Overview

Economy: Security and development challenges remain daunting, with poor security environment continuing to exert a binding constraint on confidence, investment, and growth. Economic growth reached only 0.8 percent in 2015. Adverse weather conditions reflected slow growth , which contributed to a decline in agricultural production of 5.7 percent in 2015. Available data for the first half of 2016 indicate low levels of investment into 2016, while agricultural production has been disrupted by crop diseases and pests. Growth in 2016 is therefore expected to reach only 1.2 percent, despite progress with a number of initiatives, including Afghanistan’s accession to the World Trade Organization and the opening of the Chahbahar port in Iran, which has excellent potential as an alternative trade route. Economic growth is expected to gradually pick up over coming years, from 1.8 percent in 2017 to 3.6 percent in 2019. Stronger growth in out-years is predicated on improvements in security, political stability, reform progress, and continued high levels of aid.

Consumer prices declined steadily throughout 2015, rebounding in the first half of 2016. The rebound was driven by recovery in global energy and cereal prices and by the depreciation of the Afghani against major trading currencies. The exchange rate depreciated in the first two quarters of the year by 3.8 percent and 0.3 percent respectively, followed by an appreciation of about 2 percent in the third quarter. Foreign exchange reserves declined throughout most of 2015, before increasing in the first half of 2016 to US$7.4 billion (or around 9 months of imports). This increase was largely due to the decline in imports, resulting from weakening demand.

The fiscal situation remains stable. Revenue collection performance was strong in 2015, with domestic revenues reaching 10.2 percent of GDP. This strong performance has continued into 2016, with domestic revenues collected in the first 8 months of 2016 standing at 30 percent higher than the value for the same period in the previous year. This increase is largely the result of improvements in tax administration and the introduction and implementation of new policy measures in the second and third quarters of 2015. Public spending in the first half of 2016 was 5 percent higher than in the previous year. While security costs and civilian recurrent needs increased the operating budget spending by around 9 percent in the first half of 2016, development budget expenditures have fallen due to poorer budget execution performance across most of Government institutions. A small deficit of 1.3 percent of GDP was recorded in 2015, with a balanced budget expected in 2016.

Education: In 2001, no girls attended formal schools and boys’ enrollment was about 1 million. However, education is now one of Afghanistan’s success stories. In 2001, net enrollment was estimated at 43 percent for boys and a dismal 3 percent for girls. 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 trained teacher. Since 2002, school enrollment has increased from 1 million to 8.7 million, with a girl population of 36 percent and teacher numbers at more than 185,000. In 2015 there were nearly 300,000 students in public and private institutions of higher education from a low baseline of less than 10,000 students at the end of 2001. Majority of the teacher force has received training either through Teacher Training Centers or In-service Teacher Training. Efforts are ongoing to continuously upgrade teacher qualifications and overall access to equitable and quality education in Afghanistan. Only about half of the total registered schools have proper buildings, while the rest operate in tents, houses and under trees. Only 55 percent of the teachers meet the minimum requirements while the rest get in-service training to upgrade their skills. National student learning assessments are yet to be mainstreamed and the quality of education and administration re-mains relatively weak.

Health: The Afghan health system has made considerable progress during the past decade thanks to strong government leadership, sound public health policies, innovative service delivery, careful program monitoring and evaluation, and development assistance. Data from household surveys (between 2003 and 2015) show significant declines in maternal and child mortality. The under-5 mortality rate and infant mortality rate dropped from 257 and 165 per 1,000 live births to 55 and 45 respectively. The maternal mortality ratio is 327 per 100,000 live births, compared with 1,600 in 2002. The number of functioning health facilities in-creased from 496 in 2002 to more than 2,000 in 2012, while the proportion of facilities with female staff increased.

Despite significant improvements in the coverage and quality of health services, Afghan health indicators remain below average for low income countries, indicating the need to further lower barriers for women accessing services. Afghanistan has one of the highest levels of child malnutrition in the world, with about 40.9 percent of children under 5 suffering from chronic malnutrition while both women and children suffer from high levels of vitamin and mineral deficiencies.

Access to Electricity: Despite significant progress in developing the electricity grid, Afghanistan retains one of the lowest rates of access and usage of electricity in the world. Per capita consumption averages 154 kWh per capita per year, which is significantly less than the South Asia average of 667 kWh per year and the average electricity usage per person world-wide of 3,100 kWh (based on 2012 data). Only about 30 percent of its population is connected to the grid, up from 6 percent in 2002. Afghanistan’s power utility DABS has grown its customer base steadily, increasing by an additional 6 percent every year.  In 2015, Afghanistan’s peak demand was 1,500 MW, and overall consumption was about 5,000 GWh. Afghanistan benefits from cheap imported power that in 2015 met about 55 percent of Afghanistan’s demand, with the remainder supplied from domestic hydropower and thermal plants. The reliability of the grid, particularly in Kabul, has improved significantly over the past few years. Nevertheless, load shedding and outages are still sufficiently common that few have given up their private generators. A large part of the population also owns small solar devices, such as solar lanterns, mainly for lighting and cell phone charging. The NRVA (2013/14) indicates that 46 per-cent of Afghan households own a solar device and 58 percent in rural areas.

Low connectivity to the grid conceals a vast difference between rural and urban access. While over 89 percent of the population in large urban areas like Kabul, Kandahar, Herat, and Mazar-e-Sharif have access to grid electricity, less than 11 percent of the rural population has access to grid-connected power. About 77 percent of the Afghan population lives in rural areas. Large parts of Kabul, Mazar-e-Sharif and Pul-e-Khumri have 24-hour power supply. These cities are part of the North East Power System (NEPS), which imports up to 300 MW from Uzbekistan throughout the year, supplemented by up to 300 MW from Tajikistan during the summer. Currently total installed transmission lines carrying capacity is: 326MW from Uzbekistan, 164 MW from Iran, 433 MW from Tajikistan and 77 MW from Turkmenistan.

 

Last Updated: Nov 02, 2016

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 were disbursed and $147 million were 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 over $3.34 billion for development and emergency reconstruction projects, and five budget support operations in Afghanistan. This support comprises over $2.90 billion in grants and $436.4 million in no-interest loans known as ‘credits’. As of April 2016, the Bank has 16 active IDA projects in Afghanistan with net commitments value of over $1.3 billion.

International Finance Corporation (IFC), the World Bank Group’s private sector development arm, continues to work with its investment and advisory service partners in Afghanistan. IFC’s portfolio stands at about $80 million and includes two investments in the telecommunication sector (MTN—a joint project with the Multilateral Investment Guarantee Agency—and Roshan), one investment in the hotel sector (TPS), and two operations in financial markets (First Microfinance Bank, Afghanistan International Bank—trade facility).  IFC is exploring investment opportunities across the manufacturing, financial markets, and infrastructure sectors. IFC Advisory Services is also very active in Afghanistan with six active projects during the reporting period.

The World Bank Group’s Multilateral Investment Guarantee Agency (MIGA) has $154 million of gross exposure for three projects in Afghanistan. MTN is a joint effort with IFC in the country’s critical telecommunication sector. The other two projects support dairy and cashmere production.

The Afghanistan Reconstruction Trust Fund (ARTF) was established in 2002 to provide a coordinated financing mechanisms for the GoA’s budget and national investment projects. Since its inception, 34 donors have contributed over $9.2 billion to the ARTF, making it the largest single source of on-budget financing for Afghanistan’s development.  The ARTF has a three-tier governance framework (Steering Committee, Management Committee and Administrator), plus three working groups. This sound framework has enabled the ARTF to adapt to changing circumstances and development priorities with consistency and consensus. The World Bank is the administrator of the trust fund. The Management Committee consists of the World Bank, Islamic Development Bank, Asian Development Bank, UNDP, Ministry of Finance (MoF), and UNAMA as an observer. 

Last Updated: Nov 02, 2016

The World Bank Group’s current engagement with Afghanistan is determined by the Country Partnership Framework (CPF) strategy, which is closely aligned with the government’s Afghanistan National Peace and Development Framework (ANPDF).  

The World Bank Group’s support to Afghanistan over 2017-2020 is aimed to help Afghanistan build strong and accountable institutions to deliver services to its citizens, and encourage growth of the private sector. The CPF also aims at supporting economic growth that includes all members of society, with a focus on lagging areas, urban informal settlements, and people driven from their homes by conflict. 

The World Bank Group strategy aims to help Afghanistan:

  •  Build strong and accountable institutions to support the government’s state-building objectives and enable the state to fulfil its core mandate to deliver basic services to its citizens, and create an enabling environment for the private sector;
  • Support inclusive growth, with a focus on lagging areas and urban informal settlements; and
  • Deepen social inclusion through improved human development outcomes and reduced vulnerability amongst the most underprivileged sections of society, including the large numbers of internally displaced persons and returnees.

The amount of finance available for the CPF will be determined when the World Bank Group’s International Development Association (IDA) – the fund for the poorest countries - is finalized in December and new commitments under the Afghanistan Reconstruction Trust Fund (ARTF) are confirmed.

The International Finance Corporation (IFC), the World Bank Group’s private sector arm, aims to expand its commitments in Afghanistan from its current portfolio of $54 million to a cumulative investment of about $80 million over the CPF period.

The Multilateral Investment Guarantee Agency (MIGA), the Bank Group’s political risk insurance arm, stands ready to provide additional support with a focus in the finance, manufacturing, agribusiness and services, and infrastructure sectors.

Last Updated: Nov 02, 2016

Selected 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. Funds are directed through School Management Shuras (councils), now functioning in more than 14,400 schools. Since 2002, a total of 1,033 schools have been constructed. In addition, 11,543 schools have received a total of $25 million in Quality Enhancement Grants under EQUIP I and II for the purchase of school supplies, laboratory equipment, and other materials that help strengthen the learning environment.

The Skills Development Program revived two key institutions in Kabul: the National Institute of Management and Administration (NIMA) that prepares young professionals to acquire junior level jobs in the public and private sectors; and the National Institute of Music that trains gifted young musicians, establishing a nurturing platform for music in the country. Under the Afghanistan Second Skills Development Program, 100 national occupational skills standards (NOSS) have been benchmarked to an international level with the support of an international certification agency, and corresponding curricula developed for 15 trades. To date, over 35 institutes have benefitted from two rounds of a ‘Recognition Grant’, while an additional 8 institutes have been selected for a Development Grant, which support reforms to improve academic management, school administration, linkages with local industries, and curriculum revision. In addition, over 520 Technical and Vocational Education and Training (TVET) graduates have been supported with scholarships through a voucher program, which facilitates further professional studies for meritorious students that graduate from TVET institutes. 

Health: Over the past decade, Afghanistan has made steady progress in the health sector. Around 20,000 community health workers—half of them women—were 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 to 74 percent today. The number of functioning health facilities increased from 496 in 2002 to more than 2,000 in 2012, while the proportion of facilities with female staff increased. Births attended by skilled health personnel among the lowest income quintile increased to 35 percent from 15.6 percent. Contraceptive prevalence rate (using any modern method) increased to 30 percent from 19.5 percent.

Bringing most of the efforts in public health service delivery under one umbrella in Afghanistan, the World Bank’s System Enhancement for Health Action in Transition (SEHAT) Project aims to support the implementation of the Basic Package of Health Services (BPHS) and Essential Package of Hospital Services (EPHS) through contracting arrangements across the country. SEHAT also supports efforts in strengthening the capacity of the Ministry of Public Health at central and provincial levels to effectively carry out its stewardship functions.

Rural Development: National Solidarity Programme (NSP) is a government’s flagship program in its third phase. It aims at generating a strong sense of ownership and social stability while enhancing service delivery and security through empowerment and development activities that communities identify, plan, manage, and monitor on their own. Since 2003, NSP has successfully established Community Development Councils (CDCs) in over 35,000 communities, and supported subsequent rounds of CDC elections in over 11,500 of these communities. Cumulatively, over all the NSP phases to date, CDCs have received over $2.19 billion, of which some $1.6 billion have gone to communities through block grants to finance over 87,900 sub-projects. More than 71,800 sub-projects have closed, while the rest are ongoing.  The financed sub-projects include transportation (30 percent), water supply and sanitation (25 percent), irrigation (26 percent) power (5 percent) and other small-scale infrastructure schemes (14 percent).

Improving access to basic services and facilities through secondary and tertiary roads, the Afghanistan Rural Access Project will increase the number of people living within two kilometers (km) of feeder roads and reduce travel time to essential services. To date, more than 13,000 km of rural roads and related drainage structures have been upgraded or rehabilitated under these programs through four projects financed through IDA, ARTF, and other funds.

Horticulture and Livestock: Building on the 5,300 hectares of fruit orchards established since 2009 through its predecessor, the National Horticulture and Livestock Project (NHLP) has financed the establishment of another 7,880 hectares of new orchards, about 34 percent of which are in new provinces. Further, NHLP continues to introduce innovative lines of investment support. It has successfully introduced production techniques to, inter alia, extend the production period of vegetables through establishment of some 1840 production schemes based on the use of micro greenhouses; create a culture of high productivity dry land cultivation, by having already supported establishment of 1,990 ha—a cumulative target of 300 ha—of pistachio groves with high yielding varieties; and promote modernization of horticulture sector, through establishment of 52.7 ha of demonstration of high and medium density orchards. In addition, over 1.2 million young cattle and 4 million young sheep and goats have already been vaccinated.

Irrigation: With over 85 percent of rural population relying on agriculture, irrigation remains a pressing need in rural Afghanistan. The Irrigation Restoration and Development Project (IRDP) is ensuring irrigation of some 300,000 hectares of land by rehabilitating irrigation systems and building a limited number of small multi-purpose dams. In the irrigation component a total of 98 irrigation schemes have been rehabilitated, benefiting 100,000 hectares of irrigation command area and 63,000 farmers. In the small dam component, a prefeasibility review of 22 small dams resulted in a feasibility study conducted on the six best ranked dams in the northern river basin (which is not on international rivers). A detailed social and environmental study will be carried out.  In the hydro-met component, 40 cableway stations for flow measurement at selected hydrology stations have been installed.

Rural Enterprise: Since its inception, the Afghanistan Rural Enterprise Development Project (AREDP) has established 5,561 Savings Groups with a membership of some 68,000 rural poor (52 percent women) in 747 villages. The SGs have saved over $3.37 million and members have accessed more than 27,000 internal loans for productive and emergency purposes with a repayment rate of 95 percent.

On average each VSLA has $6,500 as loan-able capital, which is further boosted with a seed grant injection. This improves access to finance for group members who would like to increase productivity or engage in entrepreneurial activities but cannot access such funds from commercial banks or microfinance institutions. AREDP also works towards strengthening market linkages and value chains for rural enterprises by providing technical support to 1,238 Enterprise Groups (65 percent female) and 563 (13 percent female) Small Medium Enterprises that have been selected for their potential as key drivers of rural employment and income generation. Support was given to 113 Kochies (nomads) and 143 disabled people to enhance their enterprise development skills and productivity. AREDP uses Community Development Councils as an entry point into communities. 

Market Development: The Afghanistan New Market Development Project is piloting a business development program in the four urban centers of Kabul, Mazar-e-Sharif, Jalalabad and Herat, which are the major hubs of economic activity. The project aims to help enterprises gain market knowledge, improve product quality, boost productive capacity, acquire new technologies, and develop and implement business plans to increase their presence in both domestic and export markets. The Facility for New Market Development (FNMD), created under the project, was officially launched on March 12, 2013. Since then it has received 1,051 applications from small and medium enterprises (SMEs), and signed cost-sharing grant contracts worth $10 million with 434 firms and associations. Moreover, FNMD has processed 67 additional grant agreements with the SMEs that successfully completed their first cycles of agreements. Also through FNMD, over 1,500 jobs have been created across the country, including more than 30 percent for women, with 155 new or improved products introduced in either domestic or export markets.

Telecommunications: The Afghanistan Information and Communication Technology Sector Development Project supports policy and regulatory reforms and strategic infrastructure investment to expand connectivity and enable more users to access high quality mobile and Internet services. It also helps mainstream the use of mobile applications to improve public service delivery and program management in strategic government sectors. The project helps develop the local IT industry by expanding the pool of skilled and qualified IT professionals, and supporting the incubation of ICT companies in Afghanistan. To date, Major milestones under the project include progress in construction of optical fiber cable with completion of about 910 km of cable. Five communication nodes on the northeast segment have become operational. On the central route, Bamiyan to Yakawlang is almost completed. In addition, new contracts for Kunar, Kapisa, and Bamiyan–Mazar-e-Sharif routes have been signed and work is in progress.  A total of 2,300 Afghans have been trained under the IT skills development program and another round of specially designed job-oriented training programs will run in 2016. Two rounds of the Innovation Support Program awarded 15 local innovators for their ideas on how mobile technologies could help address challenges in various sectors including agriculture, education, and health. The ICT business incubator complex has been constructed in the ICT Institute area of MCIT and 20 start-up business entities have undergone training programs in the complex to date.

 

Last Updated: Nov 02, 2016


LENDING

Afghanistan: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments