Uncertainty surrounding the politicaland security transition in Afghanistan has led to a slowdownin economic growth in 2013, following strong growth in 2012.After a decade of strong fiscal performance, revenuecollection has weakened in 2013, potentially delayingAfghanistan's path toward self-reliance. In order topreserve fiscal sustainability, a concerted effort will berequired going forward to improve revenue mobilization bystrengthening tax and customs administration and byexpediting introduction and implementation of the plannedvalue-added tax. Afghanistan faces considerable expenditureneeds in the areas of security, infrastructure development,service delivery, and operations and maintenance. Meetingthese needs will also require significant grant assistancefor the foreseeable future. In spite of thetransition-related uncertainty and underperformance,Afghanistan will need to stay focused on its medium termstructural reform goals. These include: (i) safeguardingsustainability by mobilizing revenue and securing grantassistance; (ii) supporting inclusive and job-creatingpost-transition growth by unlocking the potential of theagriculture and natural resource sectors and by tapping thepotential of regional integration; (iii) improving upon thelow levels of human capital and skills; and (iv) continuingto strengthen institutions and governance. This report isorganized as follows: section one gives recent economicdevelopments; section two presents economic outlook andmedium term prospects; and section three presents structuralpolicies for the medium term.
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