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Debt Relief For Afghanistan

The Paris Club agreed to erase $441 million as the Club’s contribution under the Heavily Indebted Poor Countries initiative.

The United States welcomes the accord reached by Afghanistan and members of the Paris Club, of which the U.S. is one, to cancel all debts owed by Afghanistan to Club members. The Paris Club agreed to erase $441 million as the Club’s contribution under the Heavily Indebted Poor Countries initiative. Paris Club creditors also committed on a voluntary and bilateral basis to forgive an additional $585 million dollars of debt owed them by Afghanistan.

The Paris Club is an informal group of representatives from 19 of the world's largest economies, who help very poor debtor countries find solutions to payment difficulties. Often those solutions include debt restructuring or debt cancellation. Three of the Club’s members – Russia, Germany and the United States – had lent money to Afghanistan in years past. Paris Club debt relief is extended to support countries' economic stabilization and reform programs supported by the International Monetary Fund.

U.S. Treasury advisors have worked with the Afghan Ministry of Finance since 2002. They helped the Afghan government to streamline the budget process, improve the payment system for government employees, and establish a Debt Management Unit within the Ministry of Finance.

International financial institutions were able to work with Afghanistan, and finally make the decision to erase much of the debt the current Afghan government inherited from its predecessors, because they recognized that Afghanistan was making significant reforms in public financial management, the mining sector, and improving transparency and accountability in other government service sectors.

The Paris Club accord marks the final stage of a process that will ultimately result in a 96 percent reduction of the inherited debt. When all is said and done, the accord will erase an estimated $1.6 billion worth of debt Afghanistan owed to the Paris Club, the International Monetary Fund, the World Bank and other creditors. Cancelling this debt to foreign creditors will enable the Afghan government to devote more resources for social and economic development purposes.

"Today's decision represents an important achievement for Afghanistan and reflects the international community's acknowledgment of the progress the country has made in strengthening its economy," said Deputy Treasury Secretary Neal Wolin. "Lifting the debt burden inherited by the Afghan government marks a crucial step on Afghanistan's road to economic sustainability."