Supporting Inclusive Growth in Afghanistan

April 5, 2018


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Continuing uncertainties and security threats resulted in deceleration of growth and increasing fiscal pressures. However, Afghanistan has maintained macroeconomic stability, created conditions for a recovery and demonstrated significant progress in human development: school enrollment increased from 1 million in 2002 to 8.9 million (42% girls) in 2017, while child and maternal mortality rates dropped to 34% of 2003 levels.

Challenge

Afghanistan is a deeply fragile and conflict-affected country, where the security situation remains precarious. Civilian casualties reached unprecedented levels since 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 2.2 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. Despite 2% annual reduction, 41% of Afghan children under the age of five are still 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 Government presented an ambitious reform agenda in 2014 to revitalize the economy, but its implementation has yet to gain momentum.


" The family planning classes were really beneficial. I don’t want to have more children. My oldest child is 13 and youngest is 3 years old. We can’t afford to have more children, that’s why I used Khushi injections, a contraceptive injection, to prevent further conception. "

-Feroza

a Kabul resident, a mother of seven, whose husband is an electrician and a beneficiary of System Enhancement for Health Action in Transition (SEHAT) Program.

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Approach

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


" I am sure this year I will earn more because there are no more road-related worries as in the past, "

-Haji Turjan

farmer, Daman district, Kandahar Province and a beneficiary of Afghanistan Rural Access Project (ARAP).

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Results

The Citizens’ Charter Afghanistan Project (CCAP – IDA and ARTF $672 million grant) is the successor to the highly successful National Solidarity Programme (NSP), which introduced a community-driven development approach toward rural infrastructure and service delivery and reached about 35,000 communities over 14 years. It is expected to be implemented over a period of four years.   The CCAP aims to improve the delivery of core infrastructure and social services to participating communities through strengthened Community Development Councils (CDCs). These services are part of a minimum service standards package that the government is committed to delivering to the citizens of Afghanistan. Results expected under the first phase of the CCAP include:

  • 10 million Afghans reached;
  • 3.4 million people gaining access to clean drinking water;
  • improvements to quality of service delivery in health, education, rural roads, and electrification;
  • increase in citizen satisfaction and trust in government; and 5) 35 percent return on investment for infrastructure projects.

The System Enhancement for Health Action in Transition (SEHAT) Program (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 50.5 percent. PENTA3 immunization coverage among poor young children more than doubled and contraceptive prevalence rate increased from 19.5 to 60 percent.

The Education Quality Improvement Program (EQUIP), supported by IDA and ARTF gave funds to communities to rehabilitate or construct schools and access learning materials. By closure of the project in December 2017, construction of 1,137 schools and six teacher training colleges was supported. 8.9 million children are now enrolled in general education, of whom 42 percent are girls. 16,588 schools received Quality Enhancement Grants for purchase of school supplies and laboratory equipment. 154,811 teachers (35% women) have been trained.

The National Rural Access Project focuses on year-round rural access to basic social services. 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. To date, has financed the establishment of 16,750 hectares (ha) of new pistachio and fruit orchards in 32 provinces. In addition, over 90,000 ha of existing orchards have been rehabilitated and some 96,000 kitchen gardening schemes established.

Financed by IDA and ARTF, the Irrigation Restoration and Development Project helped rehabilitate 173 irrigation schemes benefiting 175,000 hectares and 326,000 farmer households. Regular data collection is now occurring from 127 hydrological and 56 meteorological stations. In addition, 40 cableway stations for flow measurement at selected hydrology stations have been installed.


" The condition of women is much better now. We can participate in the decision-making process of our village’s development, as well as have an active role in implementing these decisions. "

-Fatana Rahmani

vice chairperson, Community Development Council, Botazar village, Paghman district, Kabul Province and a beneficiary of Afghanistan Rural Enterprise Development Project (AREDP).

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Bank Group Contribution

The World Bank has 16 active International Development Association (IDA) projects in Afghanistan with net commitment value of over $1.3 billion and continues to engage in rigorous analytical work underpinning policy dialogue. . As of December 2017, it has an active portfolio of $3 billion in 19 projects and a Recurrent Cost Window operation that has provided $4.7 billion of budget support. 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 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’s cumulative committed portfolio was $52 million at the end-FY17 and its advisory services portfolio was $8.8 million. IFC’s investments have had a transformational impact in terms of access to finance and outreach. MIGA has $116 million of gross exposure in Afghanistan including a joint effort with IFC in telecommunications. On March 8, 2018 the World Bank Group Board of Directors approved the first IDA Private Sector Window transaction for Afghanistan in support of a MIGA first-loss guarantee for an IFC investment project in food processing in Afghanistan.

Partners

The ARTF is a partnership between the international community and the Afghan government for the improved effectiveness of the reconstruction effort. As of December 2017, 34 donors have contributed over $10.3 billion, making ARTF the largest contributor to the Afghan budget. A total of $7.7 billion has been committed to Recurrent and Investment active portfolios ($4.7 billion and $3 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: Apr 05, 2018


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8.9 million
students now attend school, 42% of them being girls, compared to 1 million in 2002.