## Press Release: IMF and World Bank Announce US$1.6 Billion in Debt Relief to Afghanistan

_IMF News, January 26, 2010_

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## Bibliographic details
- Published: January 26, 2010

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### Summary of the announcement
- The World Bank's International Development Association (IDA) and the International Monetary Fund (IMF) agreed to support US$1.6 billion in debt relief for the Islamic Republic of Afghanistan.
- Afghanistan reached the completion point under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative and becomes the 27th country to reach the completion point.
- The completion point will generate total debt service savings of US$1.6 billion, which include:
  - US$1.3 billion from the HIPC Initiative (nominal terms)
  - US$260 million from Paris Club creditors beyond HIPC (nominal terms)
  - US$38.4 million from the Multilateral Debt Relief Initiative (MDRI)

### Breakdown and technical details of relief
- Debt relief under the HIPC Initiative from all of Afghanistan’s creditors amounts to US$582.4 million in net present value (NPV) terms.
- Afghanistan is expected to receive the equivalent of US$1.3 billion of debt relief in nominal terms under the HIPC Initiative.
- Paris Club creditors have indicated they would provide assistance beyond HIPC relief through 100 percent stock-of-debt cancellation, estimated at about US$260 million in nominal terms.
- Upon reaching the completion point, Afghanistan qualifies for MDRI relief:
  - MDRI relief will lead to a nominal reduction of debt to IDA by US$35 million.
  - Afghanistan does not have any MDRI eligible debt outstanding to the IMF.
- The completion point marks the end of a process (including clearance of arrears and Paris Club reductions since 1996) that will ultimately result in a 96 percent reduction of Afghanistan’s external debt, equivalent to US$11 billion in NPV terms.
- Historical context: In March 2006, Afghanistan’s debt was equivalent to US$11.6 billion in net present value terms. In June 2006, Paris Club creditors provided debt relief through a flow treatment under Naples terms, including an up-front 80 percent discount on Russian debt disbursed before 1992.

### Conditions, reforms, and implementation
- To reach the completion point, Afghanistan implemented reforms despite insecurity, a food crisis, and political difficulties. Reforms included:
  - Actions to begin implementing Afghanistan’s National Development Strategy (ANDS)
  - Maintenance of a stable macroeconomic environment
  - Enhancements in debt management
  - Progress in public financial management, mining sector reforms, and transparency and accountability in health and education services
- Waivers were granted for two completion point triggers that had been substantially implemented:
  - Pension reform for public employees and the military
  - Restructuring of four key service delivery ministries

### Expected impact and risks
- Reforms under the HIPC Initiative are expected to mobilize additional resources, support reconstruction and poverty reduction, and help place Afghanistan on a sustainable path.
- Risks and cautions:
  - Even after HIPC debt relief, Afghanistan will remain a country under high risks of debt distress due to its reliance on donor funding.
  - Continued improvements in security and substantial, sustained support from donors and multilateral institutions will be required.

### Principal policy recommendations and priorities (from IMF and World Bank statements)
- Raise domestic revenues.
- Invest in infrastructure.
- Press ahead with the implementation of the ANDS to reduce poverty.
- Sustain substantial and sustained donor and multilateral institution support.
- Continue reforms in public financial management, mining, and service delivery transparency and accountability.

### Key statistics and indicators
- Total announced debt relief: US$1.6 billion
- HIPC nominal relief: US$1.3 billion
- Paris Club beyond-HIPC nominal assistance: US$260 million
- MDRI nominal reduction to IDA: US$35 million
- MDRI component cited elsewhere in announcement: US$38.4 million
- HIPC NPV relief from all creditors: US$582.4 million
- Long-run external debt reduction: 96 percent, equivalent to US$11 billion in NPV terms
- Afghanistan per capita income (2008): about US$425
- Afghanistan ranking: one of the poorest countries in the world; performance under the IMF’s Poverty Reduction and Growth Facility arrangement described as satisfactory

*Source: Press Release No. 10/15, January 26, 2010 — IMF and World Bank announcement on US$1.6 billion in debt relief to Afghanistan; https://www.imf.org/en/news/articles/2015/09/14/01/49/pr1015*

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## References

- [Islamic Republic of Afghanistan and the IMF](http://www.imf.org/external/country/AFG/index.htm)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
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_Source: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr1015_