German Embassy Kabul                                                                                                                                                                                      Ministry of Finance

Press release

Afghan-German Debt Restructuring Agreement signed

On 2 April 2007, Finance Minister Dr. Anwar Ul-Haq Ahady and German Ambassador Dr. Hans-Ulrich Seidt signed the first debt rescheduling agreement between the Islamic Republic of Afghanistan and the Federal Republic of Germany. The agreement covers the repayment conditions of nearly US $ 44,1 million Afghan debt from bilateral trade with Germany, reducing this debt by 67%. The repayment of the remaining debt is rescheduled over a period of 23 years, including six free years. The signing ceremony took place in the Finance Ministry’s Khyber Hall. The debt rescheduling agreement is based on the Poverty Reduction and Growth Facility (PRGF) programme agreed upon between Afghanistan and the International Monetary Fund (IMF) as well as on the agreement concluded between Afghanistan and the Paris Club of bilateral lenders on 19 July 2006

 Afghanistan's external debt totaled approximately  US $ 11.9 billion as of March 2006. The Government expects to reduce this debt to approximately US $ 600 million when Afghanistan reaches the completion point of the Heavily Indebted Poor Countries (HIPC) process, aiming at the reduction of multilateral debt. This Afghan-German debt rescheduling agreement is a precondition for Afghanistan’s qualification for the HIPC Initiative. In addition, the lenders of the Paris Club have already signalled their willingness to write off 100% of bilateral debt as soon as Afghanistan qualifies for the HIPC Initiative.“By reducing our debt immediately and eventually giving total debt forgiveness, Germany is providing us with the ability to reallocate funds needed for debt service, and redirect these resources towards important goals such as better health care, poverty reduction, economic development and important social programs,” said Dr. Ahady. “Germany has been a strong supporter of Afghanistan and I would like to take this opportunity to thank the people of Germany and our friends at the German Embassy here in Kabul for their continuing support. This support has been broad based, as Germany has provided grants, technical assistance and other forms of economic support to Afghanistan now and over the past years,” the Minister added.

German Ambassador Dr. Seidt expressed his conviction that the debt release provides an important contribution to Afghanistan’s financial stabilisation and thus to its economic and social development. He particularly praised the exemplary cooperation between the two countries’ finance ministries in the course of the negotiations.

The Federal Republic of Germany is a member of the European Union (EU). The EU (European Commission and 27 member states) has disbursed collectively EUR 3,7 billion in aid to Afghanistan over five years (2002-2006), i.e. more than one third of the aid pledged by the international community. At the London Conference in spring 2006, the EU pledged a further EUR 2 billion (about USD 2.4 billion) for reconstruction assistance to Afghanistan over the coming years.

For further information, please contact:

Arian Sharifi,                                                                                           Henning Speck

Director of Communications                                                   First Secretary for Press & Cultural Affairs

Ministry of Finance                                                                 German Embassy, Kabul

Mobiles: 075-20-29442; 07000-86-402                                              Phone: 020-210-15-12

Email: arian.sharifi@gmail.com                                                             Email: ku-1@kabu-auswaertiges-amt.de