Afghanistan’s biggest economic challenge is finding sustainable sources of growth. To date, the World Bank has committed more than $2.69 billion for development projects. The Bank-administered Afghanistan Reconstruction Trust Fund has raised more than $6.42 billion. Read More »
Economy: Afghanistan has sustained a high but volatile gross domestic product (GDP) growth over the past 10 years. Real GDP growth averaged 9.2% between 2003 and 2012. In 2012/13 GDP growth reached an estimated 11.8%, thanks to favorable weather conditions and an exceptional harvest. Typically, agriculture accounts for one-fourth to one-third of GDP, depending on annual output. The mining sector, on the other hand, is slowly emerging as a source growth. The share of mining in GDP has historically been small, as it was only 0.6% in 2010/11. In 2012, the first large-scale mining project – Amu Darya oil fields – started its operations, and it is expected that the share of mining in aggregate output increases in the upcoming years. Inflation decreased to 6.4% in 2012/13, down from 10.2% in the previous year. The exchange rate depreciated by 8% in 2012, which is likely driven by increased uncertainty over security and the business environment. The medium-term outlook is tainted by uncertainty. Political and security uncertainties are expected to limit private-sector growth in the coming years.
Transition Process: In mid-2010, the North Atlantic Treaty Organization (NATO) and the Afghan government agreed that full responsibility for security would be handed over to the Afghan National Security Forces by the end of 2014. The withdrawal of most international military troops as planned is expected to have a profound and lasting impact on the country’s economic and development fabric. The drawdown is likely to be accompanied by a decline in international development assistance on which Afghanistan relied heavily since emerging out of conflict in 2001. While Afghanistan’s international partners have pledged continued support through 2016 there is a growing sense of uncertainty about Afghanistan’s stability and security in the months and years ahead.
Education: In 2001, after the fall of the Taliban, net enrollment was estimated at 43% 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 7.8 million children; girls’ enrollment increased from 191,000 to more than 2.8 million. All of the teacher force, 180,000, have received teacher training either through Teacher Training Centers or In-service Teacher Training. Efforts are ongoing to continuously upgrade teacher qualifications and overall access to equitable quality education in Afghanistan.
Health: According to recent data from Afghanistan Mortality Survey 2010 (AMS 2010), life expectancy at birth is at 64 years. Only 27% of Afghans have access to safe drinking water and 5% to adequate sanitation. Nevertheless, there has been considerable progress over the last nine years. About 85% of the population lives in districts which now have health care providers to deliver basic health services. About 57.4% of the population lives within one hour’s walking distance from a public health facility (NRVA 2007/08). Infant and under-5 mortality in 2010 has declined to 77 and 97 per 1,000 live births respectively, from 111 and 161 per 1,000 live births in 2008. The pregnancy-related mortality ratio is about 327 per 100,000 births, which means that every two hours, a woman dies in Afghanistan from pregnancy-related causes.
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% 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 Kabul, Herat, Mazar-e-Sharif, and Pul-e-Khumri, now have a 24-hour power supply for the first time in decades.
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.
Before 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 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. Aid has since grown tremendously. To date, the World Bank has provided a total of $2.63 billion in financing to the government of Afghanistan for a large number of development and emergency reconstruction projects. This support comprises $2.19 billion in grants and $436.4 million in no-interest loans also known as ‘credits’. As of April 2013, the Bank has 25 active projects in Afghanistan with net commitments of almost $1.2 billion. A number of Bank-financed projects have already been completed.
The International Financial Corporation (IFC), the World Bank Group’s private sector development arm, has provided support through investments totaling some $90 million, as well as advisory assistance involved in seven interventions in the areas of Access to Finance, Investment Climate reform, Agribusiness, SME training and Public Private Partnerships. IFC is working towards increasing its commitments to the private sector and assessing the possibility of increasing its advisory work in different areas.
Established in 2002, the Afghanistan Reconstruction Trust Fund (ARTF) is the largest single source of external on-budget financing that supports Afghanistan’s national priority programs, government operating costs and salaries, as well as the policy reform agenda. It includes support for development projects in health, education, rural development, infrastructure etc. Since 2002, 33 donors have contributed a total of $6 billion to the ARTF. The ARTF is administered by the World Bank in close cooperation with the government of Afghanistan, represented by Ministry of Finance, as well as the many donors. ARTF support is contributing to the achievement of the Afghanistan National Development Strategy goals.
The World Bank Group’s Multilateral Investment Guarantee Agency (MIGA) has offered a limited number of guarantees but there is interest by government and the private sector to see additional guarantees going forward, particularly to support infrastructure investment.
The Bank has also undertaken considerable analytical work. In February 2013, the World Bank released a report: “Afghanistan in Transition: Looking Beyond 2014”. The report, which was originally issued in May 2012, examines different aspects of transition in Afghanistan.
World Bank Strategy
The World Bank’s current engagement with Afghanistan is determined by the Interim Strategy Note (ISN), which is closely aligned with the government’s Afghanistan National Development Strategy (ANDS). World Bank support to Afghanistan over 2012-2014 will be based on supporting the delivery of some of the country's most important national priorities. It is also grounded in helping the government manage the critical transition from security and development dominated by the international community to one led by the government of Afghanistan by the end of 2014. World Bank Group support will be provided around three themes:
Building the legitimacy and capacity of institutions
World Bank support emphasizes national programs that have improved the lives of millions of Afghans across the country, including in the areas of health, education, rural development, and public finance management.
Selected World Bank Achievements in Afghanistan
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) gives funds to communities to rehabilitate or construct school buildings and access teaching and learning materials. Since 2001, over 930 schools have been established and the construction of a further 900 is in progress. Nearly 11,000 communities have formed School Management Shuras (Councils) to oversee school management and in some cases construct schools as well. Teachers across all provinces have received teacher training, and 3,500 female teachers have received scholarships to attend Teacher Training Centers.
The World Bank’s Strengthening Higher Education Program supports 12 core universities to restore basic operations. Student enrollment increased from 8,000 in 2001 to around 100,000 by 2012 in public universities and institutes of higher education. More than 65 private institutes of higher education have been established and licensed under the Ministry of Higher Education, with nearly 50,000 students.
The Skills Development Program established the National Institute of Management and Administration and revitalized the Afghanistan National Institute of Music as the first institution for nurturing gifted young musicians in the country. Over 140 students from Grades 4 to 14 are currently being provided with high quality music training within a general academic education. The Skills Program supports four other major institutions including the Blind School in Kabul. The Program has also provided short term training in technical and business development for over 9,000 persons, more than a third of whom were women.
Health: Millions of Afghans across the country now have access to primary health care and essential hospital services. Access to health services rose from 9% in 2003 to 60% in 2012 and health outcomes vastly improved. The number of health facilities more than doubled, the quality of care improved, and four times as many outpatients visit health centers as before. 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% before the project to 74% today. Currently the World Bank’s Strengthening Health Activities for Rural Poor Project is supporting Ministry of Public Health efforts to provide the Basic Package of Health Services in 11 provinces. The recently approved - System Enhancement for Health in Transition (SEHAT) program - will focus on strengthening health systems to further improve the coverage and quality of health care. The program will cover both rural and urban areas in 22 of the country’s 34 provinces.
Rural Development: The National Solidarity Program (NSP) - the country’s largest ever development program - is empowering the grassroots of Afghan society for the first time in history. 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. Across the country, over 34,000 elected Community Development Councils (CDCs) have identified over 69,000 projects to build and restore village infrastructure. To date, 80% of CDCs have received over $1.12 billion in block grants to implement projects chosen through an inclusive decision-making process.
The National Emergency Rural Access Project is working to provide year-round access to the rural areas of Afghanistan. Since 2002, a number of Rural Access Projects have helped build over 11,000 km of village roads using local labor. These roads have generated significant employment and improved access to markets, schools and health facilities for rural residents. Over 27,000 villages have been connected to markets. This year, over 700 km of rural roads are planned to be built, connecting many more villages. The routine maintenance of over 3,000 km of both tertiary and secondary roads will also be carried out.
Revenue Collection: The Second Customs Reform and Trade Facilitation Project for Afghanistan aims to improve the release of legitimate goods in a fair and efficient manner. With customs collections accounting for a substantial part of domestic revenues, efforts to modernize the customs administration and reduce opportunities for leakages have yielded substantial results. By the end of 2012, automated customs processes at major Custom Houses and Border Crossings were covering more than 95% of trade by value, increasing the speed of clearance and reducing the chances of revenue leakages, smuggling, and corruption.
Power Supply: The Power Rehabilitation Project has helped to provide an improved and more reliable supply of electricity to the residents of Kabul. Just eight years ago, about 6% of people had access to grid power in all of Afghanistan, one of the lowest rates of power access in the world. With the rehabilitation of power networks and the import of electricity from neighboring countries, around 25 % of households, mainly in Kabul and the northern provinces, are now benefiting from reliable grid-based power.
Additionally, two other ARTF-funded projects (Kabul-Aybak/Mazar-e-Sharif Power Project and Afghanistan Power System Development Project) are currently rehabilitating the distribution networks and some of the substations in the major urban population centers along the North East corridor. This year, about a million households, businesses and factories across the country are expected to benefit from round-the-clock access to grid electricity.
The government of Afghanistan is expanding connectivity in the country, mainstreaming the use of mobile applications, supporting the development of the local IT industry, and developing skills. The World Bank’s Information and Communication Technologies (ICT) Sector Development Project is supporting strategic investments to expand connectivity and develop the IT skills of the Afghan people. This year, 300 kilometers of fiber optic cables are planned to be deployed, and over 1000 Afghans trained in IT skills.
Horticulture: Between 2009 and 2012, under the Horticulture Component of the Horticulture and Livestock Project, over 4,000 hectares of new vineyards, as well as orchards of apricots, almonds, pomegranates and pistachios, and vegetable and kitchen gardens were planted
Irrigation: The Irrigation Restoration and Development Project aims to increase agriculture productivity and production in the project areas. Since 2006, over 600,000 households throughout the country’s 34 provinces have benefitted from rehabilitated irrigation systems. Over 85% of Afghanistan’s arable land requires irrigation. However, a quarter century of war and upheaval left the country’s irrigation infrastructure in neglect.
Rural Enterprise: In the past two years, the Afghanistan Rural Enterprise Development Project has supported over 35,000 rural poor - half of whom were women - to save over $1 million. Some two-thirds of these savings have been lent to other savings group members, with a repayment rate of 95%. To generate economies of scale, these 2,700 savings groups have been federated into 27 Village Savings & Loan Associations (VSLA).