AFGHANISTAN Debt Treatment - July 18, 2007

good will clause

Given the decision by Paris Club Creditors to contribute to the exceptional assistance in favour of the Government of the Islamic Republic of Afghanistan under the Enhanced HIPC Initiative, the Participating Creditor Countries declare their readiness in principle to hold a meeting at the Completion Point designed to examine the question of the Islamic Republic of Afghanistan’s outstanding debt stock and to make the necessary effort in favour of the Islamic Republic of Afghanistan to allow it to reach the objective of its debt sustainability in the context of an equitable burden sharing among creditors, provided that:

- the Government of the Islamic Republic of Afghanistan maintains satisfactory relations with the Participating Creditor Countries and a sound adjustment track record;

- the Executive Boards of the IMF and the IDA decide that the Islamic Republic of Afghanistan has reached its Completion Point under the enhanced HIPC initiative.

free transferability provision

The Government of the Islamic Republic of Afghanistan guarantees the immediate and unrestricted transfer of the foreign exchange counterpart of all amounts paid in local currency as of the date of these Agreed Minutes as well as all amounts paid from this date by the private debtors in Afghanistan for servicing their foreign debt owed to or guaranteed by the Participating Creditor Countries or their appropriate institutions, for which the corresponding payments in local currency have been or will be deposited in the Central Bank.

Phases

• First phase : From July 01, 2007 up to March 31, 2008 implemented at the signature of the agreement
• Second phase : From April 01, 2008 up to March 31, 2009 implemented at April 07, 2008

The Islamic Republic of Afghanistan was declared eligible to the Enhanced HIPC initiative by the IDA and the IMF in April 2007 and was declared to have reached its Decision Point in July 2007. In this context, the Islamic Republic of Afghanistan commits to seek promptly from all its external creditors which are not participating in these Agreed Minutes, their appropriate contribution in terms of debt relief to the enhanced HIPC initiative, on top of traditional debt relief mechanisms and consistent with the proportional burden sharing based on their relative exposure in net present value of total external debt at Decision Point after the full use of traditional debt relief mechanisms.

The appropriate nature of the debt relief provided will be assessed not only on the basis of the reduction in the net present value of the debt as computed under Appropriate Market Rate, but also on the terms of repayment of the debts not cancelled. For this purpose, all relevant elements will be taken into account, including the level of cash payments received by those creditors as compared to their share in the Islamic Republic of Afghanistan’s external debt, the nature and characteristics of all treatment applied, including debt buy backs, and all characteristics of the reorganized claims and in particular their repayment terms whatever forms they take and in general the financial relations between the Islamic Republic of Afghanistan and creditor countries not listed in these Agreed Minutes.

Consequently, the Islamic Republic of Afghanistan commits not to accord any category of creditors -and in particular creditor countries not participating in these Agreed Minutes, commercial banks, suppliers and bondholders- a treatment more favourable than that accorded to the Participating Creditor Countries.

Participating creditors