Afghanistan: Helping Support Growth and Stability

Challenge

Afghanistan is a deeply fragile and conflict-affected country, where the security situation remains precarious. Civilian casualties reached unprecedented levels in 2016. The country’s humanitarian challenges worsened, with increasing numbers of returnees and persons internally displaced by growing violence. Insecurity continues to affect livelihoods and economic activity, curtailing private investment and consumer demand. At the same time, difficult topography, vulnerability to climate change and growing population impose additional constraints on development.

Economic growth in Afghanistan has been slow: real GDP growth has increased marginally, from 0.8 percent in 2015 to 1.2 percent in 2016—a decline in per capita terms, since population growth is at nearly 3 percent. Afghanistan has the third highest youth bulge worldwide: more than one-fifth of its adult population is aged between 15 and 24. Yet 39% of Afghans live in poverty, nearly 70 percent of the working-age population are illiterate, and youth unemployment is at 28 percent. Poor nutrition, especially of children, threatens welfare and education gains. 41% of Afghan children under the age of five are stunted.

Internal revenue mobilization is weak and the government faces the risk of international aid tailing off: total security and development aid is expected to decline from about 59 percent of GDP in 2013 to about 44 percent by 2018. At the same time increasing security expenditures could crowd out civilian expenditures. The National Unity Government presented an ambitious reform agenda in 2014 to revitalize the economy, but its implementation has yet to gain momentum. Sustainability is a serious risk.

Approach

The World Bank Group’s engagement with Afghanistan is determined by the Country Partnership Framework (CPF) for 2017-2020, closely aligned with the government’s National Peace and Development Framework. The CPF aims at helping Afghanistan:

• Build strong and accountable institutions to deliver services to citizens and encourage growth of the private sector;
• Support inclusive growth, with a focus on lagging areas; and
• Deepen social inclusion and reduce vulnerability, including among people displaced by conflict.

Over the CPF period the World Bank expects to provide $250-300m annually to Afghanistan through International Development Association (IDA) grants.  Additionally, the Afghanistan Reconstruction Trust Fund (ARTF) could provide up to $800m per year in grants, depending on donor commitments. The International Finance Corporation (IFC) aims to expand from the current $54m portfolio to about $80m. The Multilateral Investment Guarantee Agency (MIGA) stands ready to provide support with a focus on finance, manufacturing, agribusiness and infrastructure.

Results

The National Solidarity Program laid the foundation for a sustainable and inclusive local governance and rural reconstruction. Using IDA/ARTF support ($1.15b) it built and strengthened community development councils (CDCs) as effective local governance institutions. CDCs were established in 35,000 communities and over 84,000 community level infrastructure schemes were completed providing greater access to services: 11.7 million people received access to improved water source; 524,000 hectares of land brought under irrigation and 1,974 classrooms built. At the initiation of the Government, NSP has been replaced by the Citizens’ Charter Afghanistan Project, which is to improve the delivery of core infrastructure and social services to participating communities through strengthened CDCs.

The System Enhancement for Health Action in Transition Program (SEHAT, IDA and ARTF $695m) is expanding the scope, quality and coverage of health services, particularly to the poor. Provision of primary care and essential hospital services through contracting arrangements resulted in the increase in births attendance by skilled health personnel among the lowest income quintile from 15.6 to 35 percent. PENTA3 immunization coverage among poor young children more than doubled and contraceptive prevalence rate increased from 19.5 to 30 percent.

The Education Quality Improvement Program (EQUIP), supported by IDA and ARTF gives funds to communities to rehabilitate or construct schools and access learning materials. As of March 2017, construction of 1,137 schools and six teacher training colleges was supported. 8.7m children are now enrolled in general education, of whom 39 percent are girls. 16,588 schools received Quality Enhancement Grants for purchase of school supplies and laboratory equipment. 154,699 teachers (35% women) have been trained.

The National Rural Access Program focuses on year-round rural access to basic social services. More than 11,000 km of rural roads have been upgraded through projects financed by IDA, ARTF, and other funds. The program also established the new GIS-based network planning and rolled out the first nationwide inventory and condition survey of rural roads.

The National Horticulture and Livestock Project (ARTF, $190m) promotes the adoption of improved technologies by farmers. As of March 2017, the project supported 89,230 farmers (57,405 of them women) who were given essential tools for proper harvesting and trained on harvesting and post-harvest handling issues.

Financed by IDA and ARTF, the Irrigation Restoration and Development Project helped rehabilitate 98 irrigation schemes benefiting 100,000 hectares and 63,000 farmers. Regular data collection is now occurring from 127 hydrological and 56 meteorological stations.

Bank Group Contribution

The World Bank has 15 active International Development Association (IDA) projects in Afghanistan with net commitment value of over $1.1 billion and continues to engage in rigorous analytical work underpinning policy dialogue. The Bank has actively supported key reforms, particularly in the fiscal and public administration spheres, while the non-lending activities have played a crucial role in informing the Government of Afghanistan (GoA) of its strategic choices. IFC has a committed investment portfolio in Afghanistan at about $54 million, including investments in telecommunications, hotel sector and financial markets. IFC’s investments have had a transformational impact in terms of access to finance and outreach. Its Advisory Services support the Investment program. MIGA has $154 million of gross exposure in Afghanistan including a joint effort with IFC in telecommunications. The Afghanistan Reconstruction Trust Fund (ARTF) is a partnership between the international community and GoA to improve effectiveness of the reconstruction effort. As of December 2016 it has an active portfolio of $3.2 billion in 25 projects. ARTF’s support for National Priority Programs (NPPs), operating costs of government operations, and the policy reform agenda is contributing to the achievement of the Afghanistan National Development Strategy goals. The Japan Social Development Fund (JSDF) administered by the World Bank supports activities that directly respond to the needs of poor and vulnerable groups and empower them for participation in the development process. As of March 2017, JSDF’s total commitment reached $85 million.

Partners

The ARTF is a partnership between the international community and the Afghan government for the improved effectiveness of the reconstruction effort. As of January 2017, 35 donors have contributed over $10 billion, making ARTF the largest contributor to the Afghan budget.  A total of $7.4 billion has been committed to Recurrent and Investment active portfolios ($4.2 billion and $3.2 billion, respectively). 

Moving Forward

Afghanistan’s achievements in the last ten years have been impressive in many ways. The coming years will be critical to strengthening Afghan institutions’ ability to deliver basic services nationally and consolidate and expand the economic development gains made to date. IDA’s role during this period—beyond the provision of its own resources—must be to continue to make the case for these principles, and to help the government effectively prioritize and utilize its own resources.

Last Updated: Jun 07, 2017