Afghanistan Country Overview 2010

February 2010

Language Versions: Dari | Pashto 

Overview| The World Bank and Afghanistan| World Bank Strategy| World Bank Achievements

Overview

After more than two decades of conflict, Afghanistan has begun an enormous political, economic, and social transformation since it was catapulted onto the world stage in 2002. Progress to date has been encouraging, but tremendous challenges remain.

In Afghanistan, the agriculture sector accounts for 30 percent of GDP. The preliminary estimates show that real GDP growth is likely to increase by about 15 percent in 2009 (Solar Year 1388) mainly due to agriculture. With the decline in agriculture production in 2008, GDP growth is estimated 2.3 percent in 2008/09 (SY1388). Although more than doubled since 2002, GDP per capita in 2008 remained US$426 leaving Afghanistan one of the poorest countries in the world. There has been a huge increase in school enrollment rates since 2002, with the number of students rising to their highest in Afghanistan’s history. However, only 40 percent of schools have buildings.

Almost 85 percent of the population now has access to primary health care. The National Risk and Vulnerability Assessment 2007/08 indicate good progress in reducing infant and under-five mortality. Infant and under five mortality in 2008 has declined to 111 (13 percent reduction) and 161 per thousand live births (15 percent reduction) respectively from 129 and 191 per 1000 live births respectively in 2006. Health service utilization increased among project area populations from a rate of 0.3 consultations per capita annually at the outset to 1.64 per capita by the mid 2009.

Life expectancy is a mere 43 years, compared to 59 years for low-income countries worldwide. Moreover, only 13 percent of Afghans have access to safe drinking water and 12 percent to adequate sanitation.

Access to electricity is among the lowest in the world. The situation has however improved significantly in Kabul after the import of power from Uzbekistan and the rehabilitation of two old hydro plants - Mahipar and Sarobi - that have been partially completed. The new imported source of electricity from Uzbekistan reaches households in the major urban population centers along the critical North East corridor between Mazar-e-Sharif and Kabul. Around 250,000 households are now benefiting from reliable grid-based power.

On 28 January 2010, an international conference on Afghanistan was held in London and attended by representatives from around 70 countries and international organizations. The conference was organized around the themes of Afghan leadership, regional cooperation and international partnership. Ms. Ngozi Okonjo-Iweala, World Bank Group’s Managing Director addressed the conference by focusing on three key points for development:

• The international community must continue to invest in Afghan leadership and ownership of the development agenda by building on the successes that have been achieved,
• The international community must support improved measures for accountability and reward those improvements with more on-budget financing, and
• The international community must ensure attention to issues of sustainability so that spending today doesn’t undermine the development and progress of Afghanistan in the future.

To read the full text of Ms. Ngozi’s speech, please click here.

Following the London conference, the government of Afghanistan and the World Bank held a meeting of the Afghanistan Reconstruction Trust Fund (ARTF) donors. At the meeting, agreement was reached that allocations from the fund will now follow a clear Afghan government strategy, with an estimated financing envelope of around US$2.6 billion for 2010-2013. This represents a 32 percent increase in available funds over the past three years. Both donors and the government of Afghanistan recognized that the mechanism – which delivers all its assistance through the Afghan government – now represents a vital tool for aid coordination in Afghanistan. For more information, please click here.

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The World Bank Group and Afghanistan

Afghanistan became a member of the World Bank in 1955. Shortly after the Soviet invasion in 1979, World Bank operations were suspended although the Bank continued to provide assistance to Afghans through its office in neighboring Pakistan. Operations were resumed in May 2002 to help meet the immediate needs of the poorest people while assisting the government in developing the administrative systems required for longer-term nationwide development.

Prior to 1979, the World Bank had provided 21 no-interest loans, known as "credits" to Afghanistan across a wide range of areas including education, roads, and agriculture. Of the original US$230 million in credits approved by the International Development Association (IDA), the Bank’s concessionary lending arm, US$83 million was disbursed and US$147 million was subsequently canceled. Afghanistan had repaid US$9.2 million to IDA and was up to date on debt service payments until June 1992, when it stopped making payments.

In 2003, Afghanistan cleared its debt to the World Bank, in part with the help of Japan, the UK, Sweden, Norway, and Italy, who contributed to a trust fund for this purpose. Additional funds from the multi-donor Afghanistan Reconstruction Trust Fund (ARTF), which is administered by the World Bank, helped to clear the remaining arrears, allowing Afghanistan to become eligible for loans for projects designed to help meet the country's longer-term development needs.

On 26 January 2010, the World Bank's International Development Association (IDA) and the International Monetary Fund (IMF) agreed to support US$1.6 billion in debt relief for the Islamic Republic of Afghanistan. The Boards of both institutions agreed that Afghanistan had taken the necessary steps to reach the completion point under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative. Afghanistan becomes the 27th country to reach the completion point under the Initiative. This will generate total debt service savings of US$1.6 billion, which include US$1.3 billion from the HIPC Initiative, US$260 million from Paris Club creditors beyond HIPC, and US$38.4 million from the Multilateral Debt Relief Initiative (MDRI). For more information, please click here.

Supported by 31 donor countries overall, the Afghanistan Reconstruction Trust Fund (ARTF) has mobilized over US$3.6 billion since it started or was established in 2002, and has now become the main financing vehicle for Afghan development priorities. The ARTF has emerged as one of the main instruments for financing the country’s recurrent budget and investment needs. The investment projects that are funded are in keeping with the with the government’s Afghanistan National Development Strategy (ANDS): they include agriculture and rural development, justice, private sector development, capacity development, education, urban development, transport and energy. To date more than US$1.9 billion has been disbursed to the Government of Afghanistan to help cover recurrent costs, such as civil servants’ salaries, and over US$1.2 billion had been made available for investment projects.

Since April 2002, the World Bank has committed over US$1.9 billion for development and emergency reconstruction projects and four budget support operations in Afghanistan. This support comprises over US$1.46 billion in grants and US$436.4 million in no-interest loans -known as "credits." Currently, the Bank has 26 active projects in Afghanistan with net commitments of over US$1 billion. So far, a number of Bank-financed projects have been completed. For more information about closed projects, please visit: www.worldbank.org.af – Projects & Programs page.

International Finance Corporation (IFC), a member of the World Bank Group, continues to work with its investment partners in Afghanistan. IFC now has an investment portfolio totaling more than US$90 million in six companies. This includes commitments in the financial (First Microfinance Bank of Afghanistan, BRAC Afghanistan Bank, Afghanistan International Bank), telecom (MTN Afghanistan), hospitality (Serena Kabul Hotel) and healthcare (Acomet Family Hospital) sectors. Moreover, IFC continues to work on its pipeline of projects in a variety of sectors in order to expand its Afghan investment portfolio. IFC’s Advisory Services continue to support the development of Afghan SMEs through its Business Edge management and business skills training program, which was launched in Afghanistan in June 2009. During the month of December 2009, trainers from the three accredited training providers for Afghanistan attended several capacity building workshops delivered by IFC Business Edge master trainers.

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World Bank Strategy

The World Bank’s current engagement with the country is determined by the Interim Strategy Note (ISN) for Afghanistan. The ISN is aligned with the government’s Afghanistan National Development Strategy (ANDS). World Bank support under the new ISN has not much shifted from the previous ISN (2006-2008), but emphasizes on supporting national programs that have resulted in improving lives of millions of Afghans across the country, including in areas of health, education, rural development and public finance management. The Interim Strategy Note (ISN) for Afghanistan covers the period 2009 - 2011 and envisages a grant program of around US$600 million.

The World Bank made a five-year pledge of US$1.1 billion (approximately $220 million per year) at the June 2008 Paris Conference provided that the country performs better than average compared to other post conflict countries, and IDA 16 donors are generous again when replenishing in 2011.

The program continued to follow the main pillars which are: building the capacity and accountability of the state to provide affordable, accessible, and adequate services; improving rural livelihoods and promoting the rural economy; and supporting the growth of a formal, modern, and competitive private sector.

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Achievements:

Since 2002, more than 6.3 million students and teachers have returned to school. The World Bank is helping to rehabilitate primary schools and train teachers, while giving technical assistance to strengthen the Ministries of Education and Higher Education. The Bank’s Education Quality Improvement Program (EQUIP) fund communities to rehabilitate or construct school buildings and access teaching and learning materials. Funds are directed through School Shuras. These Shuras are now functioning in over 9524 of the country’s 11,000 schools. It is envisaged that by the close of the two projects in 2012, some 1,575 schools will have been built, with a priority on girls’ schools; 8622 School Shuras formed and active, with 1999 more Shuras to be formed; over 110,000 teachers and around 9000 school administrators trained; 2750 girls in 25 provinces receiving scholarships to complete their two-year studies at TTC; and 750 qualified lecturers recruited in 18 provinces. Under the World Bank’s Strengthening Higher Education Program (SHEP) eleven overseas universities partnerships have been formed with participating Afghan universities to restore basic operations at these universities.

With the World Bank support in 18 provinces since 2003, the number of health facilities has nearly tripled from 148 to 421. Infant and under five mortality in 2008 has declined to 111 (13 percent reduction) and 161 per thousand live births (15 percent reduction) respectively from 129 and 191 per 1000 live births respectively in 2006. Health service utilization increased among project area populations from a rate of 0.3 consultations per capita annually at the outset to 1.64 per capita by the mid 2009. Health care for expectant mothers expanded, with the number of deliveries assisted in facility by trained health workers jumping from 6 percent to 24 percent. The number of pregnant women who received at least one prenatal care visit rose from 11 percent in 2004 to 49 percent in 2008. Child immunization rates are still low but have improved from 12 percent in 2005 to 33 percent in 2008. Around 20,000 community health workers—half of them women—have been trained and deployed throughout the country, increasing access to family planning and boosting childhood vaccinations. The number of facilities with trained female health workers rose from 25 percent before the project to 74 percent today.

The National Solidarity Program (NSP) is providing jobs and improving infrastructure throughout the country. The World Bank is the largest international source of funds for the NSP which finances small projects based on the priorities of the rural population. The program has financed over 50,778 community projects in more than 22,000 villages in all 34 provinces. About 80 percent of the projects involve infrastructure such as irrigation, rural roads, electrification, and drinking water supply, all critical for the recovery of the rural economy. Over half the projects have been completed.

The National Emergency Rural Access Program (NERAP) is working to provide year-round access to the rural areas of Afghanistan.  To date over 11,000 kms of rural access roads and 30,000 meters of cross-drainage structures, culverts, and causeways have been built with local labor. The project has helped connect over 27,000 villages to markets and has generated significant employment. Eight airfields have been rehabilitated so far.

In just over six years of operations, the Expanding Microfinance Outreach and Sustainability Project has disbursed 1.4 million loans worth US$701 million. There are now 15 microfinance institutions (MFIs) with 309 branches in 27 provinces, and more than 434,000 savings and loan clients. Sixty one percent of the clients are women; the loan repayment rate is 94 percent. The sector now employs almost 4159 people and half the management positions are held by Afghans. According to a 2007 study, each loan creates 1.5 employment opportunities. Therefore more than 650,000 current jobs in Afghanistan are attributable to microfinance and many more have received support over the years.

Since the implementation of an Automated System for Customs Data (ASYCUDA), the collection of transit fees in major transit corridors in Afghanistan has improved and customs revenues increased by more than 700 percent in Solar Year 1387 (2008/09). This was largely attributable to computerized control over transit shipments, tighter control over the clearance of goods, and the enhanced capacity of the Afghan Customs Department (ACD) staff. To date customs processes have been automated at major Inland Customs Depots (ICD), including at the Kabul Airport which receives approximately 55 percent of all the country's customs declarations. Similarly, ASYCUDA is now functional at four major transit axis which receive some 65 percent of Afghanistan’s transit trade by value.

A Government Communications Network (GCN) has been launched in 2004 and is providing internet access and voice telecommunications services, including long distance and international services, to over 30,000 government employees in Kabul and the provinces. A new radio spectrum monitoring system, to ensure proper use of the radio spectrum in Afghanistan, is operational. All provincial capitals are now also able to videoconference with the President and ministers in Kabul. Further, a Provincial Governor’s Communications Network is piggybacking on the GCN infrastructure.

The Power Rehabilitation Project has helped to provide improved and more reliable supply of electricity to the residents of Kabul. This has been facilitated by completion of several facilities funded under the project : - 110 kV link between Kabul and the North East Power Transmission System with rehabilitation of Kabul North and Kabul North- West sub-station; the 110 kV line that brings power from the Naghlu and Mahipar Hydropower Plants into the city grid; completion of high capacity optical fiber ground wire system (Chimtallah and Pul-e-Khumari) to control and operate the NEPS facilities; and rehabilitation of the part of Medium Voltage system of Kabul. This has helped in providing the consumers in Kabul with much better power supply, doing away with the need to rely on the generation of expensive diesel power. Besides, under this project residents of Khair Khana and Ahamad shah Mina also started receiving the benefits of grid power supply.

On September 30, the utility in charge of Afghanistan's power supply - the Da Afghanistan Brashna Mossesa (DABM) - officially became a state-owned enterprise – the Da Afghanistan Brashna Sherkat (DABS). The change came about through an inter-ministerial agreement between the Ministries of Finance, Energy and Water, Economy, and Urban Development. In accordance with the agreement, all former DABM staff as well as the utility's assets and liabilities have been provisionally transferred to the new corporation. DABS is committed to provide better electricity services and are planning to set up consumer care centers to resolve any difficulties faced by power consumers in Kabul.

The first unit of Naghlu hydro power project has been rehabilitated and is under testing and commissioning. It is expected that the unit would be able to provide full rated 25 MW power from April, which is about 7 MW more than generated earlier.

The Irrigation Rehabilitation Project helped rehabilitate multiple irrigation systems, benefiting over 637,110 households in all 34 provinces of the country. So far Irrigation facilities serving 639,101 hectares of irrigated areas have been rehabilitated. This has restored irrigation supplies to a previously dry area of 127,113 hectares. Also restoration of irrigation systems boosted yields of staple crops of wheat, maize, and rice, as well as of onions, melons, and watermelons. So far rehabilitation of 611 small, medium, and large irrigation schemes has been completed in various parts of the country. So far 105 hydrological stations have been installed in different locations on the 5 main river basins. The project also made a substantial contribution to building capacity within Afghanistan’s Ministry of Energy and Water through hands-on training, particularly in identifying, designing, preparing, and implementing irrigation rehabilitation schemes.

Despite the deteriorating business environment which impedes the flow of foreign direct investment to Afghanistan, the Afghanistan Investment Guarantee Facility (AIGF) in cooperation with Asian Development Bank (ADB), Department for International Development (DFID) and the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA) has been making slow but steady progress. To date, a total of six guarantees have been underwritten with the AIGF for five beneficiaries covering the agricultural, financial, pharmaceutical, construction, and telecommunication sectors. The total associated foreign investment of the projects under the AIGF is about US$107 million with approximately 730 jobs created as a result.

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