IMF to Extend Afghan Credit Line if Anti-Corruption Reforms Implemented
August 15, 2020
The International Monetary Fund (IMF) and Afghan authorities reached an agreement that would provide the country access to $364 million in credit over the next 3.5 years if actions are taken to improve transparency and reduce corruption.
The announcement comes as the Afghan government is under fire again for rampant corruption, including allegations of abusing COVID-19 funding. Last week, the Afghan Chamber of Commerce and Investment (ACCI) said corruption in Kabul is on the rise and has reached the highest levels of government.
“The IMF Executive Board… is expected to consider the request in late October, after the authorities implement the agreed prior action to improve the accountability and transparency in procurement,” the IMF’s Azim Sadikov said in a statement on August 14.
Sadikov held virtual discussions with Afghan officials in July and August about the economic reform program and the country’s requirements, according to the statement.
“The program will aim to improve fiscal governance, strengthen the anti-corruption regime, and bolster the financial sector,” the IMF official added.
Key reforms, he said, will include strengthening social protection and completing the reform of state-owned banks.
The IMF hopes that as the COVID-19 recovery gets underway, the reform program will gradually reverse the fiscal deterioration caused by the pandemic and lead to improvements in areas such as customs and revenue administration.
In a request for assistance to the IMF earlier this year, the Afghan government said the COVID-19 pandemic and measures to contain it worsened the outlook for the country’s economy, which had already been burdened by ongoing conflict and political uncertainty. The developments opened up an urgent balance of payments gap estimated at $857 million.
This came after the IMF granted Afghanistan $220 million in emergency assistance under the Rapid Credit Facility (RCF), which provides funding to low-income countries with limited conditionality.
The pandemic has hit Afghanistan’s economy hard, as it has most countries. In April, the IMF projected that Afghanistan would fall into a recession and see a negative growth rate in 2020 (-3%), quite a turnaround from the 3 percent positive growth achieved in 2019.
Moreover, the Afghan Ministry of Economy recently confirmed that 90 percent of Afghans are now living below the poverty line.
The IMF deciding to make the credit available contingent on reforming procurement and anti-corruption efforts are likely driven by recent scandals over mishandling of coronavirus supplies and equipment. In June, Afghan President Ashraf Ghani ordered the presidential palace’s inspector general to probe allegations of corruption in the spending of the coronavirus response budget.
The Afghan government had allocated nearly $156 million in COVID-19 funding by mid-summer, Tolo News reported, citing the health ministry. The international community, meanwhile, by that point had pledged $700 million to help fight the virus in the country, according to government data.
Afghan Lawmakers during a session said millions of people had been “embezzled” under the pretext of fighting the coronavirus. MP Shahpoor Hassanzoi claimed the funding was divided among senior public health officials while MP Nilofar Jalali Kofi said the ministry’s leadership was collaborating with an “economic mafia.”
Last month, Al Bawaba, citing unnamed sources, said the reason deputy ministers and department heads resigned recently, including Health Minister Ferozuddin Feroz, was due to accusations of mismanagement and graft.
In March, Feroz sounded alarms about the lack of funding, saying the health ministry needed $100 million but only had $18 million on hand to contain the pandemic.
Earlier this year, International Committee of the Red Cross (ICRC) President Peter Maurer pointed out that the COVID-19 outbreak has overwhelmed advanced health care systems let alone smaller countries that have been devastated by warfare.
In fact, the country with the biggest economy in the world, the United States, for example, has proven ill-equipped and ill-prepared to effectively fight COVID-19 as the case count surpasses a mind-boggling 5.3 million cases and 168,000 related deaths.
The rise in corruption could not come at a worse time for Afghanistan as the UN suggested a few months ago. Deborah Lyons, the UN Secretary-General’s Special Representative for Afghanistan, in a statement on June 18 said progress in the fight against corruption was crucial as the international community faces daunting economic challenges “that continue to draw attention away from Afghanistan.”
Afghanistan had 37,660 confirmed COVID-19 cases and nearly 1,370 related deaths as of August 15, according to data compiled by Johns Hopkins University. On August 13, health ministry data revealed that 97,778 samples had been tested in government centers and there were 9,347 known active COVID-19 cases in the country.