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Foreign Minister Stephane Dion speaks during a Pledging Conference in Support of Iraq, co-hosted by the United States, Canada, Germany, Japan, Kuwait, and The Netherlands at the State Department in Washington, U.S., July 20, 2016.

Joshua Roberts/Reuters

Defeating Islamic State in the proto-caliphate it has ruthlessly carved out of Iraq and Syria won't end extremist terrorism, Foreign Minister Stéphane Dion said Wednesday as Canada co-hosted a multinational conference aimed at raising $2-billion to rebuild Iraqi cities devastated by the military campaign.

"We need to make the basic distinction between Daesh and the problem we have with terrorism inspired by radical and false interpretation of Islamism," Mr. Dion said, referring to Islamic State by its Arabic acronym.

"Daesh pretends to be a state. They try to conquer villages, towns, cities, and they do it in Iraq, in Syria, in Libya. We are confident that we'll get rid of that. It will be difficult, but we are making progress."

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But the minister warned: "Once it's done, terrorism is still there. Daesh as an organization is likely to survive that, and you have al-Qaeda, Boko Haram. So we'll need to continue to work very hard, all together, with our police, intelligence services and deradicalization efforts, and we'll continue to fight."

Canada, which co-hosted the fundraising conference in Washington, pledged $200-million – or about 10 per cent of the $2-billion target – even before the day-long gathering got under way.

But aid and humanitarian groups warned the ongoing military offensive could add another 1.8 million Iraqis to the more than 3.5 million already driven from their homes by the conflict. Many of them will need assistance for years.

Mr. Dion said the looming humanitarian crisis underscored the need for the international community to provide assistance.

"There is real military progress," he said. " We are freeing villages and town and cities but the problem is that the population is in an awful situation; their homes have been destroyed, there are no schools, no hospitals. So we need to provide humanitarian assistance both now and for the medium and long term."

Foreign and defence ministers from more than two dozen countries – including Canada – in the loose U.S. military coalition battling Islamic State will gather in Washington on Thursday to update the military strategy as the battle for Mosul, Iraq's second largest city, looms. It has been under Islamic State's control since 2014 and many fear an attack on Mosul will create a massive exodus.

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Mr. Dion said Canada's assistance to the Kurdish peshmerga forces in northern Iraq "has been key to prepare for the battle of Mosul" but he would not be drawn into discussing whether additional military contributions would be announced.

RELATED: Canada's changing role in the fight against Islamic State

Winning the ground war against Islamic State without creating a humanitarian catastrophe poses new risks for war-ravaged Iraq and the international community more than 13 years after former president George W. Bush ordered a major military operation to topple Saddam Hussein's brutal regime.

With Islamic State ousted from Fallujah, an uneasy coalition of Shia militias, Kurdish forces and the still-fragmented Iraqi army is moving to encircle and attack Mosul. "The momentum has shifted," U.S. State Secretary John Kerry told the fundraising conference. "The new challenge that we face is securing and aiding in the recovery of the liberated areas."

For more than a decade, military successes without sufficient post-conflict planning, funding and governance has left Iraq riven along ethnic and religious lines. Lise Grande, the United Nations humanitarian co-ordinator for Iraq, warned that the long-term crisis of millions of displaced could reduce the defeat of Islamic State to a Pyrrhic victory. "The military campaign will have achieved a great short-term success, but perhaps little else of enduring impact," she said.

Mr. Kerry said the Iraqi government deserved support even though its critics accuse it of failing to represent the Sunni and Kurdish minorities. He said the international community needed to meet "the urgent demands of a country that is under siege but making progress, a country that is fighting for its future and specifically fighting against the most nihilistic, empty ideology that any of us have witnessed in our lifetimes."

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