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Afghanistan Systematic Country Diagnostic: An Analysis of a Country’s Path toward Development

May 9, 2016

Photo credit: Rumi Consultancy/World Bank

Despite good economic growth between 2007 and 2011, Afghanistan’s poverty rate continues to stagnate. With increased unequal growth distribution the country experiences the effects of unemployment and natural disasters. For strong economic growth and stable job creation Afghanistan will need to secure adequate donor assistance and private sector involvement across all geographic regions in the country.

The World Bank released its first Systematic Country Diagnostic (SCD) for Afghanistan in 2016. The SCD is a country-level analytical document that provides an evidence-based diagnostic within an objective framework to help identify development priorities. The SCD aims to identify key constraints and priorities for Afghanistan to accelerate sustainable progress toward reducing poverty and promoting shared prosperity. The SCD provides analytical underpinnings for the World Bank Group’s country engagement.

Key findings

High poverty rate and low economic growth 

  • The poverty rate remained stagnant at 36 percent despite good economic growth between 2007 and 2011. The highest poverty incidence is found in the rural areas, where livelihoods are dependent on agriculture.
  • Inequality increased with unequal distribution of growth. The SCD identified lagging regions in the Northeast, East, and West Central regions in the country that appear to have fallen behind due to remote access, climatic shocks, lower aid and fragility.
  • Economic growth fell sharply to 1.5-2 percent in 2014 and 2015 as private sector confidence slumped and a fiscal crisis unfolded.
  • International development aid contributed to growth and jobs in high-conflict areas, however it did not contribute to raising productivity.
  • Unemployment, natural hazards, lack of access to services, and violence are the main factors behind the high rate of poverty in Afghanistan.
  • Development challenges are further amplified by growing insecurity, uncertainty, and declining aid.   

Critical constraints

  • Fragility and conflict: the major constraint to development progress is the prevailing insurgency and civil conflict; weak state institutions and dysfunctional societal relations affect almost every aspect of development.
  • Demography and geography: pressures of high population growth and a young population are exacerbated by large numbers of returning internally displaced persons or refugees; there are significant disparities in employment generation and access to services, including the widespread exclusion of women from economic participation.
  • Declining aid: declining aid will require additional efforts to develop new sources of growth, expand effective service delivery, mobilize revenues and prioritize spending.

Key priorities

  • Strong economic growth and job creation: to reduce poverty Afghanistan will require, strong, inclusive economic growth and stable job creation with private sector involvement across all geographic regions in the country.
  • Improved prioritized service delivery: continued progress in expanding service delivery is  key to addressing critical constraints, with a focus on identifying opportunities to improve effective service delivery, and strengthening capacity and accountability of the public sector.
  • Support fiscal stability: significant action is essential to revenue mobilization, securing adequate donor assistance, and expenditure prioritization in order to restore fiscal stability and address the medium-term challenge of reducing dependence on external aid.

The SCD was conducted in close engagement with national authorities and other stakeholders in Afghanistan. It was not limited to areas or sectors where the World Bank Group is currently active.

The SCD was conducted upstream of the Country Partnership Framework (CPF) to inform strategic discussions about priority areas for the World Bank Group’s future support to Afghanistan. Upon completion of SCD, preparations are underway to develop a CPF for 2017-2020. While the SCD provides the analytical basis for the World Bank Group’s engagement in the country, the CPF serves as a framework for its portfolio.