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World Bank warns of potential for collapse if aid to Afghanistan is cut
Source: Agencies |
November 24, 2011, Thursday
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AFGHANISTAN could face economic collapse if international assistance is cut abruptly as foreign armed forces are withdrawn, the World Bank has warned, stressing that the war-ravaged nation will need billions of dollars in aid for a decade or more.
The bank's forecast released late Tuesday reflects concerns that Afghanistan will enter a deep recession as the international community gradually reduces aid to the government and starts withdrawing the 130,000 troops currently in the country.
The withdrawal, slated to be completed by the end of 2014, has already begun with the transition of security responsibility from NATO to Afghan forces in seven areas earlier this year.
In a report this week, the World Bank said: "The full assumption of Afghan responsibility for security by end-2014, the drawdown of most international military forces and the likely reduction in overall assistance will have a profound impact on Afghanistan's economic and political landscape, extending well beyond 2014."
The organization said Afghanistan this year received US$15.7 billion in aid, representing more than 90 percent of its public spending.
"International experience and Afghanistan's history after the Soviet military withdrawal in 1989 demonstrate that violent fluctuations in aid, especially abrupt aid cutoffs, are extremely dangerous and destabilizing."
It said the international community had to find ways to mitigate the impact and find a more sustainable way to deliver aid in the years to come.
The government of President Hamid Karzai has pinned much of its hopes on massive copper deposits and other mineral wealth, but exploiting those resources, which Afghan officials predict will bring in about US$3 trillion, will take years.
"The extremely high level of current annual aid is roughly the same amount as Afghanistan's gross domestic product and cannot be sustained," the study said.
The bank estimated that Afghanistan's domestic revenues will increase from 10 percent of GDP in 2011 to 17.5 percent by 2021. The rise, however, is dependent on the opening of some mining facilities, efficient tax collection and a stable security situation.
Weighing heavily on the country's fiscal position is spending on the Afghan National Security Forces - slated to increase to 352,000 personnel by the end of 2014 - and basic and civil services.
Those expenses will have grown to twice the size of revenues and will result in a shortfall of about US$7.8 billion annually, or about 25 percent of the country's GDP in 2021.
"To close this enormous fiscal gap, Afghanistan must rely on continuing international funding to pay for most security costs if the size of the force remains at currently agreed levels," the study said.
It warned that if foreign funding does not materialize, the Afghan government would have to make "extremely difficult and possibly destabilizing trade-offs," such as shrinking the security force or cutting civilian spending.
The bank's forecast released late Tuesday reflects concerns that Afghanistan will enter a deep recession as the international community gradually reduces aid to the government and starts withdrawing the 130,000 troops currently in the country.
The withdrawal, slated to be completed by the end of 2014, has already begun with the transition of security responsibility from NATO to Afghan forces in seven areas earlier this year.
In a report this week, the World Bank said: "The full assumption of Afghan responsibility for security by end-2014, the drawdown of most international military forces and the likely reduction in overall assistance will have a profound impact on Afghanistan's economic and political landscape, extending well beyond 2014."
The organization said Afghanistan this year received US$15.7 billion in aid, representing more than 90 percent of its public spending.
"International experience and Afghanistan's history after the Soviet military withdrawal in 1989 demonstrate that violent fluctuations in aid, especially abrupt aid cutoffs, are extremely dangerous and destabilizing."
It said the international community had to find ways to mitigate the impact and find a more sustainable way to deliver aid in the years to come.
The government of President Hamid Karzai has pinned much of its hopes on massive copper deposits and other mineral wealth, but exploiting those resources, which Afghan officials predict will bring in about US$3 trillion, will take years.
"The extremely high level of current annual aid is roughly the same amount as Afghanistan's gross domestic product and cannot be sustained," the study said.
The bank estimated that Afghanistan's domestic revenues will increase from 10 percent of GDP in 2011 to 17.5 percent by 2021. The rise, however, is dependent on the opening of some mining facilities, efficient tax collection and a stable security situation.
Weighing heavily on the country's fiscal position is spending on the Afghan National Security Forces - slated to increase to 352,000 personnel by the end of 2014 - and basic and civil services.
Those expenses will have grown to twice the size of revenues and will result in a shortfall of about US$7.8 billion annually, or about 25 percent of the country's GDP in 2021.
"To close this enormous fiscal gap, Afghanistan must rely on continuing international funding to pay for most security costs if the size of the force remains at currently agreed levels," the study said.
It warned that if foreign funding does not materialize, the Afghan government would have to make "extremely difficult and possibly destabilizing trade-offs," such as shrinking the security force or cutting civilian spending.
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