Economic growth slowed considerably to3.6 percent (estimated) in 2013 despite robust agriculturalproduction, as heightened uncertainty surrounding thepolitical and security transition led to a slump in investorand consumer confidence. Growth is projected to remain weakin 2014, while a smooth political and security transitionwould help restore confidence in the economy and enable apickup in growth in 2015. Revenue collection continued toweaken in 2013, while Afghanistan's large securityexpenditure obligations and high aid dependence pose therisk of crowding out important civilian operating anddevelopment spending. Domestic revenues declined to 9.5percent of GDP in 2013 from 10.3 percent in 2012 and thepeak of 11.6 percent in 2011. The decline in revenuecollections is a result of the economic slowdown as well asweaknesses in enforcement in both tax and customsadministration. In light of tight resources, austeritymeasures in 2013 disproportionately affected civilianexpenditures as security expenditures have continued togrow.A concerted effort will be required going forward toimprove revenue mobilization, while at the same timesafeguarding important civilian spending. In addition tomanaging the transition related uncertainty andunderperformance, Afghanistan will need to stay focused onits medium term structural reform goals, which include: (i)ensuring fiscal sustainability by mobilizing revenue,securing grant assistance, and safeguarding non-securityexpenditures; (ii) supporting inclusive and job-creatingprivate-sector led growth by unlocking the potential of theagriculture, services, and natural resource sectors and bytapping the potential of regional integration; (iii)continuing to improve upon the still low levels of humancapital and skills; and (iv) continuing to strengtheninstitutions and governance.
PDF
download
878987797
028-85220240
