Afghanistan has made progress on structural reforms despite a difficult environment, the IMF said Friday as it approved the release of $18.2 million in new funds under its loan program. The International Monetary Fund said Kabul had moved ahead on targets to draft a value-added tax law, set a strategy to fight economic crimes, and strengthen the central bank's capitalization framework.
The IMF said it was releasing the second tranche of the $133.6 million loan program approved in November even though Kabul had not met a goal on fiscal revenues.
"In a very difficult environment, Afghanistan has begun a transition toward greater macroeconomic stability and economic self-reliance," IMF deputy managing director Nemat Shafik said.
"The authorities have also reported on asset recovery from Kabul Bank where cash recoveries have increased following a presidential decree," she added.
"Going forward, the program will continue to focus on safeguarding the financial sector, strengthening economic governance, and moving toward fiscal sustainability. While progress has been made on all these fronts, strong government ownership of the program remains crucial to resist opposition from vested interests."
The original IMF loan was held up for a year as foreign donors and the Fund pressed the government to deal with the massive Kabul Bank scandal, in which nearly one billion dollars were lost in a scheme involving many powerful Afghan businessmen and officials.
The bank, once Afghanistan's largest, had to be taken over by the central bank in late 2010 amid accusations that powerful former executives siphoned off more than $900 million, some of which was used to buy luxury properties in Dubai.
The approval of the loan program last November opened the door for bilateral donors to begin releasing some $100 million through the World Bank-managed Afghanistan Reconstruction Trust Fund.
Shafik said the Afghan authorities' development strategy "rests on greater revenue mobilization and sustained strong donor support to meet large spending needs for security and development in the years ahead."
To this end, "The authorities will need to strengthen budget implementation capacity, address critical governance issues, and improve accountability within various government agencies."
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