International Monetary Fund IMF staff and Afghan authorities have reached a staff-level agreement on the completion of the fourth review under the Extended Credit Facility (ECF) arrangement.
Based on preliminary findings of the mission, staff will prepare a report that, subject to management approval, will be presented to the IMF’s Executive Board for discussion and decision.
In a statement, IMF said the Afghan authorities continued to implement their economic reform program, with notable progress in fiscal management and financial sector reforms.
Given the uncertainties associated with the electoral cycle, the statement said, policy discipline and strong donor support to the country would be critical over the next six months.
An IMF team led by Christoph Duenwald visited Tashkent from September 25 to October 2 to conduct discussions on the fourth review of Afghanistan’s economic program supported by a three-year ECF arrangement.
During the mission, the team met Afghan authorities to discuss the latest economic developments and review implementation of reforms under the ECF.
At the end of the mission, Duenwald said: “Following productive discussions, the IMF team and the Afghan authorities reached staff-level agreement on the completion of the fourth review under the ECF arrangement.”
The agreement is subject to approval by the IMF Executive Board, which is expected to consider the staff report for the fourth ECF review in early December.
Upon completion of this review, SDR 4.5 million (about $6.1 million) will be made available to Afghanistan, bringing total disbursements to SDR 22.5 million.
Afghanistan’s GDP growth for 2018 is projected at 2.3 percent, below the 2017 growth rate, owing to the impact of the drought and the challenges brought about by political uncertainty and deteriorating security conditions.
Growth is projected to pick up to 3 percent in 2019 as agricultural production recovers. Inflation is expected to average 3 percent during the current year, according to the statement.
Donor grants continue to finance large budget and trade deficits allowing treasury cash balances and international reserves to remain at comfortable levels.
The statement said: “Afghanistan continues to face daunting challenges, with the perilous security situation hurting confidence and growth. The drought, which affects two-thirds of the country’s provinces, as well as regional economic difficulties that are spilling over to Afghanistan, are compounding these challenges…”
During next month’s donor conference in Geneva, Afghanistan will have an opportunity to showcase the reform progress it is making and to explain to the international community why it deserves its continued backing.
