Norway to disburse withheld funds to Afghanistan Reconstruction Trust Fund

“I am pleased to see that the Afghan authorities have fulfilled several of the requirements set by the donor countries for resuming the payment of funds to the Afghanistan Reconstruction Trust Fund (ARTF). This means that important projects in the areas of education, good governance and rural development will receive funding. However, we must continue to maintain the pressure in order to reduce the risk of corruption,” said State Secretary Espen Barth Eide.   

Norway will disburse up to NOK 280 million to the Afghanistan Reconstruction Trust Fund in 2011. The funds have been withheld until the Afghan authorities met the demands of the international community to clean up after the Kabul Bank corruption scandal.  

There has been widespread agreement among all donors to Afghanistan to withhold funds earmarked for the multi-donor Afghanistan Reconstruction Trust Fund, which is administered by the World Bank. The International Monetary Fund (IMF) has presented the donor countries’ requirements, in connection with its negotiations on a new agreement with Afghanistan.  

“The fact that the donors have taken a concerted stand has been crucial for getting the Afghan authorities to take the necessary action in the Kabul Bank case. Norway will consider withholding funds in the future, too, should similar situations arise. We cannot accept corruption or breaches of agreement. We have to address these issues,” said State Secretary Eide. 

Important requirements for negotiating a new IMF agreement have included recapitalising Kabul Bank, prosecuting those involved in the scandal, and recovering embezzled funds. Moreover, the donors have demanded an audit of another Afghan bank, with a view to revealing whether illegal activities may have taken place there as well. 

The IMF and the donors have noted that there has been significant progress in the cleanup efforts. The audit of the second bank under scrutiny has been almost completed, without finding any circumstances that give grounds for suspicion of embezzlement. Furthermore, the Afghan parliament has decided to recapitalise Kabul Bank. There has also been progress on the issue of recovering funds and prosecuting those involved in the scandal. 

The IMF Executive Board is expected to consider a new agreement with Afghanistan in the middle of November.