Afghanistan Reconstruction Trust Fund Administrator’s Report: SY1387 April 5, 2009

Strong donor commitment; but recent growth driven by preferences ARTF Donor Activity: 1387 19 donors contributed US$627m in SY1387 92% of pledge was paid in (rest to roll over) Preferences grew to 48% of total contribution Strong donor commitment; but recent growth driven by preferences

ARTF Commitments: SY1387 Overall commitments: $640m Recurrent window: $316m Investments: $324m RC commitments represented 21% of operating budget & 17% of development budget.

Recurrent Cost Window Ceiling increased in January by $40m Total RC Window Allocation = $316m Education sector benchmarks agreed Fiduciary framework Afghanistan’s procurement law was changed in July, resulting in cessation of O&M reimbursement Eligibility on payroll remains strong ARTF Incentive Window Benchmarks for SY1388 agreed Technical review in May 2009 ARTF RC window pays for just over half of the non-security operating budget.

ARTF Investment Financing Activities: SY1387 9 government implemented projects received donor financing in SY1387 ANDS Sector New ARTF Commitment % Rural development (NSP, HLP) $191.7 59% Microfinance $64.0 20% Justice $27.8 9% Infrastructure (Kabul Roads) $23.6 7% Education (EQUIP & SHEP) $17.0 5% Total $324.0 100% Investment Window expanding rapidly. Financing Strategy will add value.

Overall ARTF Investment Portfolio New programs (EQUIP, justice) looking at more sectoral approaches. NSP & Microfinance the largest recipients of ARTF resources. Power sector expanding focus. Strong GoA support. Diversified portfolio – but focused towards national programs.

ARTF Disbursements Overall Active Portfolio Rural Development Institutional Capacity & Education Economic Infrastructure Disbursements on investments = 27% of the core development budget in ‘87

ARTF Results Framework ARTF Intervention Tool Method Recurrent Cost Window Monitoring Agent Reports / PEFA Tracking trends in fiduciary control framework Monthly reporting & feedback mechanism Linked with policy lending & Incentive Program Performance Assessment Matrix Tracking trends in PFM, PAR, basic services Broad proxy for RC Window impact Platform for policy dialogue ARTF Incentive Program Links RC Window to government reforms Forward looking Investment Window Government M&E Generally output-based Strengthening government systems (EQUIP) Third-party evaluation Baseline & Impact Surveys Outcome level MISFA, NRAP & NSP

SY1388 – Projected Outlook Overall ARTF pledge has declined Total resource envelope : $559m New pledge: $395m ($507m in SY1386) Pending from SY1387: $55m Un-allocated cash in parent: $109m RC Window: $250/290m Investments: $309/269m NERAP Phase II, EQUIP II, MCP II, NSP Skills, Health, Power, Water Management