The Extended Credit Facility (ECF) is aimed at helping to advance the authorities’ reform agenda, build confidence, and catalyze resources from donors
The program supported by the ECF focuses on policies to maintain macro-financial stability and reforms that lay the foundations for private sector development
The Executive Board of the International Monetary Fund (IMF) today approved a three-year Extended Credit Facility (ECF) arrangement for Afghanistan for SDR 32.38 million (US$44.9 million, or 10 percent of quota) to help raise growth by consolidating progress on the macroeconomic and structural fronts and catalyzing continued support from donors.
Following the Board’s decision, SDR 4.5 million (about US$6.2 million) is available for immediate disbursement; the remaining amount will be phased in over the duration of the program, subject to semi-annual reviews.
Following the Board discussion, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, made the following statement:
“Afghanistan is undergoing a difficult political, security, and economic transition. Against this background, the authorities’ successful completion of the 2015 staff-monitored program has provided the needed track record for a financial arrangement with the Fund. The authorities’ program supported under the Fund’s Extended Credit Facility aims to consolidate recent gains on the macroeconomic and structural fronts, and catalyze donor support. It will focus on institution building, fiscal and financial reforms, and measures to combat corruption. These reforms will help lay the foundation for private sector development, in line with the goal of Afghanistan’s forthcoming National Development Framework.
“On the fiscal side, the program aims to raise revenue and reduce reliance on aid through tax administration and policy reforms; improve the formulation, execution, and reporting of the budget; ensure a pro-growth re-composition of public spending over time; and strengthen commitment controls and cash management.
“The program envisions bolstering financial stability and the central bank’s regulatory and supervisory frameworks to address remaining financial risks, including the need to complete the resolution of the 2010 Kabul Bank crisis.
“The reform agenda also includes strong anti-corruption measures and implementation of further reforms of the AML/CFT framework, which are critical to protecting financial stability, deterring corruption, and exiting the Financial Action Task Force’s monitoring process.
“The program will support a policy mix that aims to preserve macro-financial stability by strengthening fiscal and external balances, keeping inflation low, and maintaining exchange rate flexibility and strong buffers.
“In view of the challenging circumstances, full ownership of the program and buy-in from stakeholders will help mitigate implementation risks and raise the likelihood of program success.”