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In Washington: Erik Nora (202) 458 4735
enora@worldbank.org WASHINGTON, June 3, 2008 ─ Afghanistan’s ability to effectively spend the aid it receives poses a major constraint to tackling its important development challenges, according to a World Bank/IMF paper, which reviews the Afghanistan National Development Strategy (ANDS). The national strategy, which covers the five-year period from 2008 to 2013 and was approved by President Hamid Karzai and his Cabinet on April 21, 2008, envisages a large increase in resources for the next five years, the vast majority in the form of donor assistance. “The strategy provides in many respects a reasonable basis for Afghanistan to move forward in addressing the difficult development challenges it faces,” said Alastair J. McKechnie, World Bank Director, Fragile and Conflict-Affected Countries Group. “While there is a need for greater investment in Afghanistan, we need to look beyond the size of the overall resource envelope and focus carefully on how this aid is spent and on how to increase the ability of the Government to spend it effectively in a way that produces demonstrable development results.” The international community was now in the seventh year of supporting the rebuilding of Afghanistan, said McKechnie. “We should also rethink the ways that aid is being delivered in order to strengthen the incentives to government for delivering the services that Afghans can reasonably expect.” The Joint Staff Advisory Note (JSAN) – the analysis of the ANDS by the staff of the World Bank and IMF – says that increases in actual spending on large infrastructure projects will take time and require thorough preparation. It suggests measures to enhance the government’s spending and institutional capacity, for example by further improving public financial management, procurement systems, and the budgetary process. It also says public administration reforms and better management and coordination of foreign technical assistance are urgent priorities. “There is an urgent need for stronger prioritization of programs in the strategy,” said William Byrd, World Bank Economic Adviser. “The number of policy measures and other actions is overwhelming and needs to be streamlined, for decision-making, implementation, and monitoring purposes.”
Lack of coordination among donors has been a challenge for Afghanistan, and two-thirds of aid spending still happens outside the Government’s budget and thus outside its control and ownership. With improved prioritization in the strategy, donors should be able to increasingly align their aid with the priorities of the Government. Meanwhile, both the government and international partners should strive to ensure that large availability of external resources does not undermine incentives for increasing domestic revenue collection, which remains one of the lowest in the world. In fact, revenue collection decreased as a share of GDP from 7.5 percent in 2006/07 to 7.0 percent in 2007/08. Achieving policy autonomy and getting away from long-term aid dependence will require concerted and sustained efforts by the authorities to increase domestic revenue. In particular, improvements in revenue policy and administration, and a broadening of the tax base, will be essential. Finally, the ANDS addresses some of the areas of concern raised in the previous JSAN (2006) for the Interim ANDS, such as the need for a stronger analytical base, but in other areas the problems remain. Prioritization across sectors is largely missing, and the identified priorities are not clearly linked to poverty reduction. In addition, the envisaged large increase in expenditure, as well as the faltering revenue performance in 2007/08, implies that the prospects for fiscal sustainability are no closer than they were in 2006. While progress has been made in improving public financial management, progress in public administration reforms has been modest, and little headway has been made in the fight against corruption. For more information on the Bank’s work in Afghanistan, please visit http://www.worldbank.org.af |
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