IMF OKs $370m credit facility for Afghanistan

KABUL under the Extended Credit Facility (ECF).

The 42-month credit arrangement is aimed to support the Afghan government’s economic reform programme seeking sustainable growth and poverty reduction, IMF said in a statement.

The programme seeks to preserve macroeconomic stability, reverse the fiscal deterioration caused by the Covid-19 pandemic and protect development and social spending.

Structural reforms under the programme will focus on mobilising domestic revenue, improving the quality of public spending and public financial management and strengthening the anti-corruption regime.

In line the IMF Board’s decision, an amount of $115 million will be immediately disbursed to Afghanistan.

“The remaining amount will be phased in over the duration of the Fund-supported program, subject to semi-annual reviews,” the statement added.

IMF Board’s Deputy Managing Director Mitsuhiro Furusawa said: “The COVID-19 pandemic continues to weigh heavily on Afghanistan’s economy and livelihoods.”

He added the authorities’ determined response and expedient donor support have prevented a humanitarian crisis. However, the pandemic has set back progress toward self-reliance.

“The Extended Credit Facility will support post-pandemic recovery, anchor reform implementation and catalyse donor financing. The authorities’ reform programme aims to preserve macro-financial stability and support sustainable growth and poverty reduction.

“Its success hinges on the steadfast reform implementation, continued donor support, agile response to shocks, and capacity development,” the official said.

“Macroeconomic stability, underpinned by prudent fiscal policy with low debt, adequate international reserves, and a stable financial sector, will be critical for sustaining the incipient recovery. Should downside risks, including from the pandemic and the security situation, materialize, the recovery could falter and financing needs increase.

“The fiscal deficit is widening in 2020 to accommodate needed pandemic spending. Once the recovery gets underway, the program will aim to reverse course and support the gradual shift toward self-reliance.

“With grants projected to decline, domestic revenue mobilization, underpinned by tax and customs administration reforms, will be key to protect development spending and create space for a stronger social safety net.

“Monetary policy rightly focuses on price stability with exchange rate flexibility.

“The programme envisions intensified financial sector oversight in the face of rising risks, reforms of state-owned commercial banks, and strengthening the central bank’s autonomy and governance as well as its regulatory and supervisory frameworks, including for AML/CFT.

“The reform agenda also includes operationalizing anti-corruption institutions and strengthening the asset declaration regime to better deter and fight corruption.

“Commissioning the audit of pandemic spending will be critical to ensuring its full accountability and transparency and buttressing stakeholder confidence.”

pr/mud