KABUL Bank on Sunday signed a $100 million grant agreement to improve management of public finances by strengthening the capacity of the core government agencies involved.
President Ashraf Ghani was present when Finance Minister and Eklil Hakimi and World Bank country director for Afghanistan Shubham Chaudhuri signed the agreement at the Presidential Palace, a statement from the bank said.
Under the agreement, a $100 million grant will be provided for the Fiscal Performance Improvement Support Project (FSP) designed to improve management of Afghanistan’s public finances by strengthening the capacity of the core government agencies involved, including Ministry of Finance, National Procurement Authority and Supreme Audit Office.
The financing includes a $25 million grant from the International Development Association (IDA), the World Bank Group’s fund for the poorest countries, and a $75 million grant from the Afghanistan Reconstruction Trust Fund (ARTF), managed by the World Bank on behalf of 34 donors.
It will result in improving development budget execution, increasing revenue collection, and strengthening government capacity to perform more efficiently and effectively.
“Afghanistan has made significant progress in establishing a functional Public Financial Management (PFM) system that has contributed to increasing revenues from about $130 million in 2002 to more than $2.1 billion in 2016,” said Hakimi.
He said the system was supported under the Public Finance and Expenditure Management Law and Public Procurement Law which had helped implement new reforms in public financial management system as a whole.
“These reforms have increased transparency, accountability, budget credibility, improved tax and customs administration and better cash management,” the minister said.
However, despite maintaining aggregate fiscal discipline, Afghanistan’s PFM systems are not fully developed to ensure strategic allocation of resources and efficient service delivery.
Challenges still remain in several areas, including budget execution, improving revenue collection, and government capacity to build accountability, fight corruption, and attract private sector investment.
“Today’s signing reaffirms the World Bank Group’s commitment to support the Government of Afghanistan’s development and reform agenda,” said Shubham Chaudhuri. “We commend the government’s determination to build upon progress to date in several areas, including public financial management, institutional reforms, and revenue generation.”