Afghanistan Economic Update, October 2014
Economic growth, down sharply in 2013 to 3.7 percent (estimated), has slowed further to 1.5 percent (projected) in 2014, from 9.4 percent per year during 2003-12. Uncertainty since 2013 over the political and security transition has been compounded...
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| Format: | Economic Updates and Modeling |
| Language: | English en_US |
| Published: |
Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2014/10/20310386/afghanistan-economic-update http://hdl.handle.net/10986/20668 |
| Summary: | Economic growth, down sharply in 2013 to
3.7 percent (estimated), has slowed further to 1.5 percent
(projected) in 2014, from 9.4 percent per year during
2003-12. Uncertainty since 2013 over the political and
security transition has been compounded by the protracted
elections impasse in 2014. Investor and consumer confidence
have slumped and led to a sharp reduction of new investment
commitments in the non-agriculture sectors. Agricultural
production has been robust in 2013-14, but flat from the
record levels of 2012. Afghanistan faces a deteriorating
fiscal crisis in 2014, with declining revenues leading to an
unfinanced fiscal gap, depleted cash reserves, and
accumulating arrears. Domestic revenues have continued to
weaken, with the authorities anticipating revenues of Afs
105 billion ($1.82 billion) or 8.7 percent of GDP for fiscal
2014. This would represent a further decline from revenues
of 9.7 percent of GDP in 2013, itself down from a peak of
11.6 percent in 2011. While the economic slowdown is part of
the explanation, increasing weaknesses in tax and customs
compliance are a large part of the problem. Even with
austerity measures, the unfinanced fiscal gap is estimated
at about $500 million for 2014. While part of this could be
financed from cash balances, it is estimated that at least
$300 million in additional financing will be needed for 2014
to cover civilian salaries, pensions, and critical operating
and development spending. This will need to be accompanied
by serious reforms to improve revenues. Addressing
Afghanistan's formidable development challenges will
require reforms in three areas: (i) restoring fiscal
stability; (ii) restoring confidence and creating
private-sector jobs; and (iii) strengthening social cohesion
and service delivery. Above all, high level commitment to
tackle corruption and strengthen governance across the board
will be critical. |
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