Commercial banks to finance public welfare projects under new mechanism

The Economic Deputy of the Prime Minister’s Office announced on Wednesday that a new financing mechanism has been signed between the Ministry of Finance and the central bank, Da Afghanistan Bank (DAB), paving the way for commercial banks to play a direct role in funding public welfare projects.

According to the statement, the document was developed under Article 2, Clause 5 of the Rules of Procedure of the Economic Commission. Its purpose is to provide a legal framework for mobilizing commercial banks in support of public-interest projects, while simultaneously creating opportunities for domestic investment and boosting banks’ revenues.

Under the new mechanism, the Ministry of Finance will identify and prioritize public welfare projects through consultations with relevant sectoral institutions, after which it will prepare the required financial models.

Da Afghanistan Bank, in turn, will encourage and guide commercial banks to participate in financing and implementing these initiatives.

Officials say the move is designed to ensure that critical development projects — particularly in infrastructure, healthcare, and education — can be supported through private sector involvement, easing pressure on limited state resources.

The approach also aims to provide commercial banks with sustainable investment opportunities at home, reducing dependency on foreign funding streams.

Afghanistan’s financial sector has struggled since the collapse of the former republic in 2021, when international sanctions and the freezing of central bank reserves triggered a banking crisis.

Although some stability has returned in recent years, liquidity challenges and restricted access to global markets remain key obstacles. By integrating commercial banks into public financing, the government hopes to stimulate economic activity and strengthen confidence in the country’s financial system.

The statement emphasized that the new mechanism will not only benefit public services but also build a foundation for a more resilient banking sector, capable of contributing to Afghanistan’s long-term development goals.