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Overview


  • Country Context

    • Afghanistan’s economy grew by an estimated 2.9 percent in 2019, driven mainly by strong agricultural growth following recovery from drought, but lingering political uncertainty dampens private confidence and investment, with the United Nations Assistance Mission in Afghanistan recording 3,403 civilian casualties in 2019, and more than 1.1 million Afghans internally displaced due to conflict. The surge in returns by an estimated 1.7 million documented and undocumented Afghan refugees during 2016-2017 remains a pressure on the country’s economy and institutions. Internal displacement and large-scale return within a difficult economic and security context pose risks to welfare for the displaced and for host communities.
    • As the international community’s financial commitment to Afghanistan committed at the October 2016 Brussels Ministerial Conference on Afghanistan is due to expire by the end of 2020, a new pledging conference is planned to be held at the ministerial level in November 2020 in Finland. World Bank Group engagement pursues a programmatic approach to support the Afghanistan National Peace and Development Framework (ANPDF) that was presented by the Government of Afghanistan at the Brussels Conference. Advisory work and operations focus on macro-fiscal policy and management; finance, private investments and jobs creation; public sector governance and anti-corruption; human capital development and service delivery; citizen engagement and social inclusion, urban development; and infrastructure, connectivity and sustainability.

    Recent Economic Developments

    Substantial improvements in development outcomes have been observed in Afghanistan since 2001, particularly in expanded access to water, sanitation and electricity, education, and health services. Macroeconomic management remains strong, government revenues have grown consistently since 2014, and the government has engaged in an impressive range of business environment and public financial management reforms. Expanded access to health, education, and infrastructure has seen rapid improvements in outcomes, with Afghanistan catching up with other low-income countries against key development indicators. While progress has been uneven, increased access to services and infrastructure has driven huge development gains.

    At the same time, Afghanistan continues to experience insecurity and political uncertainty. Presidential elections were held in September 2019, but the outcome remains contested. Afghanistan’s economy has been hard-hit by the outbreak of the COVID-19 virus, due to negative impacts on consumption, exports, and remittances. Conflict is ongoing, and 2019 was the sixth year in a row when civilian causalities in Afghanistan exceeded 10,000. The displacement crisis persists, driven by intensified government and Taliban operations in the context of political negotiations. The number of conflict-induced IDPs increased from 369,700 in 2018 to more than 400,000 in 2019. An additional 505,000 refugees returned to Afghanistan, mainly from Iran, during 2019.

    Negotiations between the US and the Taliban have concluded by signing of the “Agreement for Bringing Peace to Afghanistan” on February 29, 2020, but the process of a political settlement is only beginning. Meanwhile, the duration and extent of continued international security support is being questioned. Current international security and civilian grant support pledges are due to expire in 2020, creating uncertainty regarding future aid levels and the sustainability of security and development expenditures. This has fundamental implications for the economy, with growth and investment constrained by weak confidence.

    Afghanistan’s economy is estimated to have grown by 2.9 percent in 2019 driven by easing of drought conditions and rapid agricultural growth. Inflation remained modest at 2.3 percent. The trade deficit remains extremely large, at around 31 percent of GDP, financed mostly by grant inflows. Fiscal performance continued to improve in 2019 despite the elections withdomestic revenues reaching 14.1 percent of GDP. Political uncertainties, however, dampened private sector confidence and non-agriculture growth. The basic needs poverty rate was 55 percent at the time of the last household survey (2016/17) and is expected to have worsened since due to declining per capita incomes.

    The economy is expected to contract by up to four percent in 2020 with the negative impacts of the COVID-19 virus overshadowing improvements in weather conditions. Additional substantial downside risks remain, including political instability, deterioration of security conditions, premature reduction in aid flows, and further adverse regional economic or political developments. Poverty is expected to remain high, driven by weak labor demand and security-related constraints on service delivery.

    Short-term priorities include continued implementation of business environment and anti-corruption reforms to improve private sector confidence, mobilize investment, and ensure confidence of the international community. Over the medium-term, reform efforts should focus on attracting additional investment in the agriculture and extractive sectors, which have the combined potential to deliver increased employment, exports, government revenues, and growth. To ensure that benefits of agriculture and extractives led growth are maximized and widely shared, continued investment is required in human capital, regional connectivity, expanded infrastructure, and an improved business regulatory environment.

    Last Updated: Apr 01, 2020

  • 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 4.70 billion for development and emergency reconstruction projects, and six budget support operations in Afghanistan. This support comprises over $4.26 billion in grants and $436.4 million in no-interest loans. The Bank has 11 active IDA-only projects ($879 million) and 15 projects jointly funded with the Afghanistan Reconstruction Trust Fund, with net commitment value of over $1.6 billion from IDA.

    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 current cumulative committed investment portfolio stands at over $238 million and its advisory services portfolio stands at $11.5 million. IFC’s investment portfolio includes investments in the telecommunication sector, agribusiness, and financial markets. The investment pipeline looks promising and includes investments in the power and education sectors.

    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 two projects in dairy and cashmere production in Afghanistan.

    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 $12.27 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, Ministry of Finance, and the United Nations Assistance Mission in Afghanistan as an observer.

     

    Last Updated: Apr 01, 2020

  • 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 2017–2022 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, its 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 01, 2020

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    Building Institutions: The Tackling Afghanistan’s Government HRM and Institutional Reforms is a follow-on the Capacity Building for Results Facility and will assist the Government of Afghanistan to deliver its key policy priorities through merit-based recruitment and administrative reforms in 16 line ministries. The project will support up to a total of 1,500 new civil service positions to enable the ministries to meet their objectives and deliver on their priorities.

    The Eshteghal Zaiee - Karmondena Project aims to strengthen the enabling environment for economic opportunities in cities where there is a high influx of displaced people. The project will support actions to increase returnees' access to civil documents, provide short-term employment opportunities, improve market enabling infrastructure, and support investor-friendly regulatory reforms.

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    Education: The Higher Education Development Project (HEDP) aims to increase access to higher education in Afghanistan, as well as improve its quality and relevance. HEDP uses an Investment Project Financing instrument based on the Results-based Financing modality. Enrollment in key priority disciplines (those that contribute to economic and social development) has increased substantially from 64,200 at the project baseline to about 81,900 this year. The special focus on increasing female enrollment has also paid substantial dividends with female enrollment increasing from 11,400 to approximately 16,900 for the current academic year.

    The Skills Development Program project supports the Government of Afghanistan in its strategy to build market relevant vocational and technical skills for economic growth and development. Building on the former Afghanistan Skills Development Project, this program will continue to strengthen the Technical Vocational Education and Training (TVET) institutional system, improve performance of TVET schools and institutes, and improve teacher competencies. Under the Afghanistan Second Skills Development Program, 100 national occupational skills standards have been benchmarked to an international level with the support of an international certification agency, and corresponding curricula developed for 15 trades.

    The project is financing an academic partnership contract with Pune University in India, where 20 faculty members from the National Institute of Management and Administration and other TVET institutes are enrolled to pursue master’s degrees in ICT, commerce, and business administration. 24 teachers have enrolled at REVA University in India (for one-year training courses in Accounting and Business Administration). An additional 61 teachers have been selected following the last round of teacher assessment and will be joining Sam Higginbottom University in India shortly for one-year capacity building in Agronomy and Horticulture.

    A series of memorandum of understanding is also being finalized with other host institutions in India to provide one-year diploma courses in specific trades to some 200 technical and vocational education and training (TVET) teachers selected through a competitive process. In addition, over 522 TVET graduates have been supported with scholarships through a voucher program, which facilitates further professional studies for meritorious students who have graduated from TVET institutes.

    Financial Sector: The Access to Finance Project aims to build institutional capacity to improve access to credit of micro, small, and medium enterprises. The Microfinance Investment Support Facility for Afghanistan (MISFA) has initiated a series of activities, in particular the scaling up of the Targeting the Ultra Poor (TUP) program. The TUP program has been completed in four provinces (Balkh, Kunar, Laghman, and Takhar) and is ongoing in two more provinces (Kabul and Kandahar).

    The TUP  has been scaled up to reach close to 4,000 additional households in two more provinces (Parwan and Nangarhar), The two TUP projects are expected to be completed  the end-June 2021.

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    Health: Bringing most of the efforts in public health service delivery under one umbrella in Afghanistan, the Sehatmandi (Health) Project aims to increase the utilization and quality of health, nutrition, and family planning services across Afghanistan. The project supports implementation of a Basic Package of Health Services and an Essential Package of Hospital Services through contracting arrangements across the country. Sehatmandi 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.

    Health indicators saw an improvement with the support of the System Enhancement for Health Action in Transition Program, the precursor of the Sehatmandi Project. For example, the newborn mortality rate fell 32 percent from 53 to 23 per 1,000 live births from 2003 to 2018; the number of functioning health facilities increased from 496 in 2002 to more than 2,800 in 2018, while the proportion of facilities with female staff increased; and births attended by skilled health personnel among the lowest income quintile increased from 14.9 percent to 58.8 percent.

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    Horticulture and Livestock: The ARTF supported the National Horticulture and Livestock Project to promote the adoption of improved technologies by target farmers in the horticultural sector and to support the livestock sector, with gradual rollout of farmer-centric agricultural services systems and investment support. The project has financed the establishment of 32,520 hectares (ha) of new pistachio and fruit orchards in 34 provinces. In addition, over 32,000 ha of existing orchards have been rehabilitated and some 143,000 kitchen gardening schemes established.

    The project has also supported construction of 13,54 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. Over 2015 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 205,360 livestock farmers (136,088 women and 69,272 men), clustering them into producers’ 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 for the 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 200 irrigation schemes has been rehabilitated, covering over 284,940 hectares of irrigation command area (compared to the end project target of 215,000 hectares and over 425,000 farmer).

    In the small dam component, a pre-feasibility 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). 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, and the installation of 30 cableways are ongoing.

    The Afghanistan On-Farm Water Management Project works to improve agricultural productivity in project areas by enhancing the efficiency of water use. Over 500 km of irrigation canals (186 km planned) serving around 58,000 hectares (ha) of land have been rehabilitated and 614 irrigation associations (500 planned) established. Land-leveling activities have also started commercially, with over 700 ha of land laser-leveled in three provinces. The Farmer Call Center is fully functional, providing technical advice to nearly 13, 000 farmers and herders to date.

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    Rural Enterprise: 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 3,270 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.

    The Women's Economic Empowerment–Rural Development Project is a follow-on project to the Afghanistan Rural Enterprise Development Project (AREDP) that aims to increase social and economic empowerment of poor rural women in selected communities. It will engage in 76 districts and 5,000 villages in all 34 provinces across Afghanistan. The project has begun mobilization through new Community Development Councils in the five provinces previously covered under AREDP. Around 440 self-help groups (SHGs) for women are receiving their initial training. The project continues to support business development in the areas previously covered by Afghanistan Rural Enterprise Development Program.

    Social Service Delivery: The Citizens’ Charter Afghanistan Project (Citizens’ Charter) 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. The Citizens’ Charter 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 Citizens’ Charter 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. 

    Implementation progress includes:

    In rural areas: Over 11,822 community profiles (CPs) completed; more than 11,752 new CDCs elected; over 11,567 Community Development Plans (CDPs) completed; and more than 12,012 sub-project proposals prepared.

    In urban areas: Implementation has been rolled out in over 850 communities. A total of 850 CPs completed; 849 CDCs elected; 913 CDPs completed; and 913 sub-project proposals (SPs) financed for 823 CDCs, and 433 SPs completed.

    Results expected under the first phase of the Citizens’ Charter include: (i) 10 million Afghans reached; (ii) 3.4 million people gaining access to clean drinking water; (iii) improvements to quality of service delivery in health, education, rural roads, and electrification; (iv) increase in citizen satisfaction and trust in government; and (v) 35 percent return on investment for infrastructure projects.

    Urban Development: The Kabul Municipal Development Program increases access to basic urban services in certain residential areas of Kabul City. Over 1.49 million people (about 73 percent women and children) have benefited from the construction of about 770 kilometers of neighborhood roads, 590 kilometers of community drains, and 36 kilometers trunk roads.

    The Kabul Urban Transport Efficiency Improvement Project aims to improve road conditions and traffic flow on select corridors of Kabul city. To date, nine civil works contracts, totaling 32 kilometers of roadway, have been completed and the roads opened to traffic.

    Last Updated: Apr 01, 2020

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LENDING

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

*Amounts include IBRD and IDA commitments



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