Press Release No. 13/36

Press Release: Statement by an IMF Mission on Afghanistan

February 4, 2013

An International Monetary Fund (IMF) team led by Paul Ross visited Kabul during January 19 - February 2, 2013 to conduct discussions on the combined second and third reviews of Afghanistan’s IMF-supported program under the Extended Credit Facility (ECF). At the end of the mission, Mr. Ross issued the following statement:

“The Afghan authorities and the IMF staff team held constructive discussions on Afghanistan’s recent economic performance, their policy framework, and reform plans.

The IMF mission team has reached staff level understandings with the authorities on a path to complete the combined 2^nd and 3^rd reviews, subject to the implementation of key structural benchmarks for submission of laws to parliament and strengthening banks’ capital.

“The economic outlook for Afghanistan is broadly positive. Growth and inflation were better than expected in 2012 as the large crop is estimated to have boosted real GDP growth to 12 percent and helped moderate inflation, which was 6 percent year-on-year in December, 2012. In 2013, the economy will continue to grow and inflation is expected to be stable.

“Discussions focused on maintaining macroeconomic stability and structural reform momentum in 2013. On the budget, there was agreement on the need to restore momentum to revenue mobilization through measures to strengthen customs administration. To build revenue momentum over the medium term, the Afghan authorities will continue and intensify their preparations for the successful implementation of the value-added tax (VAT) in 2014, initially through the timely submission of the draft VAT law to parliament together with measures for its implementation and outreach to familiarize and prepare the private sector. Second, it was agreed that some tightening of monetary policy was appropriate to maintain price stability and protect the international reserves position. Third, there was agreement on reforms to strengthen the financial sector and economic governance, and to mobilize domestic revenue. On Kabul Bank asset recovery, the Afghan authorities reiterated their commitment to continuing asset recovery efforts and complete resolution of Kabul Bank quickly, including the sale of New Kabul Bank. The staff team noted their importance for strengthening the financial sector, mobilizing donor support, restoring investor confidence, and supporting inclusive growth in the long term.

“The IMF mission will prepare a report on the second and third reviews of Afghanistan’s ECF-supported program and present it to the IMF Executive Board following the implementation of the remaining key structural benchmarks. The IMF remains committed to the ongoing dialogue with the Afghan authorities on their reform program.”