Resources

Mr. Praful Patel, South Asia Regional Vice President

Annual Donor Meeting of the Afghanistan Reconstruction Trust Fund

May 1, 2007

Kabul, Afghanistan

Excellencies, ladies, and gentlemen.

I would like to welcome you all to the Annual Meeting of ARTF Donors – and to thank you for going the extra mile this afternoon – it has been an exceptionally busy three days for all of us.

Over the last few days we have heard a lot about Afghanistan, about development, about the effectiveness of development resources, about closer integration of development with security and diplomatic efforts, and about the challenges of governance and corruption. I must say, I go to many of these meetings but there are few that can compete with the scope, intensity, and seriousness of the discussions that the Government of Afghanistan has led us through over the past few days.

This afternoon, we have the chance to focus on a very concrete and practical issue – the delivery of resources through government. In my view this is where the real business of development happens and where our aspirations are tested by the reality on the ground.

There can be no state building without state finances and there will be no government accountability if the government does not control the resources.

The World Bank is proud to administer, in partnership with the other members of the Management Committee – UNAMA, UNDP, ADB, and Islamic Development Bank – the main channel for predictable, disciplined, and coordinated finance to the Afghan state. We see the ARTF as central to our contribution in Afghanistan.

From a very small start, the donors represented here today have pledged over $2 billion through the fund to the government’s recurrent and investment budgets. I believe that without the extraordinary generosity of these budgetary contributions, it would have been impossible for Afghanistan to capitalize on the opportunity created by the dramatic changes in 2001.

The fund has enabled government to present credible strategies and also to translate strategy into better services with real development outcomes. Providing ARTF funds through the government budget reinforces the credibility of the state to Afghans. This is the real value of your contributions. Despite these successes, this is a challenging time for Afghanistan’s economic policy makers.

Domestic revenue is increasing but political and security pressures have pushed up operational costs too. The uncoordinated and non-transparent external budget is more than double what donors commit to the government’s core budget. No matter how useful some of these activities, if the government does not determine their allocation or costs it is equally not accountable for the results. In addition, state building is undermined. Moreover, the unpredictability of external budget resources combined with the risk that liabilities suddenly get shifted to the government’s core budget can lead to counterproductive outcomes. The fundamental question remains: when donors pack-up will the state be able to pick-up the recurrent cost obligations as well as the Afghan expectations of investment that external funding has created?

In this environment of considerable uncertainty, the ARTF offers regularity, transparency, and security and a means to finance the government’s highly successful national programs in microfinance, rural development, and education.

It has also created a platform for dialogue among stakeholders in Afghanistan’s future, and today I am pleased that the Performance Assessment Matrix – many of you have been hard at work on it – will for the first time be road tested as an instrument for policy dialogue.

I invite all of you to share your concerns frankly. As Administrator we seek your guidance to adapt the ARTF to the changing environment in Afghanistan. As a matter of priority: we seek a closer marriage of the ARTF process with the national budget process and with medium-term financial planning; we seek greater predictability of resources and greater transparency of results.

We also seek to strengthen our own internal governance: we must demonstrate to critics that Afghan institutions such as the budget are fully transparent and that they can drive results more effectively than institutions imposed from the outside. No institution that I know of is immune from corruption – not even those that fight it!

This is especially critical for the ARTF. We all face domestic constituencies who are as demanding of Afghanistan as the Afghans themselves – they want to see results for every dollar put up. So I commend the work that has gone into the Performance Assessment Matrix, and I hope that today we will see that it can make a positive and concrete contribution to our engagement and substantive policy dialogue.

Peace remains fragile. Winning the peace depends on making sure the state remains a credible proposition for Afghans. Their trust in government will be earned through the delivery of essential services and a commitment to transparency. I look forward to seeing the ARTF play an ever stronger part in consolidating peace and development in Afghanistan.

Once again, I thank you, on behalf of the Management Committee, for coming today. I look forward to our discussions – and to this evening’s reception when we can continue perhaps rather less formally.