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Afghanistan development update (October 2015) (English)

More frequent incidences of violence in Afghanistan, as well as delays in the elections process and cabinet formation, continued to fuel uncertainty and affected investor confidence in 2014 and the first half of 2015. Economic growth slowed to 1.3 percent in 2014, down from 3.7 percent a year earlier. Unlike in previous years, agriculture did not contribute much to growth in 2014. Production levels were high for a third year in a row but did not supersede the strong output in 2013. Growth was mainly driven by services and a slight expansion of industries where an increase in construction activities outweighed lower production in manufacturing. Private investment activities showed strong signs of slowdown in 2014, evidenced by a drop of nearly 50 percent in new firm registrations since 2012. The National Unity Government has embarked on an ambitious reform agenda to revitalize the economy, tackle corruption, and improve investment climate. However, it will take time for these reforms to have an impact, and it is yet unclear how much they will mitigate the high risks stemming from the fragile security environment. Growing trends in security and pension and wage spending over the medium term require immediate attention. Afghanistan faces significant financing shortages for both civilian and security spending. Therefore, securing continued high levels of donor financing over the coming years is of critical importance for fiscal stability in the country. The fragile security environment and financing constraints, compounded by weak governance capacity, pose serious challenges to service delivery in Afghanistan. Any setback in reform implementation would further slowdown the pace of human capital accumulation in Afghanistan and reduce future prospects of growth and poverty reduction.

Details

  • Author

    Joya,Mohammad Omar, Nassif,Claudia, Farahi,Mohammad Aman, Redaelli,Silvia

  • Document Date

    2015/10/01

  • Document Type

    Working Paper

  • Report Number

    100507

  • Volume No

    1

  • Total Volume(s)

    1

  • Country

    Afghanistan,

  • Region

    South Asia,

  • Disclosure Date

    2015/10/28

  • Disclosure Status

    Disclosed

  • Doc Name

    Afghanistan development update (October 2015)

  • Keywords

    level of foreign exchange reserve;Exchange Rates;access to basic service;Agriculture;Drivers of Economic Growth;Financial Transparency and Accountability;sources of tax revenue;per capita consumption growth;average per capita consumption;real per capita expenditure;foreign aid inflow;opium production;global commodity;fiscal deficit;poverty headcount;security environment;domestic price;food price;domestic demand;domestic revenue;private investment;financial sector development;current account balance;medium-term macroeconomic framework;high growth rate;real sector;balance of payment;exchange rate depreciation;real gdp;trade deficit;agriculture sector;official exports;capital note;banking sector;money demand;investor confidence;commercial bank;safe drinking water;decline in agriculture;human development outcome;flexible exchange rate;foreign direct investment;revenue collection effort;human capital accumulation;international military force;responsibility for security;improving business environment;security and development;Escape from poverty;risk coping mechanisms;quality of asset;combination of factor;human resource management;implementation of reform;number of teachers;adult literacy program;operations and maintenance;public expenditure need;natural resource sector;public service delivery;investment climate reform;Civil Service Reform;monetary policy instrument;Public Financial Management;financial market development;currency in circulation;regulation monitor;agriculture and service;incidence conflict;category of revenue;consumer price inflation;national poverty line;drag on growth;provincial budget;poppy cultivation;tax policy;poor household;poverty incidence;vulnerable employment;fiscal development;construction activities;security spending;cash reserve;upward pressure;donor grant;raise revenues;tax measure;fiscal indicator;production level;agriculture production;currency depreciation;poverty gap;social outcome;security cost;international partners;budget expenditure;bank lending;consumer basket;fiscal crisis;import increase;Extractive Industry;cereal production;fiscal risk;Population Growth;good performance;broad money;global food;fuel price;deflationary pressures;negative growth;nonfood item;donor financing;medium-term outlook;natural hazard;transition process;Natural Resources;tax rate;satellite imagery;business receipt;fruit production;fiscal regime;consumer confidence;output level;expenditure wage;secondary trading;monthly revenue;legal framework;telecommunication service;industry growth;cultivated land;annual target;Employment Sector;civil society;central regions;lagging region;high unemployment;informal sector;economic shock;mountainous terrain;business license;Job Creation;labor arrangement;feed production;Economic Policy;poverty impact;fiscal space;household transfer;insurance scheme;women's empowerment;reform effort;sales tax;foreign reserve;nontax revenue;budget framework;Public-Private Partnership;procurement reform;fixed tax;reform plan;electoral reform;household consumption;high security;commodity price;education outcome;business process;Tax Code;oil seed;social transfer;expenditure amount;budget plan;policy stance;fiscal stance;expenditure cut;grant financing;dried fruit;supply chain;export sector;animal by-products;import share;metal product;chemical product;communication services;trade balance;fresh fruit;export base;capital outflow;news reports;capital flight;external payment;external account;capital expenditure;inflationary pressure;domestic production;election process;positive impact;export growth;Macroeconomic Stability;export revenue;export flow;trade flow;official statistic;investment opportunities;international reserve;government service;property price;donor community;income inequality;manufacturing industry;transitory shock;retail trade;bottom quintile;wholesale price;proxy indicator;political uncertainty;transportation service;election outcome;political transition;poverty decline;personal safety

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Citation

Joya,Mohammad Omar Nassif,Claudia Farahi,Mohammad Aman Redaelli,Silvia

Afghanistan development update (October 2015) (English). Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/426671467987856430/Afghanistan-development-update-October-2015