Economy: The political and security transition continues to take a heavy toll on Afghanistan’s economy.  Economic growth is estimated to have fallen further to 2 percent in 2014 from 3.7 percent in 2013 and an average of 9 percent during 2003-12. Political uncertainty combined with weak reform progress dealt a further blow in 2014 to investor and consumer confidence, already in a slump from uncertainty building since 2013. The economy also faces headwinds from the drawdown in aid, affecting growth in non-agricultural sectors (manufacturing, construction, and services). The agricultural harvest in 2014 was strong for the third year in a row, but was up only marginally from the bumper year of 2012. Agriculture benefited from robust cereals production thanks both to well distributed, timely rainfall and an increase in irrigated area for wheat cultivation.  The growth outlook for 2015 remains weak. 

Afghanistan’s fiscal situation is precarious. Domestic revenues fell from a peak of 11.6 percent of GDP in 2011 to 8.4 percent in 2014, because of the economic slowdown and weaknesses in tax and customs enforcement. The decline in revenue collection took place across all sources, including tax revenues, customs duties, and non-tax revenues. As a result, in spite of measures to restrain expenditures, the authorities faced a financing shortfall in excess of $500 million in 2014, managed by drawing down cash reserves, accumulating arrears, and exceptional donor assistance. The authorities curtailed civilian operations and maintenance (O&M) and discretionary development expenditures, although overall expenditures increased in 2014 because of higher security and mandated social benefit spending. Restoring fiscal stability will require accelerating revenue enhancing reforms, additional discretionary assistance, and prioritizing expenditures. The government began 2015 with a weak cash reserve position and significant arrears (around $200 million). Afghanistan thus faces a financing gap in 2015 that could be as large as last year, against the backdrop of a weaker cash position. In response to these challenges, the Government agreed to introduce a set of revenue-enhancing measures and further consolidate expenditure within the framework of an IMF-Staff Monitored Program (SMP). However, there are a number of downside risks that could undermine the impact of these measures such as the weak economic outlook or a deteriorating security environment.

Education: In 2001, after the fall of the Taliban, net enrollment was estimated at 43 percent for boys and a dismal 3 percent 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 8.2 million; girls’ enrollment increased from 191,000 to more than 3.75 million. Majority of the teacher force—195,000—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 and quality education in Afghanistan. In the same period, the number of teachers had grown from 20,000 to more than 187,000.

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 2011) show significant declines in maternal and child mortality. The under-five mortality rate and infant mortality rate dropped from 257 and 165 per 1,000 live births to 97 and 77 respectively. The maternal mortality ratio is 327 per 100,000 live births, compared with 1,600 in 2002. The number of functioning health facilities increased from 496 in 2002 to more than 2,000 in 2012, while at the same time the proportion of facilities with female staff increased.

Despite significant improvements in the coverage and quality of health services, as well as a drop in maternal, infant and under-five mortality, 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 55 percent of children under five suffering from chronic malnutrition while both women and children suffer from high levels of vitamin and mineral deficiencies.

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 Kabul, Herat, Mazar-e-Sharif, and Pul-e-Khumri, now have 24-hour power supply for the first time in decades, although supply of power to Kabul was disrupted for a few weeks from beginning of March 2015, after heavy avalanches destroyed a few of the power transmission towers in Salang.

Last Updated: Apr 14, 2015

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 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 $3.07 billion for development and emergency reconstruction projects, and five budget support operations in Afghanistan. This support comprises over $2.63 billion in grants and $436.4 million in no-interest loans known as ‘credits’. As of April 2015, the Bank has 15 active IDA projects in Afghanistan with net commitments value of over $1 billion.

The 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 Investment Services now has a committed investment portfolio totaling some $80 million in five companies, which include commitments in the financial, telecommunication, and hospitality sectors. IFC is exploring investment opportunities across the manufacturing, financial markets, and infrastructure sectors, and undertakes senior-level business development missions to Afghanistan on a quarterly basis. IFC Advisory Services is also very active in Afghanistan with eight active projects during the reporting period.

The World Bank Group’s Multilateral Investment Guarantee Agency (MIGA) has $154 million of gross exposure in Afghanistan, supporting telecoms and agribusiness projects. MIGA recently launched its "Conflict Affected and Fragile Economies Facility", which will boost the agency’s capacity to insure investments in Afghanistan. The telecommunication project (MTN) is also receiving financing from IFC. The two agribusiness projects are in dairy and cashmere production.

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, 34 donors have contributed a total of $7.99 billion to the ARTF. The ARTF is administered by the World Bank in close cooperation with the Government of Afghanistan, represented by the Ministry of Finance, as well as the many donors. ARTF support is contributing to the achievement of the Afghanistan National Development Strategy goals.

Last Updated: Apr 14, 2015

The World Bank Group’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 2012-2015 is based on supporting the delivery of some of the country's most important national priorities. World Bank Group support is being provided around three themes:

1.      Building the legitimacy and capacity of institutions

2.      Equitable service delivery

3.      Inclusive growth and jobs

The Bank delivers its program through International Development Association (IDA) grants, from which Afghanistan will receive about $150 million per year, as well as the Afghanistan Reconstruction Trust Fund (ARTF), which could potentially provide up to $800 million per year in grants during the period of the ISN (2012-15). The Bank’s private-sector arm—the International Finance Corporation (IFC) — is also strengthening its support to both private sector companies and improving the business environment.

The World Bank Group 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.

The World Bank will launch the process of developing its upcoming three-year engagement in Afghanistan. This would entail analysis of short, medium, and long term challenges that the country is facing to build a foundation for sustained poverty reduction. Consultations involving government, development partners, and civil society organizations will take place to guide the process.

Last Updated: Apr 14, 2015

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. Funds are directed through School Management Shuras (councils), now functioning in more than 14,400 schools. Since 2002, a total of 1,347 schools have been constructed. In addition, 16,587 schools have received a total of $37.2 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. Moreover, 15 Technical and Vocational Education and Training (TVET) schools and institutes selected nationwide received a recognition grant of $30,000 to scale up and/or replicate good practices in delivering skills. Subsequently, these beneficiaries received supplementary technical assistance for the preparation and implementation of Business Development Plans and five-year business plans for their institutes. In partnership with the International Labor Organization and an international certification agency, TVET graduates will receive internationally recognized certification of their skills. To date, 1,518 NIMA graduates have received an International Certificate from the University of Jyvyskala, Finland, and Ball State University, USA.

Health: Over the past decade, Afghanistan has made steady progress in the health sector. The number of health facilities in 11 target provinces nearly tripled from 148 to 432. 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 at the same time the proportion of facilities with female staff increased.

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: The National Solidarity Program (NSP), the Government of Afghanistan’s flagship rural development program, is empowering rural communities by facilitating democratically elected Community Development Councils (CDCs). To date, over 34,400 CDCs have received more than $1.53 billion in block grants; and implemented over 86,000 rural infrastructure sub-projects in their respective villages. 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. More than half the projects have been completed.

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.

Customs: The Customs Reform and Trade Facilitation Project assisted the Afghan Customs Department (ACD) to migrate to the web-based ASYCUDA World system, an automated system for customs data. This system is now fully operational in 14 computerized ACD offices, with the Khost Custom office made operational recently. Migration from ASYCUDA++ version to the newer web-based ASYCUDA World platform has been completed in 13 sites, including international and national transit covered. Work is underway to cover the one remaining large office in Farah before June 2015.

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 5,300 hectares of new orchards, about a third of which are in new provinces. In addition, demand from target beneficiaries for kitchen gardening support has been very high, and the entire annual program was amply exceeded. Through this project, 40 percent of the young cattle and young sheep and goat population have already been vaccinated. On the production side, the delivery so far of extension messages has been carried out along with distribution of improved technology packages to 31,540 beneficiaries in 138 districts of 19 provinces.

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, 82 percent of the target 45,000 hectares of incremental irrigated area have been achieved. In the small dam component, the completed pre-feasibility study had selected seven dam sites in the northern provinces. The feasibility study reports for six dams have been submitted while the seventh site has been dropped, due to inaccessibility.

Rural Enterprise: Since its inception, the Afghanistan Rural Enterprise Development Project (AREDP) has mobilized 68,000 rural poor—almost half of whom are women—in 3,590 village Savings Groups (SGs), which have collectively saved over $3.37 million. Federated in 361 Village Savings & Loans Associations (VSLAs), they have issued over 27,000 loans to SG members with a repayment rate of about 95 percent.

On average, each VSLA has $6,500 as loan-able capital, which will be further boosted with a seed grant injection in the coming months. This improves access to finance for group members who 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 over 1,393, Enterprise Groups (63 percent female) and 513 (13 percent female) Small Medium Enterprises that have been selected for their potential as key drivers of rural employment and income generation. A total of 6 Provincial Situations Analysis (PSA) have been completed and 10 PSAs are underway. AREDP uses Community Development Councils as an entry point into communities and is currently working in 20 districts of five provinces: Parwan, Bamyan, Nangarhar, Balkh, and Herat.   

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, managed by GIZ IS, is operational in the four cities and has received 947 applications, while 421 agreements for a total value of $11.8 million have been signed. The funding for the Facility is now fully committed.

Telecommunications: The Afghanistan Information and Communication Technology Sector Development Project is helping expand telecommunications connectivity, giving Afghans greater access to telephone and Internet services. It supports the government’s use of mobile technologies to improve public service delivery in strategic sectors. A total of 900 Afghans have been trained under the IT skills development program, which will train 1,500 Afghans by its conclusion. The government will also be launching a mobile government services platform soon, which will allow any citizen with a mobile phone to access a set of public services. Services will begin with two networks, and expand to include most mobile phone users in the coming year. The Innovation Support Program awarded 11 local innovators for their ideas on how mobile technologies could help address nine challenges in various sectors including agriculture, education, and health. A newly established ICT business incubator has been supporting a handful of startups to develop their business models and access mentors while providing them free high quality facilities.

Last Updated: Apr 14, 2015


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

*Amounts include IBRD and IDA commitments