Government of Afghanistan and the World Bank Sign Grant Agreements to Boost Rural Economy and Improve Access to Basic Health Services

April 11, 2010

KABUL, 11 April 2010 –The Afghanistan Ministry of Finance and the World Bank today signed two grant agreements worth $52 million. These agreements included:

1. $30 million grant assistance from the World Bank’s International Development Association (IDA) to support the Afghanistan Rural Enterprise Development Project (AREDP), a new government initiative designed to boost employment and incomes for people living in rural areas of the country.

2. $22 million from the Afghanistan Reconstruction Trust Fund (ARTF) to co-finance the ongoing Strengthening Health Activities for the Rural Poor (SHARP) project. The SHARP project is delivering the government’s basic package of health services in 11 provinces of Afghanistan. Opening this ARTF window creates the space for pooled funding for the health sector in the future.

“Reviving the rural economy and improving access to basic health care services are key elements for growth and improving the lives of Afghans,” said HE Dr.  Omar Zakhilwal, Minister of Finance (MoF).  “To this end, we appreciate the ARTF donors’ contribution to the health sector and the World Bank’s support to improving rural livelihoods.”

The AREDP will enhance participation of the rural poor in economic activities by providing business development services, improving their access to finance, and strengthening market linkages and value chains.

“This program has been designed to respond to the immense demand for employment and livelihood opportunities by rural communities of Afghanistan and to capitalize on previous investments in rural development by this ministry” said HE Jarullah Mansoori, Minister of Rural Rehabilitation and Development (MRRD). “The pilot phase of this program is already showing that it can have significant impact in terms of improving the rural economy and increasing incomes of rural men and women.”

The AREDP will support the establishment of 13,000 Savings Groups, 6,500 Enterprise Groups (EGs) and 1,300 Village and Savings Loan Associations. The EGs will help maximize the economic potential of rural entrepreneurs by improving market access, delivering technical knowledge, raising basic business skills and leveraging economies of scale to increase the value of their sales. The project will also work with  approximately 750 Small and Medium Enterprises (SMEs) which are likely to be key drivers of rural employment.  It will support SMEs in building necessary skills, promoting market development and particularly encouraging business linkages  into the rural economy.  The project will also faciliate improved access to finance for SMEs through a partial risk guarantee facility  and capacity building support to partner banks.

The SHARP supports Afghanistan’s Health and Nutrition Sector Strategy, the government's roadmap to ensure improved access to basic health care in the period 2008-2013. To date significant progress has been made in the health sector with a 13 percent and 15 percent reduction in infant and under five mortality respectively. In the meantime access to primary health care has increased remarkably from 7 percent in 2002 to 85 percent in 2009 throughout the country.

“Our achievements over the past several years were indeed because of the international community’s continued support to the health sector,” said HE Dr.  Suraya Dalil, Acting Minister of Public Health (MoPH). “We should recognize the important role played by Non Government Organizations and MoPH staff for effectively utilizing funds ensuring access to a basic package of health services to Afghan people across the country.”

ARTF’s financing for the SHARP Project will contribute to the provision of health services to the Afghan population with particular attention to basic health services for women and children in far remote and marginalized areas in 11 provinces (Helmand, Badghis, Farah, Nimroz, Samaghan, Balkh, Wardak, Sar-e-Pul, Kapisa, Panshir, Kabul and Parwan).
“Afghanistan’s needs in all sectors are enormous,” said Nicholas Krafft, World Bank Country Director for Afghanistan.  “In the health sector, in particular, we have seen how channeling resources within a clear and coordinated government strategy and framework has had an astonishing impact. In rural livelihoods, projects similar to AREDP across South Asia have demonstrated significant impact in improving the rural economy and increasing incomes. This is particularly true for women who then invest in better nutrition and education for their children.”

The MoPH has implemented the SHARP project since March 2009 which builds upon World Bank financed Emergency Health Sector Reconstruction Project, implemented in close coordination with the European Commission (EC) and United States Agency for International Development (USAID).  In addition to the ARTF financing, it is funded by a $30 million IDA grant and $17.9 million from the World Bank’s administered Japanese Social Development Fund (JSDF), and $11 million grant from Norwegian Trust Fund.

The AREDP will be implemented under the overall leadership of Ministry of Rural Rehabilitation and Development (MRRD).  The total five year project cost is $87 million of which the IDA grant will contribute US$ 30 million and the UK’s Department for International Development (DFID) will contribute $18 million through the ARTF. The Danish Government has also committed $2 million under a bilateral agreement. The project will initially be rolled out in six provinces and there are plans for a national rollout to all 34 provinces of the country.

Note to editors:
The ARTF was set up in May 2002 to provide coordinated financial support to Afghanistan. The fund has two windows: the recurrent window channels funding for the recurrent costs of government, including salaries for teachers, health workers, and civilian staff throughout the country. The investment window channels funding for government investment projects under the ANDS: such as agriculture and rural development, justice, private sector development, capacity development, education, urban development, transport and energy.

Since early 2002, 32 donors have contributed $3.6 billion (as of February 19, 2010). Just under $1.9 billion has been disbursed to the Government of Afghanistan to help cover recurrent costs, such as civil servants’ salaries, and over $1.2 billion had been made available for priority investment projects.

The ARTF is managed jointly by the Asian Development Bank, the Islamic Development Bank, the United Nations Development Program, and the World Bank. Representatives of the Ministry of Finance participate in the monthly Management Committee meetings as observers. A Monitoring Agent ensures proper fiduciary management of all recurrent cost financing under the ARTF.

About the World Bank Group Assistance:
Since the resumption of operations in Afghanistan in April 2002, the World Bank has financed a number of development and reconstruction projects, committing around $1.93 billion of which $1.49 billion is grant and $436.4 million is credit (interest-free loan).  The World Bank funded projects mostly support rural livelihoods, rebuilding infrastructure, education and basic health services as well as improving public financial management systems. In addition, IFC (International Finance Corporation), a member of the World Bank Group, has increased its Investment portfolio in Afghanistan from $8 million in two companies in 2004 to more than $90 million in six companies in February 2010. In parallel, IFC’s Advisory Services are helping increase access to finance, contributing to SME development and improving the business enabling environment through various technical assistance projects. The World Bank Group’s Multilateral Investment Guarantee Agency (MIGA) is closely working with the Afghanistan Investment Guarantee Facility (AIGF) to encourage foreign direct investment in Afghanistan.  To date, a total of six guarantees have been underwritten by the AIGF for five beneficiaries covering the agricultural, financial, pharmaceutical, construction and telecommunication sectors.