Afghanistan secured a preliminary agreement for a $129 million loan from the International Monetary Fund after taking steps to strengthen its financial system following the collapse of Kabul Bank.
The three-year loan program is likely to come to the board of directors for approval in November, the Washington-based IMF said in an e-mailed statement today. The IMF has said its support was contingent on the country’s strengthening its financial system.
“The authorities have made important progress on managing the Kabul Bank crisis that came to the fore in the fall of 2010,” IMF mission chief Axel Schimmelpfennig said in the statement. “The authorities’ program outlines further steps to strengthen and develop Afghanistan’s financial sector.”
A loan would signal approval of Afghanistan’s policies, a condition for some governments that provide assistance. The IMF, which reached a similar agreement in July 2010 that never went to the board, had said Afghan authorities needed to prevent a repeat of the conditions that led to the collapse of Kabul Bank before obtaining aid.
The government took over Kabul Bank, the country’s biggest commercial financial institution, in September 2010. Thousands of depositors rushed to withdraw their money last year after learning that the bank’s owners had lost hundreds of millions of dollars they had lent to themselves.
“Kabul Bank has been put into receivership, and efforts are under way to recover the embezzled assets from the former shareholders of the bank which will limit the fiscal costs of the crisis,” Schimmelpfennig said. “The central bank is also stepping up supervision and ensuring that the banking law and regulations are fully enforced.”
Measures the Afghan government plans to take in exchange for the loan include introducing a value-added tax to make up for the expected decrease in revenue collection when the military withdraws.
The IMF said it expects real economic growth of between 6 percent and 8 percent during the program period.