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Afghanistan - Joint World Bank-IMF Debt Sustainability Analysis (English)

This debt sustainability analysis (DSA) assesses Afghanistan’s risk of external and overall debt distress as high. Donor grants of about forty percent of gross domestic product (GDP) currently finance Afghanistan’s underlying fiscal and external deficits. Given this aid dependence and limits to official concessional financing, both external and public debt are expected to remain low for the next decade. Hence, mechanical signals in this period suggest moderate risk of debt distress. However, the financing mix is projected to shift away from grants towards debt financing in the long run, which warrants the use of the extended 20-year period. In this longer horizon, one of the indicators, the ratio of present value of debt to exports, repeatedly breaches the threshold under the baseline scenario, suggesting the high-risk rating. Downside risks come from political uncertainty, continued insecurity, faster-than-expected-drop in aid, and severe weather shocks. Mobilizing domestic revenue, enhancing the effectiveness of public spending, and strengthening themanagement of fiscal risks, including those stemming from state-owned corporations (SOCs) and public private partnerships (PPPs), should be priorities for the authorities. In addition, diversification of exports and strengthening debt management, including through local debt market development, will help Afghanistan improve its debt carrying capacity

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Afghanistan - Joint World Bank-IMF Debt Sustainability Analysis (English). Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/412161606925441043/Afghanistan-Joint-World-Bank-IMF-Debt-Sustainability-Analysis