Economy

Overview

Afghanistan remains extremely poor, landlocked and highly dependent on foreign aid, farming and trade with neighboring countries. The current standards of living are among the lowest in the world. Much of the population suffers from the shortage of the housing, drinking water, electricity, health care and employment. If the current level of donor interest and international development agencies continues their could be some optimism in the improvement of economy. Drug trade and opium cultivation account of 1/3 of the GDP and remains a major challenges for the state, the foreign troops and UN agencies.

Economy Data

• GDP – 21.5 billion USD (2003 est.)
• GDP growth rate 7.5 % (2004 est.)
• GDP – per capita 800 USD (2003 est.)
• GDP composition
  • Agriculture 60 %
  • Industry 20 %
  • Services 20 %
• Labor force by occupation
  • Agriculture 80 %
  • Industry 10 %
  • Services 10 %
• Population below poverty line 53 %
• Inflation rate 10.3 % (2003 est.)
• Budget revenue 300 US Dollars expenditure 609 US Dollars (2004 est.)
• Agriculture – products Opium wheat, fruits, nuts, wool, mutton skin or carpets.
• Industries small scale textile, soap, furniture, shoes, carpets, natural gas, gem stones and copper.
• Electricity products 540 million kwh (2002 est.) consumption 652.2 million kwh. Imports 150 million kwh.
• Natural gas productions 220 million cum (2001 est.) proven reserves 49.98.
• Exports partners Pakistan 24 %, India 21 %, US 92.4 %, Germany 5.5 %.
• Import partners Pakistan 25 %, US 8.5 %, Germany 6.5 %, Turkmenistan 5.3 %, Kenya 4.7 %, South Korea 4.2 %, Russia 4.2 %.
• Debt external 8 billion mostly Russia (2004 est.) 500 million banks.
• Economic aid 8.9 billion US Dollars pledged by donor countries in March 2004 at Berlin.

1387 National Budget

 Mustafa Mastoor, Director General Budget, MoF

 Outline

• 1386 Budget Execution
• 1387 budget Process
• Main features of 1387 budget
• ARTF contribution in 1387
• Plans for 1388
• Challenges
• Way forwarded

 1386 Core

Development Budget Execution

Note: More reports and Bank confirmations are expected

 1386 Core
Development Budget Execution

• Final disbursement expected around USD 980 Million Vs USD 712 Million in 1385
• Allotment is the main success measure (USD 1,165 Million Vs USD 871 Million in FY 1385)
• Inclusion of immature projects, late approval by parliament, unrealistic time and cost estimation, late or unavailability of  fund by donors were the main problems

1387 Budget Process

• Budget preparation started in May 07
• Budget submission to Parliament earlier than PEFM Law requirement
• Budget Approval by parliament before start of the fiscal year
• No Major changes proposed by parliament
• President endorsed it by a decree on March 23rd

Main features of 1387 budget

• Projected Domestic Revenue is 24% higher than 1386
• Operating Budget is 19% higher than 1386
• Domestic Revenue is covering only 68 % of Operating Budget vs. 65% in 1386 and 61% in 1385
• 47% (almost half of the Operating Budget) is allocated for Security Sector
• 17% of the Operating Budget is allocated to Education

1387 Budget

Figures in USD Million

* Carry forward of 1386 is not included yet. USD 750 million is expected to be carried forward

Top six Ministries in 1387 budget

1387 Budget in comparison to ceilings

ARTF and 1387 Budget

• Thanks to ARTF donors and administrator to make 1387 contribution the highest (USD $ 696.8 Million) compare to USD 499.5 Million in 1386
• Operating Window USD 276.4 Million
• Investment Window USD 420.4 Million

Plans for 1388

• Further improve/extend Budget formulation process
• Initial budget hearings for the Development budget during MYR (Sept Vs December)
• Presentation of the projects to donors during second Donor financial Review in October
• Implementation of Budget Planning and Monitoring mechanism to further improve execution
• Program Budgeting and Provincial Budget expansion

  Challenges for 1388 budget formulation

• Significant reduction in resource for program Budgeting and Costing exercises Late provision of information by Donors
• Uncertainty in financing
• ARTF’s Long approval process for non preferenced projects
• Hesitation in provision of Provincial Allocation of the External budget
• Parallel structures for sub national budgeting

More help needed

• In order to reasonably finance the mutually agreed programs MoF requests detailed consultation before ARTF donors making their preferences
• For on time payments to agreed projects/programs your disbursements earlier in the year is requested.