January 27, 2010 / 12:11 AM / 10 years ago

Afghanistan wins $1.6 billion in debt relief: IMF

A displaced Afghan man from Helmand province carries his grandchild in Kabul, January 24, 2010. REUTERS/Ahmad Masood

WASHINGTON (Reuters) - Afghanistan won $1.6 billion in debt relief from the World Bank, International Monetary Fund and creditor nations on Tuesday, as the war-torn country faces funding needs to rebuild from years of conflict.

The IMF and World Bank said in a statement Afghanistan had successfully carried out a debt cancellation program, including economic reforms, despite “an extremely challenging environment characterized by insecurity, a food crisis, and a difficult political situation.”

The news came as Afghanistan’s allies and neighbors prepare to meet in London on Thursday for a one-day conference to discuss military and other plans going forward in the country’s eight-year war against Taliban insurgents.

The debt write-off includes over $1.3 billion under two global debt relief programs overseen by the IMF and World Bank for rich donor nations, and an additional $260 million from the Paris Club of 19 creditor nations.

Nicholas Krafft, World Bank country director for Afghanistan, cautioned that even after the debt relief, Afghanistan will remain under a high risk of debt distress because it is so dependent on aid.

Afghanistan is one of the globe’s poorest nations and has some of the worst human development indicators in the world.

Enrique Gelbard, the IMF mission chief for Afghanistan, said the main challenges for the government will be to raise domestic revenues, invest in infrastructure and press ahead with a national plan to reduce poverty.

“This will require significant efforts by the authorities as well as substantial and sustained support from donors and multilateral institutions,” Gelbard said in a statement.

The Obama administration has committed to increase U.S. troops in Afghanistan by some 30,000, while Britain and other nations have sent reinforcements to the country’s turbulent south and east, raising total U.S.- and NATO-led forces to more than 100,000.

Reporting by Lesley Wroughton; Editing by Leslie Adler

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