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Cancelling Afghanistan's Debt


Afghan Finance Minister Omar Zakhilwal and U.S. Ambassador to Afghanistan Karl Eikenberry sign the debt relief agreement in Kabul.

In order to improve the lives of the Afghan people and encourage economic development, the U.S. agreed to cancel Afghanistan's debt.

In order to improve the lives of the Afghan people and encourage economic development, the United States agreed to cancel 100 percent of Afghanistan's debt to the United States, totaling 108 million $.

"Debt relief is crucial to Afghanistan’s broader poverty reduction program, as it will allow the Afghan Government to spend more of its future resources in such sectors as health and education which improve the lives of the Afghan people," said U.S. Ambassador to Afghanistan Karl Eikenberry at the debt relief signing ceremony. "Strengthening the domestic economy is an integral element of the Afghan Government’s mission to provide a safe, stable, and prosperous environment for Afghans throughout the country."

The decision to eliminate the debt was not arbitrary: the Afghan government first had to meet a number of goals to qualify for the Heavily Indebted Poor Country program sponsored by the World Bank and the International Monetary Fund, or IMF. This includes implementation of the Afghanistan National Development Strategy, reforming the legal network in Afghanistan's mining sector, strengthening its debt management program and meeting various other benchmarks set by the IMF.

Afghanistan began the Heavily Indebted Poor Country program in 2007. Its good performance within the program's parameters, and recent completion of the program in March of this year, have borne fruit: earlier this year, the IMF, the World bank and the Paris Club, an informal group of financial officials from 19 of the world's biggest economies, of which the U.S. is 1, cancelled over 2.6 billion $ worth of Afghanistan's debt. Afghanistan's gross national income for 2008 was a little over 32 billion $. [Source for all of the above: World Bank, World Development Indicators. 1.6 billion was cancelled by the IMF and the World bank, 1.026 billion by the Paris Club.]

U.S. Ambassador Eikenberry said, "The agreement by our 2 Governments to relieve Afghanistan of 108 million $ worth of debt is an important element of the international community’s broader effort to lift the debt burden inherited by the Afghan Government. This international effort will ultimately result in a 96 percent reduction of Afghanistan’s external debt, equivalent to about 11 billion $.

"We look forward," he said, "to working with the Afghan Government on further steps to strengthen the economy and increase the wealth of this great nation."

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