Financial Crime World

Afghanistan’s Public Financial Management Reforms: Progress and Challenges

PFM Reform Strategy

The government of Afghanistan has been undertaking Public Financial Management (PFM) reforms under the International Monetary Fund’s (IMF) framework as part of the accountability framework. The reforms aim to:

  • Strengthen fiscal management: Improve budget planning, execution, and transparency
  • Enhance accountability: Increase transparency and accountability in public financial management

Implementation Status

Key recommendations from the 2017 Article IV consultations and the ongoing Extended Credit Facility (ECF)-supported arrangement have been implemented. These include:

  • Maintaining fiscal balance: Keeping an overall fiscal balance
  • Improving revenue administration: Enhancing revenue collection and administration
  • Reducing lender of last resort exposure: Reducing DAB’s LoLR exposure to Kabul Bank

Financial Sector Policies

The government has strengthened regulatory and supervisory frameworks, including:

  • Corrective plans for weak private banks: Implementing corrective plans for private banks with weaknesses
  • State-owned commercial bank strategy: Implementing a strategy agreed with the World Bank for state-owned commercial banks (SOCBs)

Governance and Anti-Corruption

The authorities have taken steps to enhance governance and anti-corruption, including:

  • Publishing asset declarations: Publishing information on officials who have submitted their asset declarations
  • Imposing sanctions: Imposing sanctions on non-complying officials
  • National risk assessment: Finalizing a national risk assessment for money laundering/terrorist financing
  • Strengthening AML/CFT supervision: Enhancing anti-money laundering/countering the financing of terrorism (AML/CFT) supervision at DAB

Challenges and Areas for Improvement

Despite progress, there are still areas that require improvement, including:

  • Enhancing corruption enforcement: Increasing efforts to combat corruption
  • Operationalizing anti-corruption agencies: Ensuring anti-corruption agencies are operational and effective
  • Completing asset recoveries: Finalizing asset recoveries related to the Kabul Bank crisis