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US welcomes IMF aid to Afghanistan

US welcomes IMF aid to Afghanistan

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On
Nov 16, 2011 - 11:35

WASHINGTON (PANinfo-icon): The International Monetary Fund (IMF) has approved $133.6 million in financial assistance to Afghanistaninfo-icon, giving a major boost to the country’s fragile economy and endorsing the steps being taken by Afghan government to strengthen the economic system of the country.

The US was quick to welcome the decision, even though it said Kabulinfo-icon needed to take more steps towards economic reforms.

“We certainly support the IMF’s executive board decision to approve a country program for Afghanistan. We do believe that there’s more work that needs to be done to reform and modernize Afghanistan’s banking and financial system,” the State Department spokesman, Mark Toner, told reporters.

In a teleconference with reporters, Axel Schimmelpfennig, IMF's mission chief for Afghanistan, said  the Fund had approved a three-year loan under the Extended Credit Facility for $133.6 million.

There will be disbursements on a semiannual basis as is the case with these loans with the IMF. The first one upon approval of the program will be $18.9 million in the next coming weeks, he said.

Afghan authorities, he said, have put forward a broad and ambitious program that tackles the main challenges that they're facing going forward. These include the international troops withdrawal by 2014.

Looking further beyond is the expected gradual decline in the very high levels of donor support that Afghanistan is currently enjoying. The program puts into place an economic framework that will help these challenges and the economic impacts of these developments, he continued.

Responding to questions on Kabul Bank, Schimmelpfennig said the IMF believes the Karzai Government has made good progress on addressing the issues that relate to Kabul Bank. “Of course, more needs to be done and that again is where the program comes in,” he said.

The US State Department tended to agree with the IMF. “We are encouraged by the Afghan Government’s actions over the past year to deal with the Kabul bank crisis, as well as to respond to the International Monetary Fund’s recommendations.  These actions include enforcing accountability, safeguarding financial and economic stability, and building a strong banking sector,” Toner explained.

As such the United State believes that the Afghan Government is able to address serious reform issues.  “We do think that more steps are needed, and we’re going to continue to urge the Afghan Government to implement reforms that are necessary for meeting all of the IMF’s recommendations,” he added.

The IMF said there is a big capacity issue in Afghanistan. There are simply not enough people in Afghanistan with the relevant skills to staff the supervision department and to help out with the work that needs to be done in the receivership, et cetera, so that there are challenges that the authorities will have to continue to deal with as they strengthen supervision, Schimmelpfennig said.

“One thing the authorities are doing about it is, for example, to have 10 banks now undergoing in-depth audits to get a good sense of where are these banks standing with respect to the regulatory environmentinfo-icon and what is their financial healthinfo-icon so that this will be important input into the work of the supervision department,” he concluded.

mbg/mud

 

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