstruction task [AFP]

The total was agreed at a conference in Brussels and exceeded the $3.25bn that had been asked for following an assessment made by the World Bank and the United Nations.

Of the aid, $3.7bn will go towards public expenditure, to fund mostly social and construction programmes, and $850m to the private sector to spur economic growth.

The money will be transferred through the World Bank and EU institutions over the next three years.

Georgia 'solidarity'

Benita Ferrero-Waldner, EU external relations commissioner, said: "This is most important, not only because we want to support physically and directly the Georgians, but also because it is a political symbol of solidarity with the Georgian people."

The US had already offered at least $1bn to help Georgia rebuild after Russian troops and tanks crushed the country's armed forces and damaged infrastructure.

Yasutoshi Nishimura, Japan's deputy foreign minister, said Japan had pledged $200m in aid to Georgia, at the talks on Wednesday.

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 Moscow has since withdrawn soldiers from Georgia proper, but the West accused Moscow of a disproportionate use of force.

South Ossetia

So far, little has been said about funding for reconstruction in South Ossetia, which was at the heart of the conflict.

Dmitri Babich, an analyst from Russian Profile magazine, said: "The only nation that has so far pledged to help South Ossetia is Russia.

"The amount of money is very high, even by Russian standards," Babich said, adding that it was about $20-30m.

"Although South Ossetia has only 10-20,000 people, and Russia has 1,000 times more people, Russia is the only country helping South Ossetia."

Wednesday's ministerial-level meeting will be co-chaired by the European Commission and the World Bank.

More than 70 countries were invited as well as international financial institutions.

Referring to the tens of thousands displaced by the conflict, Lado Gurgenidze, Georgia's prime minister, said: "We clearly have issues related to the recovery of the direct civilian damage.

"We need to resettle them, give them livelihoods, rehabilitate the damaged areas - this costs a lot of money, the kind of money we, on our own, cannot afford."

Foreign dependence

Resource-rich Georgia, a key energy transit route, depends on foreign capital for growth and has enjoyed an investment boom since Mikheil Saakashvili's 2003 election as president.

Russian troops move along a road outside the Georgian town of Zugdidi in September [AFP]

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

A UN and World Bank-co-ordinated assessment has estimated that Georgia needed $3.25bn over three years to cover budget support, social sector support and infrastructure development.

The central bank in Tbilisi said last month that international institutions had pledged a loan package of about $1bn to help soften the impact of the conflict on the banking sector, which has had to scale down expectations of foreign investment.

It said institutions ready to help included the European Bank for Reconstruction and Development, the World Bank's International Financial Corp, Germany's KfW and the Asian Development Bank.

Last month, the IMF approved a $750m loan programme aimed at rebuilding Georgia's currency reserves and restoring investor confidence.

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