91083 v1
                                                   Document of
                                              The World Bank

                                        FOR OFFICIAL USE ONLY

                                                    Report No:



                                         RESTRUCTURING PAPER

                                                      ON A

                                      PROPOSED RESTRUCTURING
                                                OF

         AFGHANISTAN RECONSTRUCTION TRUST FUND GRANT AGREEMENT

                          (RECURRENT AND CAPITAL EXPENDITURES)

                                                   BETWEEN

                               ISLAMIC REPUBLIC OF AFGHANISTAN

                                                       AND

              INTERNATIONAL DEVELOPMENT ASSOCIATION
 (ACTING AS ADMINISTRATOR OF THE AFGHANISTAN RECONSTRUCTION TRUST
                               FUND)

                                                 MAY 13, 2002

                                                     TO THE

                  GOVERNMENT OF ISLAMIC REPUBLIC OF AFGHANISTAN

                                                JULY 31, 2014



Public Administration Sector
Financial Management Unit
South Asia Region

This document has a restricted distribution and may be used by recipients only in the performance of their
official duties. Its contents may not otherwise be disclosed without World Bank authorization.
ABBREVIATIONS AND ACRONYMS

    ARTF              Afghanistan Reconstruction Trust Fund
    GA                Grant Agreement
    GoIRA             Government of Islamic Republic of Afghanistan




            Regional Vice President:    Philippe H. Le Houerou
                    Sector Director:    Robert Saum
                  Practice Manager:     Fily Sissoko
                 Task Team Leader:      Paul Edwin Sisk




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  Afghanistan Reconstruction Trust Fund Recurrent and Capital Expenditures

                               TRUST FUND TF 50577
                               RESTRUCTING PAPER
1. This paper proposes restructuring of the Afghanistan Reconstruction Trust Fund
   Recurrent and Capital Expenditures (ARTF–RC), in response to the recent request by
   the Government of Islamic Republic of Afghanistan (GoIRA), dated July 12, 2014 to
   update various provisions of the grant agreement to align with the current standard provisions
   used on all trust fund agreements and with applicable current prior review thresholds.
   Specifically the GA should reflect references to the Anti-corruption Guidelines and the
   Standard Conditions for Grants and Credits, which are applied all the ARTF investment
   operations in Afghanistan. Additionally, the prior review provisions need to be brought
   into line with the region-wide thresholds for a project with moderate procurement risk.

2. The project is implemented by the Ministry of Finance (MoF). The Grant amount is US$
   3,173,321,009.24 and to date the project has disbursed US$ 3,072,521,009.24 leaving a
   Grant Account balance of US$ 100,800,000.00.

3. The project development objectives are to provide a coordinated financing mechanism
   so that the GoIRA can make predictable, timely, and accurate payments for approved
   recurrent costs related to: i) salaries and wages of civil servants and ii) government
   operating and maintenance expenditures, except security.

4. The overall implementation progress of the project has been Moderately Satisfactory.
   On the operational side, all the financial management and procurement related activities
   are progressing well. The project is in compliance with the audit covenants as there are
   no overdue audits or audit issues.

5. In light of the critical importance of the support to civilian recurrent costs, the
   satisfactory progress of the project and the expressions of donor interest in the operation,
   the Task Team recommends that this level 2 restructuring be accepted and the referenced
   amendments to the GA be approved.

6. The International Bank for Reconstruction and Development /International Development
   Association (collectively, the World Bank) is acting as administrator of Grant funds
   provided by multiple donors to the ARTF. The GoIRA is the Recipient of the Grant
   Funds and responsible for implementation of this project.




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