Supporting Inclusive Growth in Afghanistan

Challenge

Afghanistan is a deeply fragile and conflict-affected country, where the security situation remains precarious. Civilian casualties have reached unprecedented levels since 2016. The country’s humanitarian challenges worsened, with increasing numbers of returnees and persons internally displaced by growing violence. Insecurity continues to affect livelihoods and economic activity, curtailing private investment and consumer demand. At the same time, difficult topography, vulnerability to climate change, and growing population impose additional constraints on development.

Output growth has slowed to an estimated 1.0 percent in 2018, down from 2.7 percent in the previous year. The decline was because of: a severe drought that affected wheat production and livestock pasture and, heightened political uncertainty and election-related violence, which dampened business confidence. Despite the lower agriculture output, inflation remained moderate at 0.6 percent on average in 2018, due to lower regional food prices and appreciation of exchange rate against major trading partners. Afghanistan has the third highest youth bulge worldwide: more than one-fifth of its adult population is aged between 15 and 24. Yet 55 percent of Afghans live in poverty, nearly 70 percent of the working-age population are illiterate, and youth unemployment is at 28 percent. Poor nutrition, especially of children, threatens welfare and education gains. Despite a 2 percent annual reduction, 41 percent of Afghan children under the age of five are still stunted.

Revenue mobilization is expected to stall, reflecting: i) exhaustion of revenue potential from measures implemented in 2018, including amnesty programs; and ii) weakening customs revenues in the context of political instability and weakened governance. Afghanistan still remains highly reliant on aid, with domestic revenues sufficient to finance only around half of budgeted expenditures. Afghanistan faces a difficult adjustment as aid flows decline from current very-high levels over the medium-term. New sources of revenues and foreign exchange receipts will be required.

Approach

, closely aligned with the government’s National Peace and Development Framework. The CPF aims at helping Afghanistan:

• Build strong and accountable institutions to deliver services to citizens and encourage growth of the private sector;
• Support inclusive growth, with a focus on lagging areas; and
• Deepen social inclusion and reduce vulnerability, including among people displaced by conflict.

Over the CPF period the World Bank expects to provide $250-300 million annually to Afghanistan through International Development Association (IDA) grants.  Additionally, the Afghanistan Reconstruction Trust Fund (ARTF) could provide up to $800 million per year in grants, depending on donor commitments. The International Finance Corporation (IFC) aims to expand from the current $54 million portfolio to about $80 million. The Multilateral Investment Guarantee Agency (MIGA) stands ready to provide support with a focus on finance, manufacturing, agribusiness and infrastructure.

Results

The Citizens’ Charter Afghanistan Project (Citizens’ Charter) supports the first phase of the Government of Afghanistan’s 10-year Citizens’ Charter National Program and will target one-third of the country. (CDCs). These services are part of a minimum service standards package that the government is committed to delivering to the citizens of Afghanistan. 

Implementation progress includes: In rural areas: .

In urban areas: .

Results expected under the first phase of the Citizens’ Charter include: 1) 10 million Afghans reached; 2) 3.4 million people gaining access to clean drinking water; 3) improvements to quality of service delivery in health, education, rural roads, and electrification; 4) increase in citizen satisfaction and trust in government; and 5) 35 percent return on investment for infrastructure projects.

Bringing most of the efforts in public health service delivery under one umbrella in Afghanistan, the Sehatmandi (Health) Project aims to increase the utilization and quality of health, nutrition, and family planning services across Afghanistan. through contracting arrangements across the country. Sehatmandi also supports efforts to strengthen the capacity of the Ministry of Public Health at central and provincial levels to effectively carry out its stewardship functions.

Health indicators saw an improvement with the support of the System Enhancement for Health Action in Transition Program, the precursor of the Sehatmandi Project. For example, ; the number of functioning health facilities increased from 496 in 2002 to more than 2,800 in 2018, while the proportion of facilities with female staff increased; and .

The National Rural Access Project focuses on year-round rural access to basic social services. More than 3,200 km of rural roads have been upgraded through projects financed by IDA, ARTF, and other funds. The program also established the new Geographical Information System based network planning and rolled out the first nationwide inventory and condition survey of rural roads.

The ARTF supported the National Horticulture and Livestock Project to promote the adoption of improved technologies by target farmers. The project has financed the establishment of 27,000 hectares (ha) of new pistachio and fruit orchards in 32 provinces. In addition, .

Financed by IDA and the ARTF, the Irrigation Restoration and Development Project helped rehabilitate 185 irrigation schemes, benefiting 203,000 hectares and 425,000 farmer households. Regular data collection is now occurring from 127 hydrological and 56 meteorological stations. In addition, 40 cableway stations for flow measurement at selected hydrology stations have been installed.

Financed by IDA and the ARTF, the Women's Economic Empowerment–Rural Development Project is a follow-on project to the Afghanistan Rural Enterprise Development Project (AREDP) that aims to increase social and economic empowerment of poor rural women in selected communities. Through the project, around 440 women self-help groups (SHGs) are receiving their initial training.

Bank Group Contribution

T and continues to engage in rigorous analytical work underpinning policy dialogue.

The ARTF, administered by the World Bank, is a partnership between the international community and the Government of Afghanistan to improve effectiveness of the reconstruction effort. As of March 2019, it has an active portfolio of $1.8 billion in 21 projects and a Recurrent Cost Window operation that has provided $5 billion of budget support. .

The Bank has actively supported key reforms, particularly in the fiscal and public administration spheres, while the non-lending activities have played a crucial role in informing the government of its strategic choices.

. IFC’s investments have had a transformational impact in terms of access to finance and outreach.

.

Partners

The ARTF is a partnership between the international community and the Afghan government for the improved effectiveness of the reconstruction effort. As of March 2019, 34 donors have contributed over $11.4 billion, making the ARTF the largest contributor to the Afghan budget.  A total of $10.4 billion has been committed to Recurrent and Investment active portfolios ($5 billion and $5.5 billion, respectively).

Moving Forward

Afghanistan’s achievements in the last 10 years have been impressive in many ways. The coming years will be critical to strengthening Afghan institutions’ ability to deliver basic services nationally and consolidate and expand the economic development gains made to date. IDA’s role during this period—beyond the provision of its own resources—must be to continue to make the case for these principles, and to help the government effectively prioritize and utilize its own resources.

Last Updated: Apr 02, 2019