Afghanistan's economy is growingstrongly. The growth drivers in recent years have beenabove-average agricultural production, strong growth inconstruction and transportation, and security spendingenabled by large aid flows, especially in FY2009/10. RealGross Domestic Product (GDP) growth reached 8.4 percent inFY2010/11. Afghanistan's fiscal position isstrengthening. In the last three years revenues grew by anaverage of 34 percent p.a., thanks to improvements incustoms and tax administration. Larger increases areexpected once mining operations and with the introduction ofa value-added tax in FY2014/15. However, governmentexpenditures will also increase in the coming years due tohigher security spending, the roll out of pay-and-gradingreforms for the civil service, rising recurrent obligationsfrom large donor-supported projects (including thosefinanced outside of the core budget) and the fiscal costs ofthe Kabul Bank bail-out. The first phase of the handover ofsecurity responsibilities to Afghan national security forcesin six locations has been completed.
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