Afghanistan Economy

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Post-war Afghan Economy
How National is the National Development Framework


Afghanistan occupies a central significance in South Asia owing to its geo-strategic location and natural resources-but is considered as one among the poorest countries in the world. Being a small, land locked and poor country with around 85 percent of its population depending on agriculture, and its socio-economic structure being influenced in every respect by external forces for more than twenty years, Afghanistan really needs a proper policy framework- with, the authorities in Afghanistan accountable to the common people, for the policies and their implementation, more so when the government does not have a clear mandate from the common people.
Agriculture contributes around 53 percent of the country's annual GDP. Around 28 percent of the country's GDP comes from light industry, 8 percent from the trade (of which around 87 percent is unaccounted re-exports) and around 6 percent from the construction. The unaccounted and underground trade might have a much bigger share keeping in mind the high value and illegal narcotics trade and alleged trade of small arms in Afghanistan.

The devastating drought which carried on from 1999 till 2001, resulted in almost 50 percent decline of agricultural production and more than 60 percent depletion of live stock due to a change in consumption pattern and distress sale.

Post War Afghan Economy

Prolonged wars also had a substantial role in damaging the structure of the economy. The wars and war prone situations led to the destruction of infrastructure, made agriculture to become more dependent on climate, destroyed the institutions of governance and undermined the ability of the state to collect a share of surplus generated in the economy for undertaking developmental responsibilities.

In the post war Afghan economy, the government lacks any clarity as far as its capacity of internal resource mobilisation is concerned. This leads to mismatch in the planning and implementations of governments own tasks at the moment. There is no system of tax collection and revenue sharing. For example, even after an agreement between the interim government and 12 provincial governors (war lords), to part with a share of the revenue collected through taxes from border trade, and one of them delivered $ 20 million immediately, the situation is still very unclear. It is probably, on the basis of this agreement that the interim government announced, for 2003, the comprehensive recurrent budget of $550 million of which $200 million were supposed to be from these local revenues only, could not be materialised and the government had to manage with $211.2 million secured though confirmed foreign aid.

The UN-coordinated reconstruction efforts were started after the famous Bonn Agreement and the meeting of donors in Tokyo in January 2000 pledged to deliver $ 4.5 billion within a 30 month period to kick start the process of reconstruction. Since then there has been significant flow of funds in the form of foreign aid. However, the process of reconstruction has been slow.

The flow of aids takes several forms:

1. Directly to the government, through the World Bank administered Afghan Reconstruction Trust Fund, Law and Order Trust Fund, the Afghanistan Trust Fund and some other channels.

2. Indirectly to local governments, local and international NGOs, which are supported by donors for undertaking National Development Framework projects.

3. Completely outside the orbit of the government in as much as the international NGOs and US coalition forces are bringing in their own funds for activities which are not reported in any detail any where.

Under such situations, it is extremely essential to establish some mechanism which can ensure monitoring the extent, usefulness and purpose of such aids. Other than the first set of aids which are given...
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