IMF, World Bank announce $1.6 bln in debt relief to Afghanistan

10:09, January 27, 2010      

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The World Bank's International Development Association (IDA) and the International Monetary Fund (IMF) have agreed to support 1.6 billion U.S. dollars in debt relief for Afghanistan.

The Boards of Directors of both institutions agreed on Tuesday that Afghanistan has taken the necessary steps to reach the completion point under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative.

"Afghanistan becomes the 27th country to reach the completion point under the Initiative," said a joint statement released by the IMF and the World Bank.

This will generate total debt service savings of 1.6 billion U. S. dollars, which include 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).

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.

These reforms included actions to begin implementing Afghanistan's National Development Strategy (ANDS), maintain a stable macroeconomic environment, and enhance debt management.

"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 J. 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," he said. "On a cautionary note, even after HIPC debt relief Afghanistan will remain a country under high risks of debt distress due to its reliance on donor funding."

Enrique Gelbard, the IMF mission chief for Afghanistan, also said the Afghan authorities should be commended for their efforts amid a very difficult environment.

"Alongside improvements in security, the key challenges going forward will be to raise domestic revenues, invest in infrastructure, and press ahead with the implementation of the ANDS to reduce poverty," he said.

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

Afghanistan is one of the poorest countries in the world. Per capita income is estimated to have been about 425 dollars in 2008, and Afghanistan ranks well behind its neighbors on most human development indicators, according to the IMF and the World Bank.

Source: Xinhua
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