Thursday, 22 August 2019 12:04 GMT

Afghanistan facing strong headwinds to growth: World Bank

(MENAFN - Afghanistan Times) AT News Report

KABUL: Afghanistan's economy grew by around two percent in
2018 despite progress in economic policies, likely leading to further increases
in poverty and deterioration in living standards, according to the World Bank's
recent Afghanistan Development Update.

Released today, the latest edition of the biannual
publication highlights the negative combined impacts of conflict, drought and
political uncertainty on the Afghan economy, resulting in the lowest growth
rates among South Asian economies in 2018.

'Afghanistan faces challenges of insecurity,
election-related political uncertainty, potential declines in international
security support, in addition to the drought in 2018' said World Bank
Afghanistan Country Director Henry Kerali. 'Any one of these shocks
would normally generate strong headwinds to growth. Afghanistan has faced all
of these concurrently'.

The Development Update publication notes that economic
management remains strong in Afghanistan and prospects are improving for 2019,
with growth expected to accelerate to 2.5 percent with the easing of drought
conditions. Government policies have continued to support low inflation,
improved revenue collection, and a limited fiscal deficit.

According to the report, slow growth generally reflects the
impact of negative shocks rather than deterioration in government policy. In
fact, government has, by many measures, maintained progress with policy reform
even during these difficult times. Government revenues reached a new high of
nearly 190 billion afghanis in 2018, up seven percent from 2017, the Update
notes, while budget execution rates also reached record levels. The government
spent 92 percent of the available national budget in 2018 and is on track to
repeat this strong performance in 2019  

Predicated on continued strong economic management, the
World Bank projects improvements in economic growth over coming years. Growth is
expected with improving weather conditions to accelerate to 3.2 percent in 2020
and to 3.5 percent in 2021, with the resolution of election-related political

Over the longer-term, much faster rates of growth are required
to significantly reduce poverty from high current levels. According to the
report, the potential for much-faster growth exists, but will only be realized
under certain conditions.

'For government, more work is needed to improve the business
environment, ensure a smooth election process, and prevent corruption and
mismanagement of scarce fiscal resources over the difficult months to
come. The international community can also play a vital role in supporting
private confidence and growth by committing to security and aid support and
ensuring that this support is closely coordinated and aligned with government
plans' said Henry Kerali.

The Development Update notes that any political settlement
with the Taliban could bring major economic benefits through improving
confidence and encouraging the return of Afghan capital and skilled workers
from overseas. Realizing such benefits, however, will depend on achieving a
sustained and substantial improvement in the security situation.

'Whatever happens, rapid growth will only be possible with
improved security under a government that remains committed to private sector
development, respects the rights of investors, and maintains the gains
Afghanistan has achieved over the past two decades towards establishing strong and
impartial government institutions' added Henry Kerali.


Afghanistan facing strong headwinds to growth: World Bank

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