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FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1450
RUEATRS/DEPT OF TREASURY WASHINGTON DC 0887
INFO RUCNAFG/AFGHANISTAN COLLECTIVE

UNCLAS SECTION 01 OF 02 KABUL 002788 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR SRAP, SCA/FO, SCA/RA, SCA/A AND EEB/IFD/OMA 
DEPT PASS AID/ASIA BUREAU 
DEPT PASS USTR FOR DELANEY AND DEANGELIS 
DEPT PASS OPIC FOR ZAHNISER 
TREASURY FOR ABAUKOL, MNUGENT, AND LMCDONALD 
 
E.O. 12958 N/A 
TAGS: EFIN ECON EAID PREL PGOV AF
SUBJECT: MOF Zakhilwal Letter to IMF Over the Fund's Decision to 
Cancel Delegation's Visit 
 
¶1. (SBU) Summary:  Following the International Monetary Fund's (IMF) 
surprise decision to cancel its September visit to Afghanistan to 
conduct the 6th review of its Poverty Reduction and Growth Facility 
(PRGF) and proceed instead via video teleconference, Afghanistan's 
Minister of Finance Dr. Omar Zakhilwal sent a protest letter to Mr. 
Murilo Portugal, Deputy Managing Director of the IMF dated September 
12, 2009.  We agree the IMF's decision is ill advised and sends an 
unhelpful message, particularly given that the U.S. is the IMF's 
largest stakeholder and wants to encourage Afghanistan's continued 
progress under the PRGF.  Embassy believes it is important 
Washington agencies register serious concern over this development 
with the Fund with the aim of reviewing the IMF's decision.  End 
Summary. 
 
¶2. (SBU) Afghanistan's Finance Minister Omar Zakhilwal wrote IMF 
Deputy Managing Director Murilo Portugal expressing his deep 
disappointment over the IMF's decision to cancel the September 
review of the Poverty Reduction and Growth Facility (PRGF) that was 
supposed to take place in September and conduct the review instead 
by video conference.  Zakhilwal copied Ambassador Eikenberry and 
Ambassador Holbrooke on the letter as well as British Ambassador 
Sedwill and a number of senior IMF and World Bank officials. 
 
¶3.  (U) Text of the letter is as follows: 
 
Dear Mr. Portugal: 
 
We understand that the joint PRGF/HIPC mission to Kabul in early 
September has been cancelled and instead, some discussions between 
the IMF and the Government of Afghanistan will be held through 
videoconferences over the next few days. 
 
Firstly, I would like to express our deep appreciation to the IMF 
for all the support it has given to Afghanistan.  As we all 
recognize, Afghanistan's Poverty Reduction and Growth Facility 
(PRGF) program is a crucial driver for economic reform in 
Afghanistan -- indeed, its launch in 2006 stemmed from the strong 
commitment of the key IMF shareholders to support fiscal and 
macroeconomic stability in Afghanistan.  Similarly, meeting the 
Heavily Indebted Poor Countries (HIPC) reform program, also launched 
in 2006, is a key step not only towards clearing the Government's 
total debt obligations of USD 11.2b, but it will also demonstrate 
the Government's dedication to implement important social and 
economic reforms.  Like the PRGF, HIPC is strongly supported by key 
IMF shareholders. 
 
IMF missions to and in Afghanistan serve a range of very important 
purposes:  we undertake dialogue on needed reforms, they offer 
valuable advice, help build our capacity, effectively monitor the 
PRGF, and helpfully apply pressure for timely implementation of our 
commitments.  We greatly value this role.  As such, these missions 
concern not only the Ministry of Finance and the Central Bank, but a 
range of key counterparts such as other Government ministries and 
agencies (e.g., DABMS/DABS, FLGE, the Civil Service Commission, and 
CAO), and donors.  I would note that conducting missions in a third 
country or via videoconferences does not approximate the role of a 
mission in Kabul. 
 
The September mission was particularly important.  Given the PRGF is 
scheduled to end in March 2010, it is necessary to bring both the 
PRGF 6th review and HIPC to closure as soon as possible.  Despite a 
challenging period over the elections, I and my cabinet colleagues 
have worked very hard to ensure this.  We were also keen to discuss 
future reform benchmarks during this mission for the final, 7th PRGF 
review, to ensure its timely success. 
 
Hence, the cancellation of this mission is an enormous 
disappointment to the Government of Afghanistan, and as we 
understand, also for key donors.  Unfortunately, the effectiveness 
of the mission is greatly reduced by not holding it here in Kabul 
with all key stakeholders present.  It is also a concern if the 
final decisions might need to be postponed until late October.  To 
our great alarm, we have not been informed of any plans to review 
HIPC.  Hence, we would like to receive your firm assurance that the 
necessary discussions on the 6th PRGF review and HIPC will be 
concluded as planned, including decisions reached by the end of 
¶2009.  In the future, we would also be grateful if key decisions on 
missions that affect both parties be made through close consultation 
between the Government and the IMF. 
 
I have requested a meeting with you during the IMF and World Bank 
Annual Meetings in early October.  I propose that we use this 
opportunity to discuss the role of the IMF in Afghanistan going 
forward.  Economic reforms need to continue.  Given the important 
 
KABUL 00002788  002 OF 002 
 
 
role the PRGF plays in Afghanistan and the forthcoming discussions 
on a possible new IMF program, I hope that the IMF continues its 
strong commitment to Afghanistan and its development, through 
practical and active involvement with the new Government in its 
fiscal and monetary reforms. 
 
Many thanks for your consideration for these concerns, and your 
continued support to Afghanistan. 
 
Sincerely, 
(Signed) 
H.E. Dr. Omar Zakhilwal 
Minister of Finance 
Ministry of Finance 
Islamic Republic of Afghanistan 
 
¶4.  (SBU) Action Request:  The decision is the second time this year 
that the IMF has cancelled an on-site review, resulting in increased 
confusion and disappointment among key Afghan reform leaders. 
Embassy understands the on-site review was cancelled, in part, due 
to concerns regarding the security situation in Kabul.  However, we 
note the World Bank is continuing its work in Kabul without delay. 
Like the Minister, Embassy does not think a review via 
teleconference is sufficient for reviewing Afghanistan and engaging 
donors on-the-ground.  Embassy requests Washington register serious 
concern through the U.S. IMF Executive Director's Office and through 
the office of the Special Representative to Afghanistan and Pakistan 
with the aim of reviewing the IMF's decisions not to travel to 
Kabul. 
 
EIKENBERRY