Afghanistan Country Overview 2011

Overview

The Economy: Afghanistan’s economy has been experiencing strong growth fueled by international development assistance and security-related spending. The growth drivers of recent years have been above-average agricultural production, strong growth in construction and transportation, and security spending enabled by large aid flows, especially in FY2009/10 (SY1388). Real GDP grew by 8.2 percent in 2010/11 (SY1389), down from 20.4 percent last year which reflected recovery from the poor harvest in 2008/09 (SY1387). In 2010/11 (SY1389), GDP per capita reached approximately $560.

 Afghanistan’s economic outlook in the medium term is good, with real GDP growth rate of 7.9 - 8.2 percent and moderate levels of inflation. Longer-term growth prospects will depend on the extent to which mining developments can be used to foster development in agriculture and services, which are crucial to food security, employment and poverty-reduction, and export revenue.

Transition Process: By 25 July, 2011, international forces under ISAF (International Security Assistance Force) completed the first phase of transition through the handover of security responsibilities to Afghan national security forces in six locations. These locations included Bamiyan province; Parwan province; Herat city; Mehterlam city in eastern Laghman province; Laskargar city in southern Helmand, and Panjshir province. The transfers are the first phase of a plan that will place the country’s security under Afghan control in the next three years. International combat troops are scheduled to leave Afghanistan by the end of 2014. As Afghanistan launched the transition process, the World Bank Group President wrote an Op-Ed, highlighting the need for a flourishing economy.  The Op-Ed is available at: http://go.worldbank.org/XBG78ON9X0 

Education: In 2001, after the fall of the Taliban, net enrollment was estimated at 43 percent for boys and a dismal 3% for girls. Moreover, there were only about 21,000 teachers (largely under-educated) for a school-age population estimated at more than 5 million—or about 240 students for every marginally trained teacher. Since 2002, school enrollment has increased from 1 million to 8 million children; girls’ enrollment increased from 839,000 to more than 2.5 million. Over 79,000 students graduated from Grade 12 in 2008 (26% were female). Around 110,000 teachers were trained; 65,544 teachers were trained in 2009-2010 alone. Over 3,000 new classrooms and over 540 schools were built.

Health: Life expectancy remains at only 43.6 years, compared to an average 59 years for low-income countries. Only 27 percent of Afghans have access to safe drinking water and 5 percent to adequate sanitation. Nevertheless, there has been considerable progress over the last nine years. About 85 percent of the population lives in districts which now have service providers to deliver a basic package of health services. About 57.4 percent of the population lives within one hour walking distance from a public health facility (based on National Risk and Vulnerability Assessment 2007/2008). Infant and under five mortality in 2008 has declined to 111 and 161 per thousand live births respectively from 129 and 191 per 1000 live births in 2006. This reflects a 13 percent and 15 percent reduction in infant and under five mortality rates respectively.

Access to electricity: The percentage of the population with access to electricity in Afghanistan is among the lowest in the world. The Ministry of Energy and Water estimates that about 30 percent of Afghans have access to electricity from grid-based power, micro hydro or solar panel stations. The situation has improved significantly in the major urban population centers along the critical North East corridor between Mazar-e-Sharif and Kabul, following the import of power from Uzbekistan and the rehabilitation of three hydro plants (Mahipar and Sarobi completed, and Naghlu ongoing). Increasing parts of some urban centers, for example in Kabul, Herat, Mazar-e-Sharif and Pul-e-Khumri, now have 24-hour power supply for the first time in decades.

Back to top

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 the Bank office in Pakistan.

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 $230 million in credits approved by the International Development Association (IDA), the Bank’s concessionary lending arm, $83 million was disbursed and $147 million was subsequently canceled. Afghanistan had repaid $9.2 million to IDA and was up-to-date on debt service payments until June 1992 when it stopped making payments.

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. It has since grown tremendously. To date, the World Bank has committed over $2.3 billion for development and emergency reconstruction projects and four budget support operations. This support comprises over $1.9 billion in grants and $436.4 million as "credits." As of August 2011, the Bank has 25 active projects in Afghanistan with net commitments of over $1 billion. A number of Bank-financed projects have been completed. For more information about closed projects, please visit: www.worldbank.org.af – Projects & Programs page.

The World Bank also administers the Afghanistan Reconstruction Trust Fund (ARTF). Supported by 32 donor countries, the ARTF has mobilized over $4.3 billion since 2002. The ARTF has emerged as one of the main instruments for financing the country’s recurrent budget and investment needs. All investment projects are aligned with the government priorities. They include agriculture and rural development, justice, private sector development, capacity development, education, urban development, transport and energy. The ARTF also supports the Government’s recurrent cost financing needs and to date more than $2.29 billion has been disbursed to the Government of Afghanistan for civil servants’ salaries.

The International Finance Corporation (IFC), the World Bank Group’s private sector development arm, continues to work with its investment partners in Afghanistan. IFC now has an investment portfolio totaling more than $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.

On July 12, 2011, the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group, agreed to provide political risk insurance to support the expansion of MTN Afghanistan’s (MTNA) operations. In 2007, MIGA provided $74.5 million in coverage for the start-up of MTNA’s operations. The additional coverage of $82.1 million, issued this month by MIGA to parent company MTN Dubai (MTND), will protect MTND’s equity investment and shareholder loan against the risks of transfer restriction and expropriation for a period of 10 years. MIGA has backed six investments into Afghanistan since 2006 and is active in many other countries experiencing conflict, a priority area for the agency.

The Bank has also undertaken considerable analytical work. In July 2011, the Ministry of Economy (MoEc) and the World Bank released the “Afghanistan Provincial Briefs”, based on the National Risk and Vulnerability Assessment (NRVA) 2007/08. The report provides a selection of key indicators of individual and household wellbeing for each province of Afghanistan. The indicators encompass multiple dimensions of wellbeing, including poverty and inequality, food security, labor market outcomes, sectoral distribution of employment, gender, education, health, and access to services and infrastructure. By unbundling variations in development outcomes at the provincial level, these briefs enrich the aggregate description of well being presented in the 2010 MoEc-World Bank “Poverty Status in Afghanistan” report. The statistics presented in this report highlight that development outcomes in Afghanistan vary significantly from province to province. The prevalence of poverty, for example, varies from 9 percent in Helmand to 76 percent in Paktika; a considerably large spread around the national average of 36 percent. School enrollment rates among children aged 6-12 are the highest in Daykundi with over two thirds of the children enrolled in schools, while Urozgan has one of the lowest enrollment rates with an estimated 2 percent of its children enrolled in schools. Access to key services such as electricity and safe drinking water also shows a high degree of variation across provinces. For example, 85 percent of households in Kabul have access to electricity compared to less than 4 percent in Badghis and Urozgan. The report is available in English and Dari on: http://go.worldbank.org/EEXQKXSB00

Back to top

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 emphasizes 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 $600 million. A new Interim Strategy Note is currently under preparation and will be finalized for the IDA16 period (FY12-FY14).

Back to top

Achievements:

Education: 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 11,000 of the country’s 11,724 schools. EQUIP have supported the construction or rehabilitation of over 1,600 schools throughout the country.  Of these, some 50 percent have been completed while the rest are under construction. Under the World Bank’s Strengthening Higher Education Program (SHEP) 12 core universities are supported to restore basic operations.

Health: With the World Bank support in 18 provinces, the number of health facilities has nearly tripled from 148 in 2003 to 432 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. Currently the World Bank’s Strengthening Health Activities for Rural Poor Project (SHARP) is supporting Ministry of Public Health efforts to provide Basic Package of Health Services (BPHS) in eleven provinces.

Rural Development: 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 57,000 community projects in more than 27,000 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 Project (NERAP) is working to provide year-round access to the rural areas of Afghanistan.  Since the launching of this project in 2007, over 1,331 kms of district and village roads and more than 9,000 meters of cross drainage structures have been completed. The project has generated around 2 million days of employment for unskilled labor throughout the country. 

Microfinance: In just over seven years of operations, the Expanding Microfinance Outreach and Sustainability Project has disbursed $1.8 million loans worth more than $1 billion. There are now 11 microfinance institutions (MFIs) with 246 branches in 23 provinces, and more than 344,039 savings and loan clients. Seventy three percent of the total borrowers are women. The sector now employs almost 3,287 people and half the management positions are held by Afghans. According to a 2007 study, each loan creates 1.5 employment opportunities.

Collection of Revenues: 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 points which receive some 65 percent of Afghanistan’s transit trade by value.

Power Supply: 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 the rehabilitation of several facilities: -  110 kV link between Kabul and the North East Power Transmission System (NEPS) 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 consumers in Kabul with much better power supply, doing away with the need to rely on the generation of expensive diesel power.

Additionally, two other ARTF funded projects (Kabul/Aybak/Mazar-e-Sharif Power Project and Afghanistan Power Sector Development Project) are currently rehabilitating the distribution networks and some of the substations in the major urban population centers along the North East corridor. These projects - which cover Mazar-e-Sharif, Puli-e-Khumri, Charikar, Gulbahar, Jabul-Seraj, and parts of Kabul city - are expected to significantly improve the situation after their completion in 2011 and 2012.

Horticulture: Under the Horticulture Component of the Horticulture and Livestock Project, over 3,000 ha of new orchards (grapes, apricots, almonds, and pomegranates) have been planted so far, and over 600 women have participated in the program.

Livestock: Under the Animal Health Component of the Horticulture and Livestock Project, 114 government veterinary clinics have been transferred to trained veterinarians for private operation. The Poultry Component has helped poor women enhance their incomes. About 12,800 intensive poultry units have already been established, of which 7,000 units were established in 2009 and another 5,800 units were established at the beginning of 2011.  Of the units set up in 2009, 94 percent have started the second cycle independently without financial assistance from the project, demonstrating sustainability. Furthermore, over 16 million eggs have been produced so far, and some 200 small-scale broiler units established.

Irrigation: The Irrigation Rehabilitation Project helped rehabilitate 772 medium and large size traditional irrigation schemes serving more than 763,000 ha of land in various parts of the country. An additional 154,000 ha of land are now receiving irrigation, and crop yields have increased substantially.  Installation of 105 of the 174 hydrology stations in different part of the country has been completed. Work on installation of 40 Cableways has commenced. These facilities will enable the measurement of river flows for the planning and development of water resources in the country.

Rural Enterprise: The Afghanistan Rural Enterprise Development Project enhances the participation of the rural poor in economic activities by providing business development services, improving their access to finance, and strengthening market linkages and value chains. The project will support the establishment of 13,000 Savings Groups (SGs), 6,500 Enterprise Groups (EGs) and 1,300 Village and Savings Loan Associations. The EGs will help maximize the economic potential of rural entrepreneurs to improve market access, deliver technical knowledge, raise basic business skills, and leverage economies of scale to increase the value of their sales. The Project is making good progress. By August 2011, the AREDP has set up offices and recruited provincial staff in Parwan, Bamyan, Nangarhar, Balkh, and Herat provinces. These offices are now covering 17 districts and 235 communities. In total, 1,757 savings groups (SGs) have been formed with 20,837 Saving Group members.  In addition, 76 enterprise groups (EGs) have been formed with savings ranging from AFN 3.39million to AFN 8.8 million. All the SGs and EGs are now inter-loaning.

Back to top