IMF Executive Board Approves A US$370 Million Extended Credit Facility Arrangement to Support the Islamic Republic of Afghanistan

IMF News, November 6, 2020

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Published: November 6, 2020

Program objectives and core reforms

Primary aims:
- Support authorities’ economic reform program aimed at sustainable growth and poverty reduction.
- Preserve macroeconomic stability, reverse fiscal deterioration caused by the pandemic, and protect development and social spending.
- Catalyze donor financing and help cover external and fiscal financing needs emerging since the start of the pandemic.
Structural reform focus areas:
- Mobilizing domestic revenue (including VAT implementation in 2022).
- Improving the quality of public spending and public financial management.
- Bolstering the financial sector (including reforms of state-owned commercial banks and strengthened regulatory and supervisory frameworks).
- Strengthening the anti-corruption regime (operationalizing anti-corruption institutions, strengthening asset declaration regime, commissioning audit of pandemic spending).
- Tax and customs administration reforms to underpin revenue mobilization.
- Subject to fiscal space and donor support: building a social safety net over the medium term.
Program design features:
- Streamlined conditionality, measured deadlines for structural benchmarks, and flexibility to adapt to shocks and the changing environment while meeting overall program objectives.

Macro-financial policy stance and safeguards

Fiscal policy:
- Aim to preserve macro-financial stability with prudent fiscal policy and low debt.
- Protect development and social spending during pandemic; reverse fiscal deterioration once recovery underway.
- Priorities on expenditure side include a new civil service pay policy, public expenditure review, and strengthened management of state-owned assets and liabilities.
Monetary and financial sector policy:
- Monetary policy focus on price stability with exchange rate flexibility.
- Intensified financial sector oversight in face of rising risks.
- Strengthening the central bank’s autonomy and governance and its regulatory and supervisory frameworks, including for AML/CFT.
Governance:
- Operationalize anti-corruption institutions, strengthen asset declaration regime, and ensure accountability and transparency of pandemic spending.

Economic outlook and selected indicators (2018–25) — key figures preserved exactly as published

Population: approx. 32.2 million; 2019.
Per capita GDP: approx. US$586; 2019.
Poverty rate: 54.5 percent; 2016-2017.
Main exports: dried and fresh fruits and vegetables, medical seeds, 2019.

Output and prices (annual percentage change unless otherwise indicated)

Real GDP: 2018: 1.2; 2019: 3.9; 2020: -5.0; 2021: 4.0; 2022: 4.5.
Nominal GDP (in billions of Afghanis): 2018: 1,328; 2019: 1,470; 2020: 1,466; 2021: 1,598; 2022: 1,742; 2023: 1,893; 2024: 2,048; 2025: 2,215.
Nominal GDP (in billions of U.S. dollars): 2018: 18.4; 2019: 18.9; 2020: 19.0; 2021: 20.0; 2022: 21.0; 2023: 22.2; 2024: 23.3; 2025: 24.5.
Consumer prices (period average): 2018: 0.6; 2019: 2.3; 2020: 5.4; 2021: 4.8; 2022: 4.3.
Consumer prices (end of period): 2018: 0.8; 2019: 2.8; 2020: 5.0.
GDP Deflator: 2018: 2.1; 2019: 6.5.

Investment and savings (In percent of GDP)

Gross domestic investment: 2018: 18.0; 2019: 18.2; 2020: 17.9; 2021: 18.1; 2022: 19.8; 2023: 20.6; 2024: 21.4.
Private (part of gross domestic investment): 2018: 6.0; 2019: 7.1; 2020: 7.4; 2021: 7.8.
Gross national savings: 2018: 30.2; 2019: 29.9; 2020: 27.2; 2021: 26.1; 2022: 26.9; 2023: 27.4; 2024: 27.9; 2025: 28.3.
Domestic revenues and grants: 2018: 30.6; 2019: 30.3; 2020: 26.0; 2021: 28.5; 2022: 28.1; 2023: 27.6.
Domestic revenues: 2018: 14.3; 2019: 14.1; 2020: 12.1; 2021: 12.0; 2022: 14.2; 2023: 16.3; 2024: 16.4; 2025: 16.6.
On-budget grants: 2018: 12.9; 2019: 14.0; 2020: 12.7; 2021: 12.2; 2022: 11.7; 2023: 11.0.
Expenditures: 2018: 28.9; 2019: 28.0; 2020: 33.3; 2021: 28.2; 2022: 29.0; 2023: 28.8.
Operating (comprising mainly current spending): 2018: 19.4; 2019: 18.5; 2020: 21.8; 2021: 19.3; 2022: 18.8; 2023: 17.8.
Development expenditure: 2018: 9.5; 2019: 11.6; 2020: 8.9; 2021: 9.3; 2022: 10.5; 2023: 10.6; 2024: 10.7.
Operating balance (excluding grants) defined as domestic revenues minus operating expenditures: 2018: -5.1; 2019: -4.5; 2020: -9.6; 2021: -7.3; 2022: -4.6; 2023: -2.2; 2024: -1.8; 2025: -1.2.
Overall balance (including grants): 2018: 1.6; 2019: -3.0; 2020: -0.5; 2021: -0.7; 2022: -0.9.

Public debt (public sector only; incorporates committed but not yet delivered debt relief; debt relief recorded fully at time of commitment)

Public debt: 2018: 6.1; 2019: 7.7; 2020: 9.0; 2021: 9.6; 2022: 10.1.

Monetary sector (annual percentage change, end of period, unless otherwise indicated)

Reserve money: 2018: -2.7; 2019: 12.4; 2020: 10.9; 2021: 10.4; 2022: 10.3; 2023: 10.2.
Reserve money in domestic currency: 2018: -0.4; 2019: 11.8; 2020: 11.4; 2021: 11.2.
Currency in circulation: 2018: -0.2; 2019: 13.6; 2020: 14.7; 2021: 10.0; 2022: 8.0.
Broad money: 2018: 2.6; 2019: 5.7; 2020: 10.8; 2021: 12.8.
Interest rate, 28-day capital note (in percent): 2018: 3.0.

External sector (in percent of GDP, unless otherwise indicated)

Exports of goods (in millions of U.S. dollars): 2018: 875; 2019: 864; 2020: 558; 2021: 747; 2022: 973; 2023: 1085; 2024: 1209; 2025: 1360.
Exports of goods (annual percentage change): 2019: -1.3; 2020: -35.4; 2021: 33.8; 2022: 11.5.
Imports of goods (in millions of U.S. dollars): 2018: 6,596; 2019: 6,158; 2020: 6,009; 2021: 6,285; 2022: 6,347; 2023: 6,457; 2024: 6,563; 2025: 6,736.
Imports of goods (annual percentage change): 2019: -2.1; 2020: -6.6; 2021: -2.4; 2022: 4.6; 2023: 1.0; 2024: 1.7.
Merchandise trade balance (percent of GDP): 2018: -31.1; 2019: -28.0; 2020: -28.6; 2021: -27.7; 2022: -25.6; 2023: -24.3; 2024: -23.0; 2025: -21.9.
Current account balance excluding official transfers (percent of GDP): 2018: -31.4; 2019: -27.0; 2020: -30.6; 2021: -28.5; 2022: -25.3; 2023: -23.5; 2024: -20.5.
Current account balance including official transfers: 2018: 7.6; 2019: 6.9.
Foreign direct investment: 2018: 0.4; 2019: 0.0; 2020: 0.5; 2021: 0.7.
Total external debt (public sector only): 2018: 6.8; 2019: 8.7; 2020: 9.2; 2021: 9.4; 2022: 9.7.
Gross international reserves (in millions of U.S. dollars): 2018: 8,273; 2019: 8,573; 2020: 8,896; 2021: 8,788; 2022: 8,688; 2023: 8,590; 2024: 8,495; 2025: 8,400.
Import coverage of reserves (in months of next year's import of goods and services): 2018: 13.5; 2019: 14.5; 2020: 13.9; 2021: 13.4; 2022: 13.0; 2023: 12.5.
Exchange rate (p.a., Afghanis per U.S. dollar): 2018: 72.2; 2019: 77.9.

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

Excluding the narcotics economy.
Public debt includes promissory note issued by MoF to settle DAB's Kabul Bank exposure.
Current account does not include COVID emergency financing grants.

Recent economic developments (Annex I) — key findings

Fragility and conflict have hindered development, resulting in weak growth, high unemployment, and continued dependence on aid financing large fiscal and current account deficits.
COVID-19 impact:
- Pandemic and containment measures caused a collapse in economic activity in first half of 2020; activity began regaining footing with easing of restrictions since late May.
- Output expected to contract by 5 percent in 2020, down from 3.9 percent growth in 2019 (assuming infections don’t intensify).
- Inflation spiked in April due to border closures and panic buying but moderated as trade resumed and a new harvest boosted food supply.
- Fiscal deficit sharply widened to 1.6 percent of 2020 GDP in January–June due to revenue shortfalls and increased pandemic-related expenditures.
Risks to the outlook: deeper and more prolonged pandemic effects, uncertain security conditions, and potential shortfalls in donor grants.

Program conditionality, success factors, and risks

Success hinges on:
- Sustained donor support.
- Steadfast reform implementation.
- Progress in combating corruption.
- Agile response to shocks and effective capacity development.
Downside risks:
- Intensification of the pandemic and deterioration in the security situation could cause the recovery to falter and increase financing needs.

Source: Press Release No. 20/334, IMF Communications Department, November 6, 2020.