An International Monetary Fund (IMF) team led by Christoph Duenwald visited Tashkent during September 25–October 2, 2018 to conduct discussions on the fourth review of Afghanistan’s economic program supported by a three-year IMF Extended Credit Facility (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 2018. Upon completion of this review, SDR 4.5 million (about US$ 6.1 million) will be made available to Afghanistan, bringing total disbursements to SDR 22.5 million.
During the mission, the team met with Afghanistan’s authorities to discuss the latest economic developments and review implementation of reforms under the ECF.
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 in 2018. Donor grants continue to finance large budget and trade deficits allowing treasury cash balances and international reserves to remain at comfortable levels.
The team discussed with the authorities Afghanistan’s implementation of the economic reforms supported by the ECF. The program sets out a structural reform agenda focused on institution building; fiscal and financial reforms while safeguarding social and other priority spending; and measures to combat corruption, to lay the foundations for scaled up private sector development and higher inclusive growth. The team commended the authorities for prudent macroeconomic management and achieving progress under challenging circumstances and discussed follow up actions that would help move the reform agenda forward.
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. Donors continue to stand by Afghanistan, providing it with much needed financial and technical assistance support. 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.
The IMF remains a key partner to Afghanistan, including through technical assistance and training, and will continue to actively engage in a dialogue with the authorities on their reform program with the aim of maintaining macro-financial stability, reinvigorating growth, and building a healthy economy to benefit all Afghans.