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Afghanistan Reconstruction Trust Fund (ARTF) FAQ

Afghanistan Reconstruction Trust Fund FAQs

AF Econ

Making a Difference in Afghanistan

The Afghanistan Reconstruction Trust Fund (ARTF) is delivering significant results within a range of areas in Afghanistan through the financing of a large number of grants for Government projects.

ARTF Website

What is the ARTF?

The Afghanistan Reconstruction Trust Fund (ARTF) is a World Bank managed Multi-Donor Trust Fund established in 2002. The ARTF is Afghanistan’s main multi-donor mechanism for non-security on-budget assistance. It is an important vehicle for donors to channel funding into the country and to meet international commitments on donor coherence and the use of country systems. As of May 2011 donors have contributed over US$5.3 billion for service delivery and reconstruction across the country through the ARTF.

ARTF allocations are made through two ‘windows’: the Recurrent Cost Window and the Investment Window. The Recurrent Cost Window reimburses the government for a certain portion of eligible and non-security related operating expenditure every year. The Investment Window provides grant financing for national development programs.

The ARTF has been behind some of the main development achievements in Afghanistan and is a valued partnership platform for the Government of Afghanistan.

In particular, the ARTF provides:

• A mechanism for predictable on-budget financing of elements of national priority programs (NPPs) within a robust fiduciary and monitoring framework;

• A platform for policy dialogue on key reforms with the Government; and

• A means to coordinate donor support in line with an agreed Financing Strategy.

How is the ARTF managed and governed? 

The ARTF has a three-tier governance framework (Steering Committee, Management Committee and Administrator), plus two working groups. This sound framework has enabled the ARTF to adapt to changing circumstances and development priorities, with consistency and consensus.

ARTF Steering Committee: The Steering Committee sets the strategy for the ARTF which the Management Committee is responsible for implementing. Decisions of the Steering Committee are made on a consensus basis and informed by the working groups. The Committee meets once a quarter in Kabul. The Committee is made up of all ARTF donors, the World Bank and Ministry of Finance, with other MC members participating as observers. The Committee meets under the co-chair of the World Bank and the Minister of Finance. The full notes of all Steering Committees meetings are posted regularly on the ARTF website.

ARTF Management Committee: The Management Committee (MC) is responsible for reviewing and, if appropriate, approving funding proposals. It also reviews ARTF finances and makes recommendations to the Administrator on the management of the ARTF. Decisions are taken on a consensus basis. The Administrator is responsible for reporting on the decisions of the Management Committee to the Steering Committee. The Administrator is responsible for preparing all documentation for the Management Committee, for which it acts as secretariat and chair. The members of the Management Committee are the Ministry of Finance, the Asian Development Bank, the Islamic Development Bank, the United Nations Development Program and the World Bank. All notes of the MC meetings are posted on the ARTF website.

ARTF Administrator: The World Bank is the Administrator of the ARTF and is responsible for monitoring and reporting on ARTF performance. The Bank is in particular responsible for ensuring that funds are allocated in accordance with the Financing Strategy agreed with donors and GoA and in line with defined and agreed‐upon fiduciary standards and performance measures.

Working Groups: The Incentive Program Working Group and Strategy Group are technical advisory bodies accountable to the Steering Committee and representing the wider group of ARTF donors. Both working groups are Kabul-based bodies, chaired by the World Bank, with Government participation.

Strategy Group: The Strategy Group meets in Kabul at the technical level to review the Financing Strategy, review the implementation of the ARTF program and propose modifications to the Strategy for endorsement by the Steering Committee. The Strategy Group is composed of: (i) key donors with technical expertise in Kabul, (ii) the Ministry of Finance and (iii) the Administrator, acting as secretariat and facilitator.

Specifically, the Strategy Group:

- makes recommendations to the ARTF Steering Committee on the ARTF Financing Strategy at the start of each solar year as a mechanism to guide ARTF allocations during the period;

- informs the annual review (by the Steering Committee) of the implementation of the Financing Strategy ;

- holds ad-hoc review meetings during the year whenever necessary to discuss particular issues or bottlenecks;

- supports the development of a results matrix for the Strategy.

IP Working Group: The IP Working Group is the donor group that agrees on the policy benchmarks with the Government, which are subsequently incorporated into a memorandum of understanding between the ARTF Administrator and the Ministry of Finance. The Administrator undertakes the technical review of benchmarks for approval by the IP Working Group. The IP Working Group (IPWG) reports and is accountable to the ARTF Steering Committee.

Has the ARTF changed over time?

Over time the ration of allocations between the two windows has changed with an increased donor investment in the ARTF’s Investment window.

ARTF Recurrent Cost vs. Investment Allocations

How is the ARTF aligned with Afghanistan’s national development strategy?

The ARTF Investment Window is based around investments that support core national priorities for delivering essential services, better governance and infrastructure.

In 2010, the Government set out 22 National Priority Programs (NPPs) and reached agreement with donors that at least 80% of donor assistance would be in line with these priorities even while accepting that not all the NPPs, or all components of NPPs, would be fully financed. Even so, the economic picture over these next years’ contains significant uncertainties as Afghanistan will need both high levels of international assistance and to create new domestic sources of revenue and growth. The ARTF is one of the important mechanisms by which the international community can support the Government of Afghanistan in achieving the longer term objectives of transition and during the following “transformation decade” by providing on-budget financing for the implementation of some key development priorities.

How can I access the ARTF reporting documents?

All ARTF financial statements, quarterly reports to donors, as well as the Annual report are regularly posted on the ARTF website.

Where do I find detailed information on ARTF projects?

The World Bank maintains an ARTF Portfolio Results website. This website presents basic information on all investment projects financed by ARTF and provides easy access to results reporting for each of the projects. The website provides access to all core project documents, including the Project Paper and Implementation Status and Results reports.

What is the Incentive Program?

On Dec. 17, 2008, ARTF donors agreed with the government of Afghanistan to establish the annual ARTF Incentive Program (IP) within the Recurrent Cost Window of the ARTF. The Incentive Program supports the Government’s reform agenda, with a focus on fiscal sustainability and economic governance. The IP recognizes the annual automatic decline in baseline ARTF Recurrent Cost Window financing and offers an offsetting incentive package, based on concrete progress in the reform agenda. The objective is not only to support the reform process but also to allow for increased allocations towards the financing of government’s core development programs through the ARTF Investment Window.

What is the ARTF Financing Strategy?

The first ARTF Financing Strategy was introduced at the London 2010 Conference to strengthen the fund’s predictability, transparency and ownership. It set out a three-year rolling allocation plan per solar year. Since then the implementation of the Financing Strategy has been reviewed in regular meetings of the ARTF Strategy Group and endorsed annually by the Steering Committee.

The ARTF Financing Strategy sets the overarching strategic allocation of the fund, for recurrent cost expenditure (including the Incentive Program), investment financing, and monitoring and results reporting. The framework covers five priority sectors which correspond to the Government’s development clusters: Agriculture, Rural Development, Infrastructure, Human Development and Governance/Public Sector Capacity. Implementation of the Financing Strategy depends on donor contributions as well as capacity in the line ministries to implement approved projects developed with the World Bank.

On April 1, 2012, the ARTF Steering Committee endorsed the new ARTF Financing Strategy for the period SY1391-1393. The endorsement followed extensive consultations with the Ministry of Finance and the ARTF Strategy Group. The new Financing Strategy SY1391-1393 covers the three year period SY1391-1393, or March 2012 through December 2014. The Strategy presents an ambitious plan for investment and recurrent cost financing of around US$3 billion in total over the three year period, representing a substantial increase in expected donor contributions over the US$1.8 billion received from donors during the three year period SY1387-1390. Moreover, it represents a significant increase in the allocations planned under the Investment Window.

The Financing Strategy is a flexible rolling mechanism, which will evolve over time in response to emerging needs, government capacity and actual paid-in contributions. The Strategy Group reviews the Financing Strategy with the World Bank and Ministry of Finance after which it is presented to the ARTF Steering Committee annually for endorsements.

What about IDA?

The International Development Association (IDA) funding for Afghanistan is determined through IDA’s performance based allocation plus a post-conflict premium, which has been declining. Given IDA’s limited size in comparison with the much larger ARTF, IDA resources are being used strategically particularly in piloting programs and new approaches. A portion of IDA may be provided in the form of Development Policy Grants in order to support further improvements in governance and an improved environment for effective investment, but this will continue to be dependent on a satisfactory macroeconomic framework, appropriate fiduciary controls and commitment to a reform program.

How does the ARTF approach gender issues in its programmes?

The ARTF has mainstreamed gender considerations across all projects and recognizable impacts have already been achieved. Looking forward, Gender efforts supported by ARTF projects will continue to receive focused attention. Within the programs, opportunities will be sought to re-enforce and increase gains for women (for example ensuring increased access to health facilities and education for women) and expand women’s access to economic activity (for example under AREDP and the Horticulture project). The ARTF will also use specific gender studies and analysis to help strengthen our understanding of gender issues within the cultural context of Afghanistan. Finally, we will look to develop strategies for how to engage more women within ARTF-funded programs at the national and local level.

What are the financial management arrangements for Investment window projects?

ARTF investment projects are subject to the same fiduciary arrangements as all IDA-financed projects in Afghanistan. The World Bank requires that each project maintains financial management and procurement systems capable of accurately reporting on use of funds, linking funds flow to project activities, ensuring compliance with agreed procurement procedures and providing timely and reliable financial and procurement progress reports. These systems (encompassing budgeting, procurement, accounting, internal control, funds flow, financial reporting, and auditing arrangements) are assessed before each new project and are reviewed as part of formal and ongoing project supervision. A comprehensive fiduciary risk assessment is likewise conducted for each new investment.

During implementation the World Bank ensures that the systems are maintained and continue to produce reliable information. Financial management and procurement missions are scheduled as part of regular project supervision during which quarterly interim unaudited financial reports, annual audited financial statements and auditors’ management letters, and financial management and disbursement arrangements are all reviewed to ensure compliance with the World Bank’s requirements. Large-value procurements (above an agreed threshold set for each project) require World Bank “No Objection.

In addition to these regular procedures, the Administrator has hired a Third-Party Supervisory Agent for the Investment Window to further strengthen the Bank’s technical supervision and reporting.

What does the Investment window Supervisory Agent do?

An Investment Window Supervisory Agent has been contracted to carry out on-site monitoring of physical progress, quality of construction and usage of physical investments for selected projects supported by ARTF, to enhance portfolio monitoring and reporting. The agent carries out site visits across all 34 provinces on three national programs: EQUIP , NSP and NRAP. The agent works with a team of trained Afghan engineers who review physical progress, quality of construction and usage of physical investments. The agent is also responsible for registering and mapping all assets financed by the ARTF . The agent reports directly to the World Bank as Administrator and the Bank makes the information available to the responsible line ministries as well as the Ministry of Finance to ensure identified issues are addressed.

I am a donor – how can I make a contribution?

Donors generally make annual pledges which are paid in during the Afghan Budget cycle (Solar Year, changing to the Calendar year as of 2013). The following steps are necessary to make a contribution:

1. Donors can contact the World Bank, acting as Administrator for the ARTF, to indicate its intention to make a contribution. The main point of contact is Ditte Fallesen, Coordinator of ARTF, based in Kabul (dfallesen@worldbank.org).

2. Following initial discussions, a legal agreement is drafted by the World Bank and sent to the donor agency for clearance.

3. Once both the donor and the Bank are comfortable with the draft, it is signed and sent for signature in duplicate to the donor country.

4. Following counter-signing a disbursement letter is sent to the donor and the donor pays in the contribution.

5. Donors are free to make further contributions whenever they are able. A simple ‘amendment’ letter is drafted, approved and countersigned.

Can a donor earmark funds?

The World Bank has a policy of not permitting ear‐marking of donor funds for particular activities in the trust funds that it administers. However, donors can express preferences for projects or programs for a portion of their overall contribution. While a preference is not an earmark it is a formal recognition by the Administrator of the donor’s preference to allocate a certain portion of a contribution towards a particular project. To date, preferences have been met.

There are some key rules that guide this system:

1. The ARTF will not accept preferencing in excess of 50 percent of a donor’s contribution in a solar year.

2. Geographic preferencing is not accepted by the ARTF.

3. Preferences must be for ongoing, on-budget, national priority programs, that have a clear funding gap.

Has the work of the ARTF ever been reviewed?

Two external evaluations of the ARTF were undertaken by an independent consulting group over the last years and a third evaluation is underway. The first evaluation (published March 2005) provided recommendations concerning reporting, government‐donor dialogue, and the investment window. The second evaluation (published August 2008) made recommendations for better integration of the investment and recurrent windows, the development of a 3-year financing strategy and improved performance monitoring and donor engagement.

Both evaluations’ findings were broadly positive and concluded that the Fund was in line with good practice principles for structuring and managing funds in post‐conflict situations. They each set out a framework to focus the ARTF’s activities in subsequent years and recommended broad changes in the strategic direction of the ARTF, many of which were subsequently adopted. In addition, bilateral donors have undertaken their own reviews including audits by SIGAR.

A third external review of the ARTF is underway to assess the positioning and ability of the ARTF to continue as an important mechanism for on-budget development assistance during and beyond Afghanistan transition period.

Finally, the World Bank’s own Independent Evaluation Group is currently undertaking a major evaluation of the Bank’s program since 2002, including the ARTF. These results will be publicly available and the external review can draw on them. Given the plethora of ongoing and completed review materials, the current review will have a strong forward-looking focus, but will draw on the reviews underway, and, if necessary, include additional measures to consider results achieved to date.

Why does the ARTF support the recurrent costs of the government?

The government is gradually improving its own revenue base, through customs and taxation, so that it can pay its recurrent expenditures fully in the future. Improvements in revenue collection are being made. However it will take some time before the government is fully able to support its recurrent expenditures by domestic revenues. According to the MTFF (Medium-Term Fiscal Framework) as of January 2009 the government will be able to cover 79 percent of operating expenditures in 2013/14. Therefore, ARTF remains a critical part of the government’s fiscal sustainability, reimbursing a major component of non-security related costs. The annual budget is first approved by the Cabinet and, since SY1385, subsequently by the National Assembly. From SY1388 onwards, the ceiling for ARTF recurrent cost financing includes financing for the ARTF Incentive Program. This program envisages an automatic annual decline in guaranteed resources through the recurrent cost window, with an additional incentive top-up, based on the government’s performance against reform benchmarks.

Why does the ARTF not fund military or security related expenses?

The Articles of Agreement of the International Development Association (IDA) and the International Bank for Reconstruction and Development (IBRD) (together, “the World Bank”) prohibit the World Bank from involvement in the political affairs of its member countries. In addition, the Articles of Agreement spell out the purposes of the World Bank, which purposes have been interpreted by the World Bank’s Board of Executive Directors not to permit involvement in military or security related activities of member countries. The World Bank in its capacity as the trustee of the ARTF is guided by the overall purposes of the World Bank, the political prohibition clause and the other provisions in the Articles of Agreement. Funding military or other security-related expenditures would be outside the World Bank’s mandate and would violate the political involvement prohibition.

What kinds of recurrent costs are financed by the ARTF?

Government’s recurrent expenses are reimbursed by the ARTF as long as they adhere to the ARTF grant agreement, government's financial management regulations and the fiduciary standards agreed with the government. To date, approximately 74 percent of recurrent costs have been for payroll expenses and 26 percent for operations and maintenance expenses.

How does the ARTF Administrator monitor use of these funds?

The Administrator has a contract with Joshi & Bhandarito serve as a Monitoring Agent (MA), which is responsible for reviewing recurrent cost expenditures for compliance with the eligibility criteria under the ARTF Recurrent Cost Trust Fund. The MA checks compliance with (i) government's internal controls; (ii) ARTF requirements; and (iii) efficiency standards. The MA reviews all of the expenditures codes to ensure they are eligible for ARTF funding and in line with the budget. The MA also reviews some expenses in more detail. The MA decides which expenses to examine more thoroughly by applying a carefully designed risk-based approach to monitoring.

The Monitoring Agent’s review of expenditures comprises first, an assessment of the controls applicable to the expenditures to be reimbursed and then based on this assessment the Agent plans and carries out a review in two steps: (i) a desk review of all expenditures and (ii) site visits to test a sample of expenditures against support. Central to the work of the Monitoring Agent is the understanding that all non-security recurrent costs are monitored. In the fiscal year ending March 2011 (SY 1389) non-security expenditures, which are all subject to monitoring, came to US$ 875 million while ARTF disbursements against this was only US$ 288 million or 32%. For the current solar year 1391 this drops to less than 20%.

What are 'ineligible expenditures'?

Firstly, any security related expenditures are ineligible for ARTF financing. In addition, any expenditure that does not adhere to the government's budget and procurement rules, or to the reporting and cash management standards agreed with the World Bank, or with the ARTF grant agreement would be ineligible. When an expenditure is found to be ‘ineligible’ it does not necessarily imply misuse or wrongdoing.

What is the mechanism for recouping ineligible expenditures?

After ineligible expenditures are detected by the MA, they are deducted from the other eligible reimbursements made by the ARTF to the government. Sometimes this happens in the same month the expenditure is submitted but often it happens later due to the lag in the monitoring process. For this reason the ineligible expenditures reported each month can vary as amounts are reconciled through an ongoing process. The same process is followed if funds have been misused but in such cases the ARTF brings the issue to the direct attention of the Ministry of Finance so that controls may be strengthened in the future.

Additional resources

Afghanistan Reconstruction Trust Fund is designed to promote development results in Afghanistan. Read More »

Afghanistan: Data & Statistics
A wide range of social and economic measures on Afghanistan, including links to the World Bank's most important online development databases. Read More »

Afghanistan: Analysis and Research
Compilation of all the World Bank's publications on Afghanistan. Read More »

World Bank Program in Afghanistan
Launching pad to all information on World Bank activities in Afghanistan. Read More »




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