The European Commission has announced new financial assistance to the Afghan government in the form of a State-building contract, the European Union office in Kabul said in a press release on Tuesday.
Through State-building contracts, the European Union provides direct budget support to countries in fragile and transitional situations, the statement said.
The signing ceremony of the State-building contract took place on Tuesday at the margins of the Brussels Conference on Afghanistan.
The agreement was signed by the Commissioner for International Cooperation and Development, Neven Mimica, and the Afghan Minister of Finance, Eklil Ahmad Hakimi in the presence of President Ashraf Ghani.
Addressing the signing ceremony, Mimica, said: "Today's signature is an important step forward for the EU's development partnership with the Afghan Government. The EU is committed to increasing the effectiveness of our aid, as a sign of our confidence in the Afghan side to deliver on its reform program. As the State-building contract is indeed a contract, both sides agree to play their part. We will provide the funding on the basis of satisfactory progress in key reform areas."
At the same event, Hakimi, said: "The State Building Contract is an effective mechanism that aligns EU's development assistance with the Afghanistan's reform agenda. As an on-budget funding, it gives the Government of Afghanistan the required fiscal space to implement its development priorities that will improve the lives of the Afghan people."
This first State-building contract for Afghanistan will provide up to €200 million ($224 million USD) in direct budget support over a two-year period from 2017 onwards.
It will assist the Government of Afghanistan in defining its own strategic development priorities and policies, as outlined in the new Afghanistan National Peace and Development Framework.
The Afghanistan National Peace and Development Framework will be presented at the main event of the Brussels Conference on Afghanistan. It will provide a credible strategic framework for Afghanistan's development towards increasing self-reliance.
The State-building contract will support more effective budgetary management and the fight against corruption. A robust policy dialogue on reform progress in public policies, the macroeconomic framework, public financial management, as well as on transparency and oversight, will be put in place with the Afghan Government and determine the payments under this contract.
The EU will closely coordinate with other partners and disburse when specific reform targets are reached.