IMF moves toward new $129m Afghan loan

The IMF said its Afghan mission had reached an agreement in principle on the new financing to help the government advance its fiscal program and strengthen the financial sector.The announcement came after more than one year of discussions that were stalled by the collapse of the war-torn countrys biggest commercial lender which saw hundreds of millions of dollars stolen from the government and depositors and highlighted endemic corruption among Kabuls elite.The authorities have made important progress on managing the Kabul Bank crisis that came to the fore in the fall of 2010, the IMF said in a statement.Kabul Bank has been put into receivership and efforts are underway to recover the embezzled assets from the former shareholders of the bank which will limit the fiscal costs of the crisis.It said the Afghan central bank was strengthening its supervision of the banking sector and ensuring that the banking law and regulations are fully enforced, including on conflict of interest.In February the IMF said it was holding back on a new three-year extended credit facility pending a cleanup of the banking system including, it advocated, prosecutions of illegal behavior or fraud tied to Kabul Bank.The new ECF, which is expected to be submitted to the IMF executive board for approval in November, comes as planned NATO troop withdrawals and waning donor support will challenge economic growth and the government revenue collection, the Fund said.But it forecast annual economic growth of 6-8 percent during the period of the loan, which it said could pick up with the development of Afghanistans mining sector.Over the medium term, sustaining high and inclusive growth with a view to reducing poverty will require a stable security situation, improvements in governance, and an enabling environment for the private sector.