Wednesday, January 27, 2010

IMF, World Bank announce debt relief for Afghanistan

WASHINGTON — The IMF and the World Bank announced that they will back an international debt relief program of 1.6 billion dollars for Afghanistan, following completion of key reforms.

The announcement came ahead of Thursday's major international conference on Afghanistan in London aimed at determining the conditions needed for achieving the international community's goals in the war-ravaged country.

The IMF and World Bank boards of directors agreed that Afghanistan has taken the necessary steps to reach the "completion point" under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative, said a joint statement by the sibling Washington-based bodies.

Afghanistan qualified to become the 27th country to benefit from the international program that rescues poor countries from being buried under interest payments on mountains of debt.

That total includes 1.3 billion dollars from the HIPC Initiative, 260 million dollars from Paris Club creditors beyond HIPC, and 38.4 million dollars from the Multilateral Debt Relief Initiative (MDRI).

All multilateral and Paris Club creditors, as well as some other official creditors, have agreed to participate, the statement said.

"To reach the completion point, Afghanistan carried out a number of important reforms despite an extremely challenging environment characterized by insecurity, a food crisis, and a difficult political situation," the institutions said.

The reforms included actions to begin implementing a national development strategy, maintain a stable macroeconomic environment, and enhance debt management.

The Afghan authorities also made progress in public financial management, mining sector reforms, and transparency and accountability in health and education services, the statement said.

"Based on strong commitments going forward, the government of Afghanistan was granted waivers for two completion point triggers on pension reform for public employees and the military, and the restructuring of four key service delivery ministries, both of which had been substantially implemented," the institutions said.

The IMF and the World Bank underscored that reforms under the HIPC Initiative are expected to mobilize additional resources and support the country?s reconstruction and poverty reduction, helping to place it on a sustainable path.

"The Afghan government has demonstrated a very strong commitment to an ambitious reform program since it reached its HIPC decision point in 2007," said Nicholas Krafft, World Bank country director for Afghanistan.

"This is a very commendable achievement given the deteriorating security situation and political uncertainty over the recent election year."

Officials stressed that even after HIPC debt relief Afghanistan "would remain a country under high risks of debt distress due its reliance on donor funding."

Enrique Gelbard, the IMF mission chief for Afghanistan, said that in addition to improvements in security, the key challenges Afghanistan faces will be to increase domestic revenues, invest in infrastructure, and forge ahead with its national development plan to reduce poverty.

"This will require significant efforts by the authorities as well as substantial and sustained support from donors and multilateral institutions," Gelbard said.

Foreign ministers including US Secretary of State Hillary Clinton will attend the 60-nation conference on Afghanistan aimed at boosting the domestic security forces there and tackling corruption.

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