Overview


    • Economic recovery is slow as continued insecurity curtails private investment and consumer demand. Agricultural growth has been constrained by unfavorable weather conditions. The fiscal position remains strong, driven by continued improvements in revenue performance, although Government remains heavily reliant on donor grants. Poverty continues to increase amid slow growth, security disruptions to services, and poor agricultural performance.
    • Afghanistan faces numerous political challenges as it fights the insurgency. In February 2018, President Mohammad Ashraf Ghani, during the second Kabul Process Conference, offered to the Taliban a cease-fire and prisoner release with no preconditions, but said the Taliban must recognize the government as legitimate. Parliamentary and district council elections, originally scheduled for July 07, 2018, are now rescheduled to take place on October 20, 2018.
    • World Bank Group engagement pursues a programmatic approach to support the Afghanistan National Peace and Development Framework (ANPDF). Advisory work and operations focus on macro-fiscal management and institution building, stimulating private investments and growth, governance and anti-corruption, human development and service delivery, citizen engagement and gender equality, and urbanization, infrastructure and connectivity.

    Country Context

    The security situation has worsened. Civilian casualties are at their highest since 2002, with an unprecedented level of conflict-induced displacement. In 2017, The United Nations Assistance Mission for Afghanistan (UNAMA) recorded 10,000 civilian casualties. During the same period, more than 202,000 Afghans were internally displaced by conflict and 44,000 others were displaced by natural disasters. A surge in returnees from Iran and Pakistan (over 296,000 in 2017) has brought mounting pressure on humanitarian assistance.

    Afghanistan’s Government continued to pursue its ambitious reform agenda. In October 2016, the Government presented the new Afghanistan National Peace and Development Framework (ANPDF) at the Brussels Conference on Afghanistan (BCA). At the conference, attended by representatives of around 70 countries and 30 international organizations, development aid of $3.8 billion per year.

    Recent Economic Developments

    Real GDP growth was estimated at 2.6 percent in 2017. The agriculture sector grew by only around 1.4 percent in 2017 due to unfavorable weather conditions, with service and industry sectors recording slightly faster growth of 3.4 percent and 1.8 percent respectively. Slowly accelerating growth reflects bottoming out and slight recovery of business confidence following the withdrawal of international security forces in 2014. Inflation accelerated slightly from 4.4 percent in 2016 to 5 percent in 2017. The slight increase reflected higher food prices and depreciation during the early period of the year. Despite the large trade deficit (35% of GDP) the current account remains in surplus (4 percent of GDP in 2017), largely due to aid inflows. Foreign exchange reserves remain at comfortable levels (10 months of prospective imports). The Afghani depreciated by around 4 percent against the US dollar during 2017 (end period) driven mostly by declining private foreign exchange inflows and slowing foreign direct investment.

    Insecurity is taking a heavy toll on private investment and consumer demand. Business sentiment shows no sign of recovery. Growth is projected at 2.6 percent in 2017, only slightly higher than the 2.2-percent achieved in 2016. Inflation rose slightly in the first half of 2017, edging up to 5.1 percent in July from 4.5 percent in December 2016, driven by higher food prices—particularly for fruit and vegetables. The annual trade deficit of around 33 percent of GDP is financed by foreign aid inflows. Gross foreign exchange reserves remain unchanged at around $7 billion--equivalent to nearly 10 months of imports.

    The fiscal position remains strong. The 2017 outturn saw a balanced budget, with under-execution of the development budget offsetting off-setting a shortfall in expected grants. Revenue performance continues to improve, driven largely by stronger compliance. Revenues reached 11.9 percent in 2017, up from 8.5 percent in 2014.

    Because of the sluggish economic growth and the deteriorating security situation since 2011, the poverty rate increased to 39.1 percent in 2013-14 (latest available survey data), up from 36 percent in 2011-12, meaning that 1.3 million people fell into poverty over this period. Rural areas, where most of the population lives, saw the biggest increase, from 38.3 to 43.6 percent. Labor demand in the off-farm sector declined. Most of the jobs created in the service sector during the pre-transition phase were lost.

    The most recent household survey (ALCS 2016-17) showed an increase of about 1 percentage point in the unemployment rate over the past two years. In 2013/14, the unemployment rate stood at 22.6 percent, with the female unemployment rate two and half times higher than the male rate. Unemployment is particularly severe amongst low-skilled, illiterate workers, who historically are at the greatest risk of falling into poverty.

    Economic Outlook

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    Growth is projected to slow to 2.2 percent in 2018, increasing slightly to 2.5 percent in 2019. Slow growth in 2018 reflects low rainfall and higher temperatures over the recent wet season, which will adversely impact snow accumulation, which is vital for agricultural production. Output will also be adversely impacted by weak confidence and potential disruptions amid upcoming parliamentary elections (scheduled for June 2018).  With an average annual population growth rate of 3 percent and 400,000 Afghans entering the labor market each year, living conditions may further deteriorate.

    The fiscal deficit in 2018 is expected to be approximately 2 percent of GDP, and to be financed from cash reserves and limited concessional borrowing. Expenditures will increase by about 1 percent of GDP, driven by increased on-budget civilian expenditures, financed by a combination of on-budget grants and tax revenues, reflecting ongoing improvements in compliance. Development spending needs and security costs are expected to increase, yet resources will remain tight. Any delay or shortfall in the disbursement of pledged aid would also strain fiscal positions.

    Long-term, sustained economic growth requires a structural economic transformation and new sources of growth. Increased human capital investment and improved agriculture productivity could provide significant opportunities. Development of the extractives sector could help generate domestic revenues and foreign exchange earnings against a possible decline in future aid flows.

    Last Updated: Apr 10, 2018

  • 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 its office in Pakistan.

    Prior to 1979, the World Bank 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 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 $3.48 billion for development and emergency reconstruction projects, and six budget support operations in Afghanistan. This support comprises over $3.48 billion in grants and $436.4 million in no-interest loans. As of March 2018, the Bank has 16 active IDA projects in Afghanistan with net commitment 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 services partners in Afghanistan. IFC’s cumulative committed portfolio stood at $52 million as of end-FY 2017 and its advisory services portfolio stood at $8.8 million. IFC’s Investment portfolio includes investments in the telecommunication sector and financial markets. The investment pipeline looks promising and includes investments in the power sector and agribusiness.

    IFC’s Advisory Services program has been supporting the Investment program in access to finance, strengthening horticulture export, access to renewable energy, corporate governance structure enhancement, and investment climate reform interventions.

    The World Bank Group’s Multilateral Investment Guarantee Agency (MIGA) has $116.5 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 mechanism for the Government of Afghanistan’s budget and national investment projects. Since its inception, 34 donors have contributed over $10.3 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, United Nations Development Programme (UNDP), Ministry of Finance (MoF), and the United Nations Assistance Mission in Afghanistan (UNAMA) as an observer. 

    Last Updated: Apr 10, 2018

  • The World Bank Group’s assistance to Afghanistan will support the government’s strategic vision and goal to reduce poverty.

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    The World Bank Group’s current engagement with Afghanistan is determined by the Country Partnership Framework (CPF), 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 aims to help Afghanistan build strong and accountable institutions to deliver services to its citizens, and to 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 among the most underprivileged sections of society, including the large numbers of internally displaced persons and returnees.

    Over the CPF period the World Bank expects to provide $250-$300 million in grants annually to Afghanistan through the World Bank Group’s International Development Association, the fund for the poorest countries.  Additionally, the Afghanistan Reconstruction Trust Fund could provide up to $800 million per year in grants, depending on donor commitments. The International Finance Corporation, the World Bank Group’s private sector arm, aims to expand from the current $54 million portfolio to about $80 million. The Multilateral Investment Guarantee Agency, the Bank Group’s political risk insurance arm, stands ready to provide support with a focus on finance, manufacturing, agribusiness, and infrastructure. 

    Last Updated: Apr 10, 2018

  • Selected World Bank Achievements in Afghanistan

    Social Service Delivery: The Citizens’ Charter Afghanistan Project (CCAP) 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 project supports the first phase of the Government of Afghanistan’s 10-year Citizens’ Charter National Program and will target one third of the country.  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: 1) 10 million Afghans reached; 2) 3.4 million people gaining access to clean drinking water; 3) improvements to quality of service delivery in health, education, rural roads, and electrification; 4) increase in citizen satisfaction and trust in government; and 5) 35 percent return on investment for infrastructure projects.

    Education: The Education Quality Improvement Program (EQUIP), provided 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 39 percent are girls. 16,588 schools received Quality Enhancement Grants for purchase of school supplies and laboratory equipment. 154,699 811 teachers (35% women) have been trained.

    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.

    Over 35 institutes have benefited from two rounds of a Recognition Grant, while an additional eight institutes have been selected for a Development Grant, which supports reforms to improve academic management, school administration, linkages with local industries, and curriculum revision. In addition, over 522 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: 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 a Basic Package of Health Services (BPHS) and Essential Package of Hospital Services (EPHS) through contracting arrangements across the country. SEHAT also supports efforts to strengthen the capacity of the Ministry of Public Health at central and provincial levels to effectively carry out its stewardship functions.

    Rural Development: 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 2,000 km of rural roads and related drainage structures have been upgraded or rehabilitated through four projects under these programs financed through IDA, ARTF, and other funds.

    Horticulture and Livestock: Building on the 5,300 hectares (ha) of fruit orchards established since 2009 through its predecessor, the National Horticulture and Livestock Project (NHLP) has financed the establishment of 16,750 ha of new pistachio and fruit orchards in 32 provinces. In addition, 96,000 kitchen gardening schemes established.

    The project has also supported construction of 1,037 small water harvesting structures, improving farmers’ resilience to weather changes by allowing harvest and storage of water during the rainy season and gradual release in the growing period based on crop needs. A total of 997 raisin drying houses has been constructed on a cost-sharing basis to reduce post-harvest losses of grapes and improve the quality of raisins produced.

    Regarding livestock activities, NHLP continues to focus on key activities, including poultry production and animal health and extension services, while expanding work programs to other areas such as fishery and dairy. To date, the project has supported 122,800 farmers (78,968 women and 43,872 men), forging them into 5,768 producer groups, including poultry producer groups, to benefit from animal production and health services.

    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) envisages support to rehabilitate irrigation systems serving some 215,000 hectares of land and design of a limited number of small multi-purpose dams and related works, while establishing hydro-meteorological facilities and services. In the irrigation component, a total of 173 irrigation schemes has been rehabilitated, covering over 175,000 hectares of irrigation command area (compared to the end project target of 215,000 hectares and over 326,000 farmer households).

    In the small dam component, a prefeasibility review of 22 small dams resulted in a feasibility study being 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, installation of 127 hydrological stations and 56 snow and meteorological stations located in various locations on the five river basins in the country is ongoing. In addition, 40 cableway stations for flow measurement at selected hydrology stations have been installed.

    The Afghanistan On-Farm Water Management Project aims to improve agricultural productivity in project areas by enhancing the efficiency of water use. To date, land productivity of wheat and other crops has increased by 15–20 percent. Water productivity of wheat and other crops increased 15 percent, and the irrigated area increased by 20 percent. Physical rehabilitation of irrigation schemes exceeded its target with good quality and within the project budget allocation and timeline: 170 irrigation schemes (mostly informal) have been rehabilitated, covering a total of 43,000 hectares of irrigation command area.

    Rural Enterprise: Since its inception, the Afghanistan Rural Enterprise Development Project (AREDP) has established 5,990 Savings Groups with a membership of some 60,700 rural poor (54 percent women) in 694 villages. The SGs have saved over $4.2 million and members have accessed more than 41,900 internal loans (64 percent by female members) for productive and emergency purposes with a repayment rate of 95 percent.

    To generate economies of scale, 505 Village Savings and Loan Associations (VSLAs) have been established as federations of the SGs. The VSLAs maintain accurate and up-to-date records of accounts with a good governance structure in place. On average, each VSLA has $5,780 as loanable 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 toward strengthening market linkages and value chains for rural enterprises by providing technical support to 1,338 Enterprise Groups (63 percent female) and 657 (15 percent female) small and medium enterprises that have been selected for their potential as key drivers of rural employment and income generation.

    Building Institutions: The Capacity Building for Results (CBR) Facility supports government in developing its internal human capacity, organizational structures, and functions over the medium term to improve service delivery to the population. CBR promotes accountability in line ministries by introducing results-based reform and services improvement programs. CBR is also one of the key tools for the government to reduce reliance on external technical assistance and parallel structures. The grant helps finance the costs associated with (i) technical assistance for preparation and implementation of capacity building programs; (ii) recruitment of some 1,500 managerial, common function, and professional staff for key positions in selected line ministries; (iii) a management internship program; (iv) training of civil servants; and (v) project management, monitoring, and evaluation.

    CBR is demand driven and open to all line ministries and independent agencies.  Based on pre-agreed criteria, including service delivery potential and reform readiness, line ministries and agencies are grouped as either Category 1 (high priority) or Category 2.  Of the selected CBR positions, 807 have been contracted to date, 52 of whom are women (7 percent of selected positions), with the remainder 503 contracts at various stages of quality review and approval.

    Last Updated: Apr 10, 2018

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In Depth

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Apr 01, 2018

Country Update April 2018 - The World Bank Group in Afghanistan

Summarizes the World Bank Group’s ongoing operations aimed at development in various sectors and job creation in Afghanistan.

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Sep 30, 2017

Afghanistan Program Snapshot

Economic recovery is slow as continued insecurity curtails private investment and consumer demand. Growth remains principally driven by agriculture. The fiscal position remained strong in the first half of 2017. Poverty ...

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Supporting Inclusive Growth in Afghanistan

Afghanistan’s achievements in the last 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 ...

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Open Data on Afghanistan

The World Bank provides free and open access to a comprehensive set of data about development in countries around the globe, including Afghanistan.

Additional Resources

Country Office Contacts

Kabul
+93 (0) 701133328
infoafghanistan@worldbank.org