Global aid critical to Afghan self-reliance: IMF

KABUL will remain vital as the country navigates the difficult path toward self-reliance, says an International Monetary Fund (IMF) official.

Christoph Duenwald said in a statement Afghanistan continued to make good progress in implementing the programme supported by the Extended Credit Facility (ECF) arrangement. The facility expires at the end of this year.

Duenwald led the IMF team that conducted discussions for the 2019 Article IV consultation and the sixth and final review of Afghanistan’s economic programme supported by the ECF arrangement.

“All end-June 2019 performance criteria and end-September indicative targets were met, and most of the structural benchmarks are on track to be met by their end-October and mid-November deadlines,” he said.

The IMF Executive Board is expected to discuss the sixth review under the ECF arrangement along with the 2019 Article IV consultation in December.

On the completion of this review, $7.4 million will be made available to Afghanistan, bringing the total disbursements under the arrangement to about $44.4 million.

The IMF team underlined the need for reforms to strengthen institutions, deepen financial inclusion, boost the business climate, combat corruption and harness a peace dividend -- should that opportunity arise.

“The financial support of the international community remains critical as the country navigates the difficult path toward self-reliance,” the statement added.

Insecurity and violence, combined with political uncertainty and weather events, had kept Afghanistan’s real GDP growth rate below 3 percent in recent years.

Insufficient to absorb the large number of labor market entrants and improve living standards, the growth rate is expected to reach 3 percent in 2019, rising gradually later on -- contingent on a gradual improvement in security, political stability and continued external assistance.

“Inflation should average around 2.6 percent this year, rising to an average of 5 percent over the medium term, consistent with the central bank’s objective,” the statement said.

The overall fiscal balance including donor grants is forecast to remain broadly balanced over the medium term reflecting the authorities’ commitment to fiscal discipline.

Large trade deficits continue to be financed by substantial grants, allowing international reserves to remain at comfortable levels.

Discussions focused on policies and reforms that will help deliver the objectives of stronger growth, self-reliance and poverty reduction.

“To this end, continued macroeconomic policy discipline remains indispensable to underpin growth and job creation,” the team believed.

“The IMF will remain closely engaged with the Afghan authorities to support economic policy design and implementation of economic reforms.”

pr/mud