## IMF Executive Board Completes First Review of the Extended Credit Facility Arrangement for the Islamic Republic of Afghanistan

_IMF News, June 7, 2021_

## Source details

**Canonical URL:** [IMF Executive Board Completes First Review of the Extended Credit Facility Arrangement for the Islamic Republic of Afghanistan](https://www.imf.org/en/news/articles/2021/06/07/pr21162-afghanistan-first-review-ecf-arrangement)

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## Bibliographic details
- Published: June 7, 2021

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### Context and objectives
- 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).

### Key developments and program performance
- 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:
  - IMF disbursement of SDR 161.9 million (about US$220 million) under the Rapid Credit Facility.
  - Debt service relief of SDR 7.2 million (about US$10 million) under the Catastrophe Containment and Relief Trust.
- All end-December program performance criteria (PCs) were met.
- All but two end-December indicative targets (ITs) were met:
  - The IT on revenue was not observed due to a shortfall in nontax revenue.
  - The IT on social and other priority spending was not observed for classification reasons.
- 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.

### Economic outlook and downside risks
- Growth is expected to resume in 2021, but the outlook is subject to considerable downside risks, including:
  - adverse security developments,
  - drought,
  - the pandemic.
- 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.

### Policy recommendations and conditionalities (summary of Deputy Managing Director statement)
- Fiscal policy:
  - Modest fiscal loosening in 2021 is appropriate to support the recovery and mitigate scarring from the pandemic.
  - As the economy strengthens in 2022, fiscal policy should shift to advance toward self-reliance and protect priority spending as grants decline.
  - Achieving this hinges on:
    - implementation of the VAT in 2022,
    - tax administration gains,
    - spending optimization,
    - strengthening fiscal risk management.
- Monetary and financial sector policy:
  - Monetary policy should remain geared toward price stability, with the exchange rate allowed to adjust in response to shocks.
  - Sustain intensified bank oversight and strengthen regulatory and supervisory frameworks, including for bank resolution and AML/CFT.
  - Reforms of state-owned commercial banks should be reinvigorated.
- Social and governance measures:
  - Boost spending for healthcare and support to the vulnerable if risks materialize, using fiscal space created by spending reprioritization and grants.
  - Continue progress in improving public spending transparency, including in procurement.
  - Conducting the audit of pandemic spending will help reassure the public and donors about government accountability.
  - Further strengthen the asset declaration regime and anti-corruption institutions to help deter and fight corruption.
- Program ownership:
  - Despite formidable challenges, the authorities continued to demonstrate strong program ownership.
  - Macroeconomic stability, reforms supported by donor grants and capacity development, and accelerating vaccinations are key to addressing the pandemic’s legacies.

### Immediate financial action
- Completion of the first review makes SDR 103.6 million (about US$149.4 million) available immediately for disbursement under the ECF arrangement.

*Press Release No. 21/162, June 7, 2021*

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## References

- [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)

_Source: https://www.imf.org/en/news/articles/2021/06/07/pr21162-afghanistan-first-review-ecf-arrangement_