IMF Executive Board Completes First Review Under the ECF for the Islamic Republic of Afghanistan and Approves US$6.2 Million Disbursement

IMF News, May 24, 2017

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Executive Board completed the first review of the arrangement under the Extended Credit Facility (ECF) for Afghanistan on May 24, 2017.
Completion enables the release of SDR 4.5 million (about US$6.2 million).
Total disbursements under the arrangement now equal SDR 9 million (about US$12.4 million).
The ECF arrangement for SDR 32.38 million was approved on July 20, 2016 (Press Release No. 16/348).
The Executive Board’s decision was taken on a lapse-of-time basis.

Program implementation through end-December 2016 has been satisfactory despite the challenging security situation.
All quantitative performance criteria and indicative targets were met.
On structural reforms:
- Three out of five benchmarks were met.
- All requirements for one of the remaining two benchmarks were implemented with a delay.

Executive Board approved the authorities’ request for modification of two sets of performance criteria:
- Exclusion from the zero ceiling on non-concessional borrowing of two loans from the Islamic Development Bank to finance an important infrastructure project.
- Modification of three performance criteria, approved by the Executive Board in July 2016, reflecting updates to the macroeconomic framework and methodological changes affecting the monetary variables.

Afghanistan’s security situation remains challenging, undermining confidence and growth.
Real GDP:
- In 2016, real GDP is estimated to have risen by 2 percent, up slightly from 2015 reflecting improved agricultural output.
- In 2017, a pickup to 3 percent growth is projected.
- The 3 percent projection is contingent on an improvement in confidence, implementation of reforms, and continued strong donor support.
Labor market and living standards:
- Recent growth remains far below the rate needed to create sufficient jobs to absorb labor market entrants and raise living standards.
Prices:
- Consumer price inflation remains moderate.

Continued strong program ownership by the government remains vital to the success of the program.
Critical reform areas:
- Reforms in the financial sector (turning the page on the Kabul Bank crisis).
- Corruption and economic governance.
- Revenue mobilization combined with improved public financial management.
Implementation challenges:
- Sustained reform implementation will be difficult in the context of fragile security and political uncertainty.
External support:
- In this challenging environment, the backing of donors remains key to success, together with the determination and commitment of the authorities.
IMF stance:
- The IMF remains committed to playing its role in the collective international effort to help Afghanistan.

IMF Press Release No. 17/192 — May 24, 2017