Statement by the IMF Staff Representative on the Islamic Republic of Afghanistan June 29, 2012

Afghanistan’s development, humanitarian, and governance challenges are formidable. Afghanistan is in its transition to become self-reliant. To achieve this goal, the government requires donor support. The IMF-supported economic program tries to address key macroeconomic challenges and seeks to safeguard the financial sector. The authorities have broadly met their program objectives, but their implementation suffered from delays. The authorities have now initiated an asset recovery process for each Kabul Bank beneficiary. The Executive Board has agreed to the authorities’ request for a waiver.

Abstract

Afghanistan’s development, humanitarian, and governance challenges are formidable. Afghanistan is in its transition to become self-reliant. To achieve this goal, the government requires donor support. The IMF-supported economic program tries to address key macroeconomic challenges and seeks to safeguard the financial sector. The authorities have broadly met their program objectives, but their implementation suffered from delays. The authorities have now initiated an asset recovery process for each Kabul Bank beneficiary. The Executive Board has agreed to the authorities’ request for a waiver.

Since the staff report was finalized, the authorities provided staff with revised outcome data for domestic revenue collection, donor assistance grants, and foreign loans at end-March 2012 (Table 1). The revisions do not change the staff appraisal.

  • The revised revenue collection is Afs 97.5 billion, which is Afs 0.2 billion (0.02 percent of GDP) higher than shown in the staff report and the authorities’ letter of intent. Even with this revision, the end-March revenue target of Afs 98.8 billion was missed, and the quantitative performance criterion is not observed.

  • The revised grants stand at Afs 93.5 billion, which is Afs 7.6 billion (1 percent of GDP) lower than shown in the staff report. The revised foreign loans stand at Afs 3.1 billion, which is Afs 1.5 billion (0.2 percent of GDP) higher than shown in the staff report and the authorities’ letter of intent. These revisions lead to minor changes in the calculations of the adjustors to two quantitative program targets—net international reserves and net central bank credit to the government—but do not materially affect performance under the program.

Islamic Republic of Afghanistan: First Review Under the Extended Credit Facility Arrangement, Request for Waiver of Nonobservance of a Performance Criterion,Modification of Performance Criteria, and Rephasing of Disbursements Staff Report;Staff Supplement; Staff Statement; Press Release on the Executive Board Discussion;and Statement by the Executive Director for the Islamic Republic of Afghanistan
Author: International Monetary Fund