IMF warns of slippage in Afghan economic program
Source: Reuters
(Adds more details, quotes, background) By Lesley Wroughton WASHINGTON, Feb 12 (Reuters) - An International Monetary Fund staff mission to Afghanistan expressed concern on Monday that the government's determination to stick to targets set by an IMF economic program "might be waning" amid spending pressures from rising social and security needs. "The political environment surrounding the program is becoming increasingly complex," the IMF mission said in a statement following a visit to Kabul between Jan. 21 to Feb. 1 to assess the country's eligibility for debt relief. "Multiple and competing demands pose a challenge for the authorities and complicate policy decisions," the Fund said. Despite significant support from donors, jobs were scarce and progress slow in improving the lives of ordinary Afghanis, the IMF mission said. It also pointed to increasing budget outlays from a volatile security situation and urged the government to prioritize its spending. Afghanistan is facing its bloodiest violence since the Taliban government was toppled by U.S.-led forces in 2001, which has raised concern for the country after optimism generated by successful elections in 2004 and 2005. Analysts have cautioned that unemployment and poverty are the main reasons for a rise in support for a Taliban insurgency in the country's south, where violence is increasing. During a Jan. 30 conference in Berlin, the IMF said Afghanistan's finance minister said that IMF conditions, security needs and development targets were putting "conflicting" pressures on the government. "The mission is concerned that, in this environment, the authorities' determination to deliver on commitments under the IMF-supported program -- notable in the past -- might be waning," it added. The IMF said the government had met all targets agreed during a mission in November, but was unable for the first time since agreeing to an IMF program to meet its revenue target. Changes in Afghanistan's customs tariff system were also "moving in the wrong direction," the Fund said. Domestic revenue at the end of the third quarter was 4.3 percent of gross domestic product, below the program target for December 2006, the fund said. "The uncertainty of recurrent expenditures and the dependency on donor grants underscore the importance of focusing on revenue measures," the IMF said. The fund said fiscal policy for the remainder of 2006-07 would likely be in line with the IMF program, but security demands would put pressure on the 2007-08 budget. It urged the authorities to develop a strategy to modernize the tax and customs administration to meet long-term revenue objectives.
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