## IMF Survey: Afghanistan to Get $133.6 Million IMF Loan

_IMF News, November 15, 2011_

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**Canonical URL:** [IMF Survey: Afghanistan to Get $133.6 Million IMF Loan](https://www.imf.org/en/news/articles/2015/09/28/04/53/socar111511a)

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## Bibliographic details
- Published: November 15, 2011

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### Program overview and objectives
- The IMF has approved a $133.6 million loan for Afghanistan to help the country maintain economic stability and begin laying the basis for fiscal sustainability and economic growth.
- The program is a three-year arrangement under the Fund’s Extended Credit Facility.
- The program was endorsed by the IMF’s Executive Board on November 14.
- Major program aims:
  - Start addressing corruption, strengthen the banking system, and improve revenue collection.
  - Make tangible progress on improving social conditions in one of the world’s poorest countries.
  - Strengthen the hand of the economic team to push forward with difficult reform; acknowledge clear risks from vested interests that may oppose reforms.

### Kabul Bank crisis and financial sector measures
- Crisis facts:
  - Concerns about the soundness of Kabul Bank caused a run in September 2010, leading to the withdrawal of about half of its $1.3 billion in deposits.
  - Kabul Bank represented nearly a third of the financial system’s assets.
- Authorities’ actions taken:
  - Kabul Bank put under receivership; its license revoked; shareholders’ rights and interests extinguished.
  - A bridge bank—New Kabul Bank—established, with a business plan to put it up for sale in 2012.
  - A comprehensive audit of Kabul Bank by an independent, internationally recognized firm is under way.
- Program emphasis:
  - Effectively manage the Kabul Bank crisis and strengthen the financial sector based on lessons learned.

### Restoring stability, governance, and supervision
- Key requirements identified:
  - Enforce rule of law in the banking sector to secure economic stability and donor engagement.
  - Make faster progress on asset recovery and apply Afghan laws where crimes have been committed.
  - Ensure the central bank is free from political interference to safeguard the banking system.
- Legal and regulatory reform priorities:
  - Revise existing banking law and regulations to align with the Basel Core Principles and Financial Action Task Force recommendations.
  - Strengthen corporate governance, beneficial ownership, capital, large exposures, related parties, enforcement, and bank resolution.
- Governance measures:
  - Strengthen governance in the economic and financial sphere.
  - Improve government capacity to deal with economic crime and tighten rule of law application in the financial sector.
  - Reaffirmed commitment by Afghan authorities to critical anti-corruption and governance reforms.

### Fiscal progress and revenue mobilization
- Recent progress:
  - Domestic revenue amounts to about 11 percent of GDP, up from about 6½ percent of GDP collected in fiscal year 2005/06.
- Medium-term fiscal targets:
  - Authorities intend to increase revenues by another 4 percentage points of GDP over the next five years, including by introducing a value-added tax in 2014.
- Fiscal risks and support needs:
  - International troops scheduled to withdraw from the country by 2014, increasing government security spending and removing associated foreign spending.
  - Donor support is expected to gradually decline over the medium term, adding to fiscal pressures.
  - “The government cannot borrow to cover the financing gap. This would just lead to a fast and unsustainable buildup of debt,” said Axel Schimmelpfennig, IMF mission chief for Afghanistan.
  - Continued donor support to the budget will be important for many years.
- Debt relief:
  - In early 2010, Afghanistan received $1.6 billion in debt relief from its official creditors under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative.

### Growth potential and risks
- Growth projections and conditions:
  - Afghanistan has the potential to grow by around 6 to 7 percent over the medium term, but this assumes a stable security situation and is subject to considerable uncertainty.
- Key risks:
  - Economic impact of troop withdrawal and evolution of the security situation; risks are clearly to the downside.
  - Agriculture represents about 30 percent of GDP and is subject to weather fluctuations.
- Mining sector opportunities:
  - Afghanistan has rich mineral deposits not yet exploited; attracting large foreign investment requires security stabilization and improved legal framework.
  - If mines are developed, associated roads and electricity infrastructure could benefit other businesses.
  - Need for a strong fiscal regime and robust governance structures to harness benefits from mining.

### Policy priorities under the program
- The government aims to achieve the following goals:
  - Put Afghanistan on a medium-term path toward fiscal sustainability, including by increased domestic revenue mobilization.
  - Contain inflation and ensure adequate central bank capitalization to allow it to follow its mandate.
  - Improve governance to enhance the investment climate and lay the foundation for high and inclusive growth.
  - Strengthen the financial sector by revising the legal and regulatory framework, including in the area of anti-money laundering, and enhancing supervision and enforcement.
  - Achieve maximum recovery of Kabul Bank losses and apply Afghan law, as appropriate, in dealing with financial crimes.

*IMF Survey online, November 15, 2011.*

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [IMF Country Focus](https://www.imf.org/en/news/country-focus)
- [In The News](https://www.imf.org/en/news/search)
- [Read press release](https://www.imf.org/external/np/sec/pr/2011/pr11412.htm)
- [IMF blog on fragile states](http://blog-imfdirect.imf.org/2011/09/07/finding-a-way-out-for-fragile-states/)
- [Seminar on fragile states](https://www.imf.org/external/pubs/ft/survey/so/2011/pol012411a.htm)
- [Regional economic outlook](https://www.imf.org/external/pubs/ft/survey/so/2011/CAR102511A.htm)
- [Afghanistan and the IMF](https://www.imf.org/external/country/AFG/index.htm)
- [IMF program note on Afghanistan](https://www.imf.org/external/np/country/notes/afghanistan.htm)
- [Extended Credit Facility](https://www.imf.org/external/np/exr/facts/ecf.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/28/04/53/socar111511a_