Speeches & Transcripts

The London Conference on Afghanistan 2014

December 4, 2014

Sri Mulyani Indrawati, Managing Director, The World Bank London, United Kingdom

As Prepared for Delivery

Good morning. Excellencies, Ladies and Gentlemen.  Two and a half years ago, I stood before a similar gathering in Tokyo as Afghanistan was beginning its political and security transition.  Today, as a new National Unity Government has taken charge of the country’s future, it gives me great pleasure to congratulate the Afghan people.

At Tokyo we recognized that Afghanistan’s economic transformation would take at least another decade.  Much progress has been made since 2002.  Per-capita GDP has more than tripled. More than 9 million children, including 3.6 million girls, attend school. And public financial management has been strengthened significantly.

But the political and security transition of the last two years has not been easy.  We estimate that growth has fallen sharply to 1.5 percent in 2014 from an average of 9 percent during the previous decade.  Revenues are down to 8.7 percent of GDP from a high of 11.6% in 2011, leaving a large unfinanced fiscal gap.   

The international community has responded with urgent assistance through the Ad Hoc Facility of the Afghanistan Reconstruction Trust Fund. However, the magnitude of the unfinanced gap means that arrears will be carried forward.  This is the time to act with courage and decisiveness. 

Today, Afghanistan and its partners are reaffirming their partnership at this critical time. Our joint response will need to match the magnitude of the challenge.

Let me highlight three key areas that need our joint attention:

First, we need to stay focused on the poorest and most vulnerable people. Poverty in Afghanistan remains high and persistent at 36 percent. We need to continue to invest in services like health and education to break the vicious cycle in which so many Afghans are trapped. This is as much about improving lives as it is about building hope and confidence.

And of course, Afghanistan will need to pay particular attention to improving opportunities for girls and women, so that all Afghans can contribute to and benefit from the success of their nation.

Second, we need to ensure that the private sector can create the jobs the country needs so badly.  Every year 400,000 young Afghans enter the labor force. If they don’t find work it will be impossible to build a stable society.

Businesses, small and large, create jobs, but they need stability. A smooth conclusion to the political and security transition is paramount in reducing uncertainty.  Private sector confidence will also require addressing weaknesses in the financial sector, investment climate, and the land tenure system. The World Bank Group stands ready to work with you on business climate reforms and supporting innovative public private partnerships.   

In the medium term, agriculture, mining, and services hold the promise of driving the transformation from public to private job creation.  Reforms to stimulate agricultural productivity and an expansion of mining can accelerate growth to 7 percent during the next decade.

Finally, restoring fiscal stability while supporting development progress is an urgent priority.  In Tokyo, we said that Afghanistan would need to make steady progress toward self-reliance by improving domestic revenues, securing more on-budget assistance and prioritizing spending. These priorities have not changed.

  • Improving revenues requires immediate, credible, and decisive reforms, including implementing the customs action plan, improving taxpayer compliance and strengthening governance, especially by fighting corruption. 

  • We know that financing security and development needs will require considerable donor grant assistance through 2025.  But to be effective more of this support should be handled on-budget so that aid is prioritized along government programs.  This will also lead to more money being spent locally ensuring tangible results.

  • More on-budget assistance needs to be accompanied by strengthening the government’s capacity to implement and to build a strong fiduciary framework.  The Afghanistan Reconstruction Trust Fund provides a transparent vehicle for this purpose.

  • As Afghanistan prioritizes expenditures in line with available resources, care will be needed to ensure that economic recovery is not stifled and development progress is not compromised.  This includes ensuring adequate funding for operations and maintenance.

Let me close by saying that Afghanistan has the opportunity to leverage its unique geographic location at the heart of Asia to meet the region’s growing need for energy and water and to explore opportunities for labor migration.  The Central/South Asia – CASA - transmission line demonstrates Afghanistan’s emerging role as a regional economic partner.

We look forward to our continued partnership with the people and the government of Afghanistan and the international community – in our collective effort to make the country a more secure and prosperous place for all Afghans.

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