Economic growth, down sharply in 2013 to3.7 percent (estimated), has slowed further to 1.5 percent(projected) in 2014, from 9.4 percent per year during2003-12. Uncertainty since 2013 over the political andsecurity transition has been compounded by the protractedelections impasse in 2014. Investor and consumer confidencehave slumped and led to a sharp reduction of new investmentcommitments in the non-agriculture sectors. Agriculturalproduction has been robust in 2013-14, but flat from therecord levels of 2012. Afghanistan faces a deterioratingfiscal crisis in 2014, with declining revenues leading to anunfinanced fiscal gap, depleted cash reserves, andaccumulating arrears. Domestic revenues have continued toweaken, with the authorities anticipating revenues of Afs105 billion ($1.82 billion) or 8.7 percent of GDP for fiscal2014. This would represent a further decline from revenuesof 9.7 percent of GDP in 2013, itself down from a peak of11.6 percent in 2011. While the economic slowdown is part ofthe explanation, increasing weaknesses in tax and customscompliance are a large part of the problem. Even withausterity measures, the unfinanced fiscal gap is estimatedat about $500 million for 2014. While part of this could befinanced from cash balances, it is estimated that at least$300 million in additional financing will be needed for 2014to cover civilian salaries, pensions, and critical operatingand development spending. This will need to be accompaniedby serious reforms to improve revenues. AddressingAfghanistan's formidable development challenges willrequire reforms in three areas: (i) restoring fiscalstability; (ii) restoring confidence and creatingprivate-sector jobs; and (iii) strengthening social cohesionand service delivery. Above all, high level commitment totackle corruption and strengthen governance across the boardwill be critical.
PDF
download
878987797
028-85220240
