{
  "title": "IMF Executive Board Completes First Review of the Extended Credit Facility Arrangement for the Islamic Republic of Afghanistan",
  "publication": "IMF News, June 7, 2021",
  "sourceUrl": "https://www.imf.org/en/news/articles/2021/06/07/pr21162-afghanistan-first-review-ecf-arrangement",
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  "summary": "Afghanistan faces a precarious security situation and rising uncertainty that are hurting confidence, investment, and growth, while the Covid-19 pandemic has imposed a heavy socioeconomic toll, with higher poverty and unemployment.",
  "publishDate": "2021-06-07",
  "sections": [
    {
      "heading": "Context and objectives",
      "content": "- Afghanistan faces a precarious security situation and rising uncertainty that are hurting confidence, investment, and growth, while the Covid-19 pandemic has imposed a heavy socioeconomic toll, with higher poverty and unemployment.\n- The 42-month Extended Credit Facility (ECF) arrangement aims to support Afghanistan’s recovery from the COVID-19 pandemic, anchor economic reforms, and catalyze donor financing.\n- Afghanistan’s ECF arrangement of SDR 259 million (about US$370 million) was approved by the Executive Board on November 6, 2020 (see press release No. 20/334)."
    },
    {
      "heading": "Key developments and program performance",
      "content": "- The Executive Board completed the first review of Afghanistan’s economic reform program and approved immediate disbursement of SDR 103.6 million (about US$149.4 million).\n- Since the onset of the pandemic, Afghanistan also benefitted from:\n  - IMF disbursement of SDR 161.9 million (about US$220 million) under the Rapid Credit Facility.\n  - Debt service relief of SDR 7.2 million (about US$10 million) under the Catastrophe Containment and Relief Trust.\n- All end-December program performance criteria (PCs) were met.\n- All but two end-December indicative targets (ITs) were met:\n  - The IT on revenue was not observed due to a shortfall in nontax revenue.\n  - The IT on social and other priority spending was not observed for classification reasons.\n- The Executive Board approved the authorities’ request to modify all non-continuous PCs and all ITs, other than the IT on the Treasury cash balance, through end-2021, aligning them with the revised macroeconomic framework, and to update structural benchmarks."
    },
    {
      "heading": "Economic outlook and downside risks",
      "content": "- Growth is expected to resume in 2021, but the outlook is subject to considerable downside risks, including:\n  - adverse security developments,\n  - drought,\n  - the pandemic.\n- The pandemic caused an output loss, worsened poverty, and set back self-reliance efforts.\n- If downside risks materialize, boosting spending for healthcare, support to the vulnerable, and food security will be essential."
    },
    {
      "heading": "Policy recommendations and conditionalities (summary of Deputy Managing Director statement)",
      "content": "- Fiscal policy:\n  - Modest fiscal loosening in 2021 is appropriate to support the recovery and mitigate scarring from the pandemic.\n  - As the economy strengthens in 2022, fiscal policy should shift to advance toward self-reliance and protect priority spending as grants decline.\n  - Achieving this hinges on:\n    - implementation of the VAT in 2022,\n    - tax administration gains,\n    - spending optimization,\n    - strengthening fiscal risk management.\n- Monetary and financial sector policy:\n  - Monetary policy should remain geared toward price stability, with the exchange rate allowed to adjust in response to shocks.\n  - Sustain intensified bank oversight and strengthen regulatory and supervisory frameworks, including for bank resolution and AML/CFT.\n  - Reforms of state-owned commercial banks should be reinvigorated.\n- Social and governance measures:\n  - Boost spending for healthcare and support to the vulnerable if risks materialize, using fiscal space created by spending reprioritization and grants.\n  - Continue progress in improving public spending transparency, including in procurement.\n  - Conducting the audit of pandemic spending will help reassure the public and donors about government accountability.\n  - Further strengthen the asset declaration regime and anti-corruption institutions to help deter and fight corruption.\n- Program ownership:\n  - Despite formidable challenges, the authorities continued to demonstrate strong program ownership.\n  - Macroeconomic stability, reforms supported by donor grants and capacity development, and accelerating vaccinations are key to addressing the pandemic’s legacies."
    },
    {
      "heading": "Immediate financial action",
      "content": "- Completion of the first review makes SDR 103.6 million (about US$149.4 million) available immediately for disbursement under the ECF arrangement.\n\nPress Release No. 21/162, June 7, 2021\n\n---\n\n\n References\n\n- Mitsuhiro Furusawa\n- PRESS CENTER\n- see press release No. 20/334\n- Rapid Credit Facility\n- Catastrophe Containment and Relief Trust\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2021/06/07/pr21162-afghanistan-first-review-ecf-arrangement"
    }
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    "Published: June 7, 2021",
    "Afghanistan faces a precarious security situation and rising uncertainty that are hurting confidence, investment, and growth, while the Covid-19 pandemic has imposed a heavy socioeconomic toll, with higher poverty and unemployment.",
    "The 42-month Extended Credit Facility (ECF) arrangement aims to support Afghanistan’s recovery from the COVID-19 pandemic, anchor economic reforms, and catalyze donor financing.",
    "Afghanistan’s ECF arrangement of SDR 259 million (about US$370 million) was approved by the Executive Board on November 6, 2020 (see press release No. 20/334).",
    "The Executive Board completed the first review of Afghanistan’s economic reform program and approved immediate disbursement of SDR 103.6 million (about US$149.4 million).",
    "Since the onset of the pandemic, Afghanistan also benefitted from:",
    "All end-December program performance criteria (PCs) were met.",
    "All but two end-December indicative targets (ITs) were met:",
    "The Executive Board approved the authorities’ request to modify all non-continuous PCs and all ITs, other than the IT on the Treasury cash balance, through end-2021, aligning them with the revised macroeconomic framework, and to update structural benchmarks.",
    "Growth is expected to resume in 2021, but the outlook is subject to considerable downside risks, including:",
    "The pandemic caused an output loss, worsened poverty, and set back self-reliance efforts.",
    "If downside risks materialize, boosting spending for healthcare, support to the vulnerable, and food security will be essential.",
    "Fiscal policy:",
    "Monetary and financial sector policy:",
    "Social and governance measures:",
    "Program ownership:",
    "Completion of the first review makes SDR 103.6 million (about US$149.4 million) available immediately for disbursement under the ECF arrangement.",
    "[Mitsuhiro Furusawa](http://www.imf.org/external/np/omd/bios/mf.htm)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[see press release No. 20/334](https://www.imf.org/en/News/Articles/2020/11/06/pr20334-afghanistan-imf-executive-board-approves-a-us-370m-ecf-arrangement-to-support)",
    "[Rapid Credit Facility](https://www.imf.org/en/Publications/CR/Issues/2020/04/30/Islamic-Republic-of-Afghanistan-Request-for-Disbursement-Under-the-Rapid-Credit-Facility-49386)",
    "[Catastrophe Containment and Relief Trust](https://www.imf.org/en/Publications/Policy-Papers/Issues/2021/04/05/Catastrophe-Containment-and-Relief-Trust-Third-Tranche-Of-Debt-Service-Relief-In-The-Context-50336)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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