ARTF DONOR MEETING KABUL: 13 JUNE 2010 Administrator’s Update: Sy1389 Q1

SY Summary  21 donors contributed $657m  46 percent preferenced  up 5% on 1387  ARTF committed $510m in total  $290m to the RC; $220m to 7 ARTF investments  Delay of Sy1387 project audits blocked new financing from Sep 09 to Feb 10  Large unallocated cash balance at end of year  ARTF donors endorsed the Financing Strategy  Core focus remains in ARD  New investments in infrastructure  Builds stronger GoA ownership of the investment portfolio  ARTF supported second round of reforms under the Incentive Program

SY1388 ARTF Development Investments ARTF introduced two new investments: skills development and water management TA

PAM draft highlights PAM indicator PFM & Aid Effectiveness Revenue / GDP ratio7.0 %6.9 %9.4 % Discretionary funds available as % of core development budget21 %0 %21 % % of ARTF funding un-preferenced53 %51 %54 % Development budget execution (%)54 %43 %40 % Public Admin Reform % of civil servants receiving individual salary payment (VPP program) 30 % 50% + % positions re-graded in civil service according to P&G0 %10 %80 % Numbers of MCP hires in civil service03271 Health Outpatient visits per capita per year to GoA clinics Provinces with hospital reform initiated Education % of teachers female27 %29 %32 % % of incoming teachers with stipulated qualificationsn/a 27 % PAM tracks GoA annual performance in core public sector indicators. Final PAM for SY1388 to be released shortly

SY 1389 to date – cash flow Un-allocated cash carried forward from SY1388$252 Donor contributions in Q (Australia, UK, Ireland, US)$87 Total funds available to ARTF in Q1$ ARTF allocations in Q1 (March-June 2010) MAIL: Horticulture & Livestock Program$23 MoPH: Health - BPHS$22 MoE: Basic education - EQUIP II$50 MAIL: On-farm Water Management - preparation funds$1 MoF: Recurrent cost & incentive program tranche 1$71 Funds allocated in Q1$168 Balance available in Q2$ ARTF pipeline for Q2 (July-September 2010) MRRD: National Solidarity Program III$100 MRRD/MPW: National Rural Access Program$50 MRRD: Rural Enterprise Development Program$13 MEW: Power Systems Development Program$25 MoF: Recurrent cost & incentive program tranche 2$71 Funds to be allocated in Q2$259 Balance needed from donors in Q2-$88 Cash overhang funds strong pipeline in Q1 and Q2 Q1 investments total US$168 million

Donor activity remains positive: 1) maintaining breadth of donors 2) maintaining loyal core 2) maintaining appropriate flexibility in funding

 ARTF commitments reduced in 1388  Targeting over US$600m in 1389  Disbursements track government execution rates  Cumulative portfolio focused on ARD  Microfinance to soon leave the portfolio

ARTF Financing Strategy & Bankable Programs  A 3-year framework for funding national programs  Strategy now under implementation  Strategy fits well with the “bankable projects”  Framework for discussion/prioritisation  Strong overlap” Community-based programs are at the heart of both cluster work and ARTF Higher education, skills, energy, agriculture  Next steps:  Infrastructure modality discussion  Review post-Kabul  Introduce PAM “plus” and 3rd party monitoring

GoA ClusterCluster ProgramsARTF ProjectsStatus/comments Agriculture & Rural Development 1. Water Management & Natural Resources Development Emergency Irrigation Rehabilitation Program National program in 34 provinces. Currently IDA-financed. In ARTF Financing Strategy for scale-up. On-farm Water ManagementARTF project now underway in MAIL. Water Resources Development TAWater basin planning capacity building. Project underway in MEW. 2. Comprehensive Agriculture Production and Market Development Horticulture & Livestock ProgramOngoing national program & in ARTF Financing Strategy Agriculture Inputs Supply ProjectUnder preparation for SY1389. Rural Enterprise DevelopmentARTF to initiate financing in SY National Rural AccessNational Rural Access ProgramCore ARTF program. Financing Strategy envisages scale up. 4. Strengthening Local InstitutionsNational Solidarity ProgramCore ARTF program. Financing Strategy envisages scale up. Economic Growth & Infrastructure 5. Integrated Resource CorridorsARTF Infrastructure WindowWindow proposal under discussion with MoF and ADB 6. Extractive IndustriesNatural Resources Development Program Currently IDA-financed. ARTF to co-finance later in SY1389. Project delivers TA for MoM. 7. National Energy SupplyPower Systems Development ProjectOngoing ARTF program. Phase II additional financing expected SY1389 Kabul – Aybak – Mazar PowerOngoing ARTF program. 8. Urban PlanningKabul Urban Reconstruction (KURP)Ongoing ARTF program. Kabul Urban Roads (KURIP)Ongoing ARTF program. Additional financing expected SY1389. Urban Water Supply & SanitationOngoing ARTF & IDA program. Recently restructured. 9. Integrated trade and SME SupportGrowth Poles Project Under preparation with IDA financing. ARTF to scale up to other cities if successful. 10. E-AfghanistanICT ProjectUnder preparation for ARTF & IDA. Fiber optic ring-road & e-governance Human Resource Development 11. Skills DevelopmentNational Skills Development (NIMA)Currently financing National Institute for Management & Administration 12. Education for allEQUIPCore ARTF program. Financing Strategy envisages further scale up. 13. Gender EquityEQUIPEQUIP II contains scholarships for girls 14. Human Resources for HealthBasic Package of Health (BPHS/EPHS) ARTF health financing recently started. EPHS under preparation for financing 15. Expanding Higher EducationSHEPOngoing ARTF program. Additional financing expected SY1389.