Islamic Republic of Afghanistan: Third Review Under the Extended Credit Facility Arrangement and Request for Modification of Performance Criteria
Author: International Monetary Fund. Middle East and Central Asia Dept.
Publication Date:
29 May 2018
eISBN:
9781484357576
Language:
English
Keywords:
ISCR; CR; Afghanistan; government; growth; foreign currency; real GDP; promissory note; trade balance; government plan; Fiscal risks
Download PDF (786.7 KB)

Third Review of the Arrangement under the Extended Credit Facility-Press Release; Staff Report

Abstract

Third Review of the Arrangement under the Extended Credit Facility-Press Release; Staff Report

Context

Objectives and Modalities of the 2016 ECF Arrangement for Afghanistan

The ECF supports macroeconomic and structural reforms, catalyzes donor support, and rests on:

  • Structural reforms for institution building, fiscal and financial reforms, and measures to combat corruption for scaled-up private sector development;

  • Policies to preserve macro-financial stability.

The third review covers nine structural benchmarks (SBs) and eight performance criteria (PCs):

  • SBs on: fighting corruption and strengthening revenue administration, including through a VAT implementation plan; adopting a sound budget, including transfers to reduce the central bank’s lender of last resort exposure to Kabul bank; reforming state-owned banks; and strengthening the central bank’s mandate.

  • PCs for end-December 2017 on: government revenues, net credit to central government from the central bank, reserve money, FX reserves, borrowing, and lending.

1. Violence remains significant, and political uncertainty has risen with coming parliamentary (October 2018) and presidential (April 2019) elections. In 2017, civilian deaths and casualties declined from the record 2016 levels, but several high-profile attacks, which continued in early 2018, deepened concerns that the counter-insurgency effort was losing ground. Against this background, and with the support of international partners, peace efforts have been revived. During a January visit to Kabul, members of the UN Security Council confirmed their support and called for a renewed focus on Afghan-led peace negotiations, and at the February Kabul Process peace talks the National Unity Government (NUG) offered the Taliban direct talks without preconditions and recognition as a political party. On March 28, another international meeting in support of the peace process was held in Tashkent. In late April, the Taliban rejected the peace offer as it announced its spring military offensive.

uA01fig01

Civilian Deaths and Injuries

(In thousands)

Citation: IMF Staff Country Reports 2018, 127; 10.5089/9781484357576.002.A001

Source: United Nations Assistance Mission in Afghanistan.

2. The prospect of a large influx of Afghan migrants from neighboring countries and increasing internal displacement raises risks of a humanitarian crisis. In 2016–17, returning refugees (including 0.8 million from Pakistan) added nearly 4 percent to Afghanistan’s population. The capacity to absorb refugees is hampered by stretched public services providing for an equivalent share of the population internally displaced by the conflict. In 2018, the country’s population could again swell by nearly 4 percent if Pakistan does not extend the refugees’ residency permits beyond June.

3. Encouraged by the NUG’s continued reform efforts, donor support remains strong. By and large, disbursements of aid have been in line with the pledges from the Warsaw and Brussels meetings in 2016, though the timing of disbursements has been somewhat unpredictable. The U.S. renewed a long-term commitment to military assistance last summer, and committed an additional 1,000 troops in April. A ministerial-level donor conference to review reform progress is scheduled for November 27–28, 2018 in Geneva.

Recent Developments

4. Constrained by weak confidence, growth remains feeble, while inflation has eased.1 In 2017, real GDP growth, estimated at 2.5 percent2 and roughly unchanged from 2016, was too low to reduce unemployment and poverty, which stood at 55 percent in 2016–17.3 Inflation moderated from a mid-2017 high of 7.5 percent y/y to 3 percent at end-2017 and further to 0.2 percent at end-March, reflecting declining imported food prices.

uA01fig02

CPI Inflation

(Y-o-y change, in percent)

Citation: IMF Staff Country Reports 2018, 127; 10.5089/9781484357576.002.A001

Source: Afghanistan authorities.

5. In 2017, the Afghani depreciated by about four percent against the US dollar (end-period) while international reserves rose. In early 2018, Da Afghanistan Bank (central bank; DAB) upped sales of U.S. dollars to counter increased exchange rate volatility that reflected political tensions. The rate has remained broadly stable since then at about Af 69 per U.S. dollar. The trade and current account deficits (before grants) remain very large despite some import substitution for agricultural products, food processing, and capital goods. At end-2017, gross international reserves covered nearly 11 months of imports, while net international reserves (NIR) significantly exceeded the program target. This mainly reflected lower-than-planned foreign exchange intervention by DAB. Gross reserves have increased further to $8.2 billion at end-March.

uA01fig03

Gross International Reserves and Exchange Rate

Citation: IMF Staff Country Reports 2018, 127; 10.5089/9781484357576.002.A001

Source: Afghanistan authorities.

6. The overall fiscal balance including grants moved from zero in 2016 to a deficit of 0.6 percent GDP in 2017. This was due to a decline in operating grants, which fell by 2.5 percentage points of GDP.4 Some offset was provided by higher revenues and lower operating expenditures. In 2017, domestic revenues grew by nearly 20 percent, exceeding the ECF’s target by Af 15 billion. Of this overperformance, around Af 7 billion was due to one-off gains, another Af 1 billion to arrears collection, and the remainder to improvements in revenue collection efficiency. The treasury’s discretionary cash balance stood at Af 24.2 billion at end-2017, well above the program’s Af 10 billion floor. In the first three months of 2018, domestic revenues increased by 12 percent over the same period in 2017, supported by continued efforts to improve tax administration. Expenditure declined by 10 percent (partly owing to execution delays), and as a result, discretionary cash balances have remained well above the program floor.

uA01fig04

Domestic Revenues Growth

(Y-o-y percentage change, 12-month cumulative)

Citation: IMF Staff Country Reports 2018, 127; 10.5089/9781484357576.002.A001

Sources: Afghan authorities and IMF staff calculations.
uA01fig05

Total Treasury Discretionary Cash Balances

(In billions of Afghanis)

Citation: IMF Staff Country Reports 2018, 127; 10.5089/9781484357576.002.A001

Sources: Afghan authorities and IMF staff calculations.

7. Financial soundness indicators continue to paint a picture of a struggling banking sector. Nonperforming loans (NPLs) remain high at 12 percent of total loans at end-March 2018, and profitability is weak given limited lending reflected in high liquidity ratios. The rebound in growth of credit to the economy, since mid-2017, is encouraging, but credit remains below 4 percent of GDP given the dearth of bankable projects in a high-risk environment.

uA01fig06

Credit to Economy

Citation: IMF Staff Country Reports 2018, 127; 10.5089/9781484357576.002.A001

Source: Afghanistan authorities.

Outlook and Risks

8. The outlook for growth remains subdued. Owing to the difficult security environment affecting private sector confidence, and a relatively dry winter which likely will constrain agriculture (one of the few sources of economic growth), the 2018 growth projection has been revised down by ½ percentage point to 2.5 percent relative to the forecast made at the time of the second ECF review. The returning refugees could boost demand in the short run but the related medium-term supply response depends on the pace of job creation. The baseline scenario envisages a lower growth trajectory compared to the second review, and assumes a gradual increase in growth to 5 percent by 2023 predicated on no significant deterioration in security, continued reforms, and no adverse shocks to aid flows. Over time, extractive industries and regional trade integration could support growth and job creation. Average inflation for 2018–19 is revised down to 5 percent in line with the recent dynamics. The external position is expected to remain comfortable, assuming continued inflows of aid.

uA01fig07

Growth Scenarios

Citation: IMF Staff Country Reports 2018, 127; 10.5089/9781484357576.002.A001

Source: IMF staff calculations.

9. Risks are mostly tilted to the downside. If security worsens, growth would be further undermined by lower confidence, leading to higher unemployment and poverty. In addition, a premature withdrawal of aid would threaten fiscal sustainability, necessitating growth-reducing cuts in expenditure. Indeed, as shown in the most recent DSA which uses bound tests to illustrate stability risks,5 a decline in aid compensated by a partial shift towards concessional lending would lead to a deterioration in debt dynamics and put Afghanistan at a risk of high debt distress, with consequences for growth and stability. In turn, lower growth would weaken the fiscal position and job creation, and push up poverty. Moreover, in view of the coming electoral cycle, the risk of political instability is elevated, which could also undermine private sector confidence. On the other hand, lasting peace, boosting private sector confidence and investment, and enabling a reallocation of spending to productive infrastructure investments and critical social transfers would improve prospects fundamentally.

Policy Discussions

A. Fiscal Policy

10. Staff and the authorities discussed ways of bringing the budgeted fiscal balance for 2018 in line with the program. The budget originally submitted to parliament targeted an overall balance including grants of zero, consistent with the end-November structural benchmark (SB) set as part of the third review. However, the final budget approved by parliament in January 2018 envisages an overall deficit including grants of about one percent of GDP. In view of the mounting fiscal risks, balanced by growth considerations, staff and the authorities agreed on a revised deficit target of 0.4 percent of GDP. To this end, the authorities agreed to raise this year’s revenue target to Af 172 billion (compared to Af 169.5 billion agreed in the second review). The remainder of the adjustment will come from reduced expenditure including through expenditure rationalization related to identifying and eliminating “ghost workers”, review of the operating budgets, and improvements in the management of development projects. However, the authorities cautioned that this could be difficult in an election year and emphasized that, as a contingency, higher-than-expected grants from the World Bank might support achieving the agreed deficit target, should the spending cuts prove impossible to implement.6 The authorities noted that the mid-year budget review would be used to make these adjustments, and agreed to a structural benchmark in this area (MEFP ¶19). The benchmark requires that a supplementary budget be approved by the Cabinet and submitted to Parliament by end-September 2018 in line with the Parliamentary schedule and in the meantime, the authorities intend to implement the current budget cautiously with a view of achieving the revised deficit target.

11. Both sides noted fiscal risks in 2018. While agreeing to a slightly higher revenue target, the authorities emphasized the downside risks to revenue given uncertainty surrounding growth and security conditions.7 They pointed to the experience of the last election year (2014) when revenue declined sharply. The authorities and staff agreed that expenditure risks during the election year were largely contained, but staff emphasized the need to ensure that the slightly lower deficit target in the program is met. Staff urged the authorities to resist politically motivated spending pressures, and to closely monitor revenue collections, especially in provinces experiencing violence.

12. On structural fiscal issues, the authorities and staff discussed the need to:

  • Better monitor state-owned corporations and enterprises (SOCs and SOEs), which remain outside the fiscal perimeter monitored by staff. There are 36 state owned enterprises (SOEs), 16 state-owned corporations (SOCs), and three state-owned commercial banks (SOCBs). SOEs and SOCs operate in the security, construction, transport, agriculture, and extractive industries, and their combined revenue is estimated at about 4.5 percent of GDP and less than 10 percent of government revenue. They do not receive explicit budgetary support, relying on non-core operations to finance core public functions, and their financial position and accounting systems remain weak. Following staff’s advice, the authorities are strengthening the institutional/legal framework for monitoring the state-owned entities, upgrading the relevant department in the Ministry of Finance to a General Directorate, and improving their capacity to monitor such entities, including collecting data on their operations to quantify the size of possible contingent liabilities. As a first step to enhance monitoring, the authorities are amending the corporate governance framework under the laws on SOEs and SOCs, and the related templates of articles of organization (fourth review SB). To assist the authorities, IMF staff is reviewing the laws and regulations governing the SOEs/SOCs, and other relevant PFM legislation, from a fiscal risk perspective, and World Bank staff are helping to improve corporate governance in state-owned entities (MEFP ¶21, 28). The reform of SOCBs is most advanced, and is being implemented with the World Bank staffs assistance (see ¶16).

  • Prepare for the introduction of a VAT in January 2021, which will boost revenue collection capacity. A plan to implement a VAT was adopted as a third review SB. To help implement this plan, the authorities intend to appoint a VAT team spanning the revenue and customs departments with legal, audit, risk management, and communication expertise relevant for implementation and collection of the VAT (fifth review SB). In addition, the introduction of the VAT will require a reform of the Large Taxpayers Office (fourth review SB). The VAT will eventually replace the business receipts tax. The authorities are planning these reforms in consultation with Fund staff (MEFP ¶23).

  • Improve budget execution and transparency, and public investment management. Afghanistan has recently made some progress in budget transparency, and the 2018 budget moves further down this path. This progress has been recognized by the International Budget Partnership which rated the 2017 budget’s transparency above the global average.8 Further progress has been made with the 2018 budget, including: more realistic expenditure projections—previous budgets overstated development expenditures resulting in low execution rates; more information, including three-year projections with detail at the level of ministry, project and province, and a discussion of fiscal risks; actual spending by ministries; no carryovers of unspent funds to the next year; and a reduction in unallocated contingency budgets. The mission welcomed the improvements made to budget transparency, and encouraged further efforts to make the budget an effective policy tool, including through improved budget execution supported by realistic multi-year development programming. In this context, strengthening public investment management, including effective project appraisal, selection, and implementation procedures, is an important element in further improving the budget process. These efforts will become especially important as the government plans to increase its reliance on public private partnerships (PPP) to strengthen Afghanistan’s infrastructure (see table below). Staff emphasized that a careful assessment of the possible contingent liabilities emanating from these PPP supported projects will be crucial for proper evaluation of the public sector’s exposure and risk management. The authorities have been receiving assistance from the World Bank staff in this area since 2015, and are committed to continued progress including under the ECF arrangement. To this end, they requested a review of their PPP laws and regulations by the IMF staff and will review and adopt the revised relevant laws in line with the IMF staff’s recommendations as a fourth review SB (MEFP ¶21, 27).

  • Strengthen debt management. It is important to strengthen public debt monitoring and management, and planning for development projects. Afghanistan’s public debt is low and only a limited amount of concessional borrowing is planned. Thus, the country’s debt outlook appears benign. However, given large underlying fiscal and external current account deficits, even a modest shift to loan financing would quickly lead to an unsustainable debt burden and require significant fiscal adjustment. Afghanistan’s debt sustainability hinges on continued ample grant inflows, combined with sound policies and reforms, and improving security. Staff suggested enhancing the capacity to evaluate prospective financing and to monitor and analyze debt and fiscal risks to properly identify and mitigate risks to debt sustainability (MEFP ¶29).9

Text Table 1.

Public Private Partnerships (Power Plants) in Final Stage of Negotiations 1/

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Source: 2018 National Budget Document.

The government guarantees purchase of energy from these projects and provides a sovereign guarantee backed by the World Bank with IDA funding to Mazar and Kajaki projects. Budget resources are allocated for only one of the above four projects. Projects not listed above are in very early stages of development and estimates of the required financing are not available.

B. Monetary and Financial Sector Policies

13. Staff encouraged DAB to remain committed to exchange rate flexibility while continuing to target a moderate inflation rate. With weak monetary transmission channels, reserve money should remain the nominal anchor for monetary policy to keep inflation low. The high degree of dollarization (around two-thirds of loans and deposits) limits monetary policy transmission to the economy. Staff emphasized that, in the current environment, the main objective of monetary policy should be low and stable inflation with a flexible exchange rate and adequate reserves. This will help reduce dollarization over time. In that context, staff noted the importance of allowing the exchange rate to clear the market, with interventions only when the exchange rate fluctuations seem excessive. If used to de-facto peg the exchange rate, foreign exchange intervention could encourage speculation, deepen volatility, and delay de-dollarization. The authorities confirmed their commitment to a market-based exchange rate, while being mindful of excessive volatility which could undermine confidence (MEFP ¶20). Staff also encouraged DAB to continue developing the transparency of its operations by publicizing its strategy through various media.

14. The financial sector remains vulnerable, and staff welcomed DAB’s efforts to contain risks in the weak banks. Staff recommended that DAB and MOF coordinate to resolve the delays in payments to government contractors that cause NPLs,10 and urged DAB to continue vigilant supervision as the sector faces risky prospects and feeble growth. DAB should accelerate the financial sector clean-up process (MEFP ¶9, 34, 35). Though the New Kabul Bank (NKB) has been recapitalized and the gradual repayment of DAB’s lender of last resort support to the failed Kabul Bank is on track, recovery of the latter’s assets has stalled (MEFP ¶11, 32).

15. The crisis prevention framework needs strengthening. To this end, DAB is upgrading its regulatory framework and its supervisory capabilities. Improvements in the legal framework to support its activities are also being considered. A Financial Stability Committee (FSC) will be established by end-2018 (fifth review SB) with the Ministry of Finance chairing and DAB providing the secretariat, and both sharing responsibility for crisis preparedness and management. Staff reiterated the importance of retaining DAB’s de jure and de facto independence as an important signal of commitment to building strong institutions (MEFP ¶36).

16. The three SOCBs remain a potential source of macro-financial instability. The SOCB reform strategy was approved by the High Economic Council in line with the World Bank’s recommendations (third review SB), and an implementation plan is being prepared with World Bank support. Staff urged the authorities to implement the strategy speedily, especially the improvements of SOCBs’ corporate governance, staffing, and operational capacity—the pre-conditions for their consolidation and eventual privatization. Staff reiterated the importance of adhering to the adopted strategy, including by prohibiting sector-targeted lending (MEFP ¶37).

17. The authorities are seeking ways to increase the flow of bank credit to the private sector, and hence boost demand and growth. DAB is encouraging banks, using light touch moral suasion, to switch to term loans from the widely favored short-term overdrafts. The overdrafts are favored as they produce sure short-term income and the risky environment discourages term lending. In addition, to incentivize credit growth, DAB reduced the interest rate on its capital notes— interest on which has constituted the lion’s share of banks’ income—to almost zero. Also, DAB wants to increase demand for financial services by lowering their costs through modernization of the payments system. Staff advised that measures to encourage credit growth should be implemented without loosening prudential requirements while continuing to pay close attention to the associated contingent fiscal risks. Staff encouraged implementation of a National Financial Inclusion Strategy (NFIS) with the World Bank’s support. The implementation has been delayed until mid-2019 from the original mid-2018 deadline (MEFP ¶39, 40).

18. The authorities intend to develop Sharia-compliant banking to expand the market for credit and banking services. The first Islamic bank received its license on April 9, 2018, and was inaugurated two weeks later. Staff acknowledged the benefits of offering banking services to those who do not participate in the interest-based financial sector, and encouraged the authorities to build on DAB’s existing supervisory capacity in this area to recognize and contain potential risks as Sharia-compliant banking grows.

19. Revival of correspondent relationships with global banks remains a challenge for some Afghan banks. Afghanistan exited the Financial Action Task Force (FATF)’s monitoring in June 2017. However, this has not revived correspondent banking relationships, with global banks shying away from correspondent relationships reportedly owing to low profitability of transactions and reputational risks. DAB has been monitoring the situation and actively engaging donors for assistance. Staff encouraged the authorities to continue engaging international banks and foreign supervisors to understand their specific concerns and seek to address them, including by strengthening the AML/CFT measures and supervision. Regarding the latter, with World Bank assistance, the authorities have launched a national money laundering and financing of terrorism risk assessment, and aim to conclude it by end-2019. Moreover, DAB has taken steps to improve its risk-based AML/CFT supervision of banks, conduct thematic inspections focused on politically exposed persons, verify the fitness and propriety of beneficial owners of banks, and strengthen regulation and supervision of money service providers.

C. Governance

20. The authorities remain committed to addressing corruption including through continued implementation of the National Strategy for Combatting Corruption adopted in October 2017. Continued anti-corruption activities stressing enforcement of the new penal code, especially through the Anti-Corruption Justice Center (ACJC), remain high on the authorities’ agenda. The new penal code, which criminalizes corruption in line with the United Nations Convention against Corruption (UNCAC), came into force in February 2018. A new position of Deputy Attorney General for Anti-corruption was created to oversee prosecution (including through the ACJC) of corruption. The United Nations Office on Drugs and Crime provides training to prosecutors and judges working in the ACJC (MEFP ¶44). The authorities plan to disseminate results of ACJC’s activities, including prosecutions and convictions of major corruption cases that fall under its jurisdiction by end-January 2019 (fifth review SB).

21. Substantial progress has been made in strengthening the framework for asset declaration by public officials. Now, the focus needs to switch to its implementation and enforcement. In September 2017, a law prescribing annual asset declaration requirements by senior officials besides those mentioned in Article 154 of the Constitution, covering assets legally and beneficially owned, with sanctions for noncompliance (third review SB), was enacted by Presidential decree. The law mandates submitting the declarations by the end of January 2018. The timely compliance has been impeded by obstacles posed by poor security, inadequate infrastructure, and recent transfer of responsibilities for administering the assets declaration framework to the Administrative Office of the President.

Third Review

22. Program performance has been satisfactory. All end-December 2017 quantitative performance criteria (PCs) have been met (Text Table 2), with sizeable over-performance on the domestic revenue and net international reserves (NIR) targets.11 The indicative target on social and other priority spending was missed by a small amount. The authorities spent in line with their budget target, marginally below the program target.

Text Table 2.

Quantitative Performance Criteria, December 21, 2017

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Sources: Afghan Authorities and IMF staff calculations.

23. Eight out of nine third review SBs were met (Table 12). In line with the program’s commitments, the MoF made payments to reduce DAB’s lender of last resort (LoLR) exposure to Kabul Bank, and the 2018 budget submitted to Parliament includes further payments to reduce DAB’s LOLR exposure consistent with repaying the remaining balance in full by end-2019. The SBs on strengthening of DAB’s independence, adoption of a strategy to reform SOCBs, VAT implementation plan, and cash planning, commitment control and prevention of arrears in the budget were met. Two anti-corruption SBs (due in November and December 2017) were also met. The end-April 2018 SB on asset declarations was not met, but the requirements of this measure were implemented with a few days’ delay. The latter calls for the publication of names and positions of heads and deputies of law enforcement agencies, customs, and tax administration, and of mechanisms to access their declarations. Such information was published on May 8, 2018 on a dedicated website.

Table 1.

Islamic Republic of Afghanistan: Selected Economic Indicators, 2016–19

(Quota: SDR 323.8 million)

(Population: approx. 34.7 million; 2016)

(Per capita GDP: approx. US$561; 2016)

(Poverty rate: 54.5 percent; 2016–17)

(Main exports: opium, US$2.0 billion; carpets, US$92.8 million; 2015)

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Sources: Afghan authorities, United Nations Office on Drugs and Crime, WITS database, and IMF staff estimates and projections.

Excluding the narcotics economy.

Comprising mainly current spending.

Defined as domestic revenues minus operating expenditures.

Public sector only. Incorporates committed but not yet delivered debt relief. Debt relief recorded fully at time of commitment.

Public debt includes promissory note issued by MoF to settle DAB’s Kabul Bank exposure.

In months of next year’s import of goods and services

CPI-based, vis-a-vis the U.S. dollar. Positive – real appreciation of the Afghani.

Table 2.

Islamic Republic of Afghanistan: Medium-Term Macroeconomic Framework, 2015–23

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Sources: Afghan authorities and Fund staff estimates and projections.

Excluding the narcotics economy.

Comprising mainly current spending. It is assumed that donors’ recurrent expenditure off-budget, mostly in the security sector, is being moved onto the budget by 2031.

Defined as domestic revenues minus operating expenditures.

In months of next year’s import of goods and services.

Public sector only. Incorporates committed but not yet delivered debt relief. Debt relief recorded fully at time of commitment.

Incorporates the 2012 revision to the UN World Population Prospects.

Table 3a.

Islamic Republic of Afghanistan: Central Government Budget, 2015–23 (In billions of Afghanis)

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Source: Afghan authorities and Fund staff estimates and projectionsNote: Government Finance Statistics Manual 1986 presentation Overall budget balance including grants for 2018 approved budget excludes repayment to DAB and treasury cash balance.

ARTF: Afghanistan Reconstruction Trust Fund; LOTFA: Law and Order Trust Fund for Afghanistan; CSTC-A: Combined Security Transition Command – Afghanistan (now NTM-A: NATO Training Mission – Afghanistan)

2015 figure includes about Af 2.85 billion arrears, which are repaid.

2015 figure includes about Af 7 billion discretionary development arrears, which are repaid.

Positive number indicates that expenditures have been recorded, but not yet executed.

Pro-poor spending covers ministries of education, labor and social affairs, martyrs and disabled, public health.

Table 3b.

Islamic Republic of Afghanistan: Central Government Budget, 2015–23 (In percent of GDP)

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Source: Afghan authorities and Fund staff estimates and projectionsNote: Government Finance Statistics Manual 1986 presentation Overall budget balance including grants for 2018 approved budget excludes repayment to DAB and treasury cash balance.

ARTF: Afghanistan Reconstruction Trust Fund; LOTFA: Law and Order Trust Fund for Afghanistan; CSTC-A: Combined Security Transition Command – Afghanistan (now NTM-A: NATO Training Mission – Afghanistan)

2015 figure includes about Af 2.85 billion arrears, which are repaid.

2015 figure includes about Af 7 billion discretionary development arrears, which are repaid.

Positive number indicates that expenditures have been recorded, but not yet executed.

Pro-poor spending covers ministries of education, labor and social affairs, martyrs and disabled, public health.

Table 4a.

Islamic Republic of Afghanistan: Central Bank Balance Sheet, 2015–23 (In billions of Afghanis, unless otherwise indicated)

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Sources: Afghan authorities and Fund staff estimates and projections.Note: Monetary indicators are calculated based on modified methodology and, thus, differ from the numbers reported in the previous staff reports.

A nonmarketable security issued to DAB by the Ministry of Finance for the cost of a lender of last resort assistance to Kabul Bank.

Includes Afghanistan’s SDR holdings (MoF is the fiscal agent for the IMF).

International reserves for Dec 2016 were revised relative to June 2017 report.