Abstract
Third Review of the Arrangement under the Extended Credit Facility-Press Release; Staff Report
On May 24, 2018, the Executive Board of the International Monetary Fund (IMF) completed the third review of the arrangement under the Extended Credit Facility (ECF)1 for Afghanistan. The completion enables the release of SDR 4.5 million (about US$6.4 million), bringing total disbursements under the arrangement to SDR 18 million (about US$25.5 million). The Executive Board’s decision was taken on a lapse-of-time basis.2 The ECF arrangement for SDR 32.38 million was approved on July 20, 2016 (see Press Release No. 16/348).
In completing the review, the Executive Board also approved the authorities’ request for modification of three performance criteria: on domestic revenues, net international reserves, and net credit to government reflecting updates to the macroeconomic framework.
Program implementation through end-December 2017 was satisfactory, despite the challenging security situation and mounting political risks. All quantitative performance criteria and eight of the nine structural benchmarks were met. The end-April 2018 benchmark related to asset declarations by public officials was implemented with a short delay.
Violence remains significant in Afghanistan and political uncertainty has risen with coming parliamentary (October 2018) and presidential (April 2019) elections, thus undermining confidence and growth. In 2017, real GDP growth is estimated at 2.5 percent, roughly unchanged from 2016. For 2018, GDP growth is projected at 2.5 percent owing to the continued difficult security environment affecting private sector confidence and a relatively dry winter which mars agricultural prospects. Inflation is forecast at 5 percent on average in 2018, the same as in 2017.
The authorities’ strong ownership remains critical to the success of the program, especially in the context of continued security challenges and political uncertainty. Reforms in support of fiscal sustainability, institution building, anti-corruption efforts, and financial stability should continue. In this challenging environment, the sustained backing of donors, together with the reform commitment of the authorities, remains vital. The IMF is committed to helping the government as it builds a more vibrant and inclusive economy for all Afghans.
Islamic Republic of Afghanistan: Selected Economic Indicators, 2015–19
(Quota: SDR 323.8 million)
(Population: approx. 34.7 million)
(Per capita GDP: approx. US$561; 2016)
(Main exports: opium, US$2.0 billion; carpets, US$92.8 million; 2015)
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.
Islamic Republic of Afghanistan: Selected Economic Indicators, 2015–19
(Quota: SDR 323.8 million)
(Population: approx. 34.7 million)
(Per capita GDP: approx. US$561; 2016)
(Main exports: opium, US$2.0 billion; carpets, US$92.8 million; 2015)
| 2015 | 2016 | 2017 | 2018 | 2019 | ||
|---|---|---|---|---|---|---|
| Est. | Proj. | |||||
| Output and prices 1/ | (Annual percentage change, unless otherwise indicated) | |||||
| Real GDP | 1.3 | 2.4 | 2.5 | 2.5 | 3.0 | |
| Nominal GDP (in billions of Afghanis) | 1,228 | 1,320 | 1,422 | 1,532 | 1,657 | |
| Nominal GDP (in billions of U.S. dollars) | 20.1 | 19.5 | 20.9 | 21.7 | 22.9 | |
| Consumer prices (period average) 2/ | −0.7 | 4.4 | 5.0 | 5.0 | 5.0 | |
| Public finances (central government) | (In percent of GDP) | |||||
| Domestic revenues and grants | 24.5 | 26.1 | 24.5 | 23.1 | 25.0 | |
| Domestic revenues | 10.0 | 10.7 | 11.8 | 11.2 | 11.4 | |
| On-budget grants (excl. donors’ direct spending outside the budget) | 14.6 | 15.4 | 12.6 | 11.9 | 13.6 | |
| Expenditures | 25.9 | 26.0 | 25.1 | 23.6 | 24.5 | |
| Operating 3/ | 19.2 | 18.9 | 17.8 | 16.8 | 17.5 | |
| Development | 6.8 | 7.1 | 7.3 | 6.8 | 7.0 | |
| Operating balance (excluding grants) 4/ | −9.2 | −8.2 | −6.0 | −5.5 | −6.1 | |
| Overall balance (including grants) | −1.4 | 0.1 | −0.6 | −0.4 | 0.6 | |
| Public debt 4/5/ | 9.1 | 8.0 | 7.3 | 6.8 | 6.3 | |
| Monetary sector | (Annual percentage change, end of period, unless otherwise indicated) | |||||
| Reserve money | 2.3 | 11.8 | 10.2 | 10.7 | 7.2 | |
| Broad money | 3.1 | 9.7 | 4.1 | 10.7 | 9.0 | |
| External sector 1/ | (In percent of GDP, unless otherwise indicated) | |||||
| Exports of goods (in millions of U.S. dollars) | 580 | 619 | 665 | 748 | 842 | |
| Exports of goods (annual percentage change) | −9.8 | 6.8 | 7.4 | 12.6 | 12.5 | |
| Imports of goods (in millions of U.S. dollars) | 7,666 | 6,160 | 7,180 | 7,443 | 7,941 | |
| Imports of goods (annual percentage change) | 17.4 | −19.6 | 16.5 | 3.7 | 6.7 | |
| Current account balance | ||||||
| Excluding official transfers | −30.1 | −31.2 | −35.3 | −34.9 | −35.3 | |
| Including official transfers | 7.5 | 7.1 | 1.6 | 0.6 | −0.2 | |
| Foreign direct investment | 0.8 | 0.5 | 0.4 | 0.5 | 0.5 | |
| Total external debt 5/ | 6.8 | 6.3 | 6.3 | 6.3 | 6.3 | |
| Gross international reserves (in millions of U.S. dollars) | 6,808 | 7,357 | 8,139 | 8,280 | 8,279 | |
| Import coverage of reserves 6/ | 10.9 | 10.2 | 10.8 | 10.2 | 9.8 | |
| Exchange rate (average, Afghanis per U.S. dollar) | 61.2 | 67.9 | 68.1 | … | … | |
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.
Islamic Republic of Afghanistan: Selected Economic Indicators, 2015–19
(Quota: SDR 323.8 million)
(Population: approx. 34.7 million)
(Per capita GDP: approx. US$561; 2016)
(Main exports: opium, US$2.0 billion; carpets, US$92.8 million; 2015)
| 2015 | 2016 | 2017 | 2018 | 2019 | ||
|---|---|---|---|---|---|---|
| Est. | Proj. | |||||
| Output and prices 1/ | (Annual percentage change, unless otherwise indicated) | |||||
| Real GDP | 1.3 | 2.4 | 2.5 | 2.5 | 3.0 | |
| Nominal GDP (in billions of Afghanis) | 1,228 | 1,320 | 1,422 | 1,532 | 1,657 | |
| Nominal GDP (in billions of U.S. dollars) | 20.1 | 19.5 | 20.9 | 21.7 | 22.9 | |
| Consumer prices (period average) 2/ | −0.7 | 4.4 | 5.0 | 5.0 | 5.0 | |
| Public finances (central government) | (In percent of GDP) | |||||
| Domestic revenues and grants | 24.5 | 26.1 | 24.5 | 23.1 | 25.0 | |
| Domestic revenues | 10.0 | 10.7 | 11.8 | 11.2 | 11.4 | |
| On-budget grants (excl. donors’ direct spending outside the budget) | 14.6 | 15.4 | 12.6 | 11.9 | 13.6 | |
| Expenditures | 25.9 | 26.0 | 25.1 | 23.6 | 24.5 | |
| Operating 3/ | 19.2 | 18.9 | 17.8 | 16.8 | 17.5 | |
| Development | 6.8 | 7.1 | 7.3 | 6.8 | 7.0 | |
| Operating balance (excluding grants) 4/ | −9.2 | −8.2 | −6.0 | −5.5 | −6.1 | |
| Overall balance (including grants) | −1.4 | 0.1 | −0.6 | −0.4 | 0.6 | |
| Public debt 4/5/ | 9.1 | 8.0 | 7.3 | 6.8 | 6.3 | |
| Monetary sector | (Annual percentage change, end of period, unless otherwise indicated) | |||||
| Reserve money | 2.3 | 11.8 | 10.2 | 10.7 | 7.2 | |
| Broad money | 3.1 | 9.7 | 4.1 | 10.7 | 9.0 | |
| External sector 1/ | (In percent of GDP, unless otherwise indicated) | |||||
| Exports of goods (in millions of U.S. dollars) | 580 | 619 | 665 | 748 | 842 | |
| Exports of goods (annual percentage change) | −9.8 | 6.8 | 7.4 | 12.6 | 12.5 | |
| Imports of goods (in millions of U.S. dollars) | 7,666 | 6,160 | 7,180 | 7,443 | 7,941 | |
| Imports of goods (annual percentage change) | 17.4 | −19.6 | 16.5 | 3.7 | 6.7 | |
| Current account balance | ||||||
| Excluding official transfers | −30.1 | −31.2 | −35.3 | −34.9 | −35.3 | |
| Including official transfers | 7.5 | 7.1 | 1.6 | 0.6 | −0.2 | |
| Foreign direct investment | 0.8 | 0.5 | 0.4 | 0.5 | 0.5 | |
| Total external debt 5/ | 6.8 | 6.3 | 6.3 | 6.3 | 6.3 | |
| Gross international reserves (in millions of U.S. dollars) | 6,808 | 7,357 | 8,139 | 8,280 | 8,279 | |
| Import coverage of reserves 6/ | 10.9 | 10.2 | 10.8 | 10.2 | 9.8 | |
| Exchange rate (average, Afghanis per U.S. dollar) | 61.2 | 67.9 | 68.1 | … | … | |
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.
The ECF is a lending arrangement that provides sustained program engagement over the medium to long term in case of protracted balance of payments problems. Details on Islamic Republic of Afghanistan’s arrangement are available at www.imf.org/external/country/AFG.
The Executive Board takes decisions under its lapse-of-time procedure when the Board agrees that a proposal can be considered without convening formal discussions.