WB Sees Hurdles to Afghanistan's Economic Growth

7/22/2019 4:13:04 AM

(MENAFN- Daily Outlook Afghanistan) KABUL - Afghanistan is facing strong headwinds to economic growth, says theWorld Bank's latest development update.
Afghanistan's Economy grew by around two percent in 2018 despite progressin economic policies, likely leading to further increases in poverty anddeterioration in living standards.
The latest edition of the biannual publication highlighted the combined negativeimpacts of conflict, drought and Political uncertainty on the economy,resulting in the lowest growth rates among South Asian economies in 2018.
'Afghanistan faces challenges of insecurity, election-related politicaluncertainty, potential declines in international security support, said WorldBank's Country Director Henry Kerali.
'Anyone of these shocks would normally generate strong headwinds to growth.Afghanistan has faced all of these concurrently.
Economic management remains strong in Afghanistan and prospects areimproving for 2019, with growth expected to accelerate to 2.5 percent with theeasing of drought conditions.
Government policies continued to support low inflation, improved revenuecollection, and a limited fiscal deficit, the World Bank said.
Slow growth generally reflects the impact of negative shocks rather thandeterioration in government policy. Infact, the report acknowledged, the government has maintained progress withpolicy reform even during these difficult times.
Government revenues reached a new high of nearly 190 billion afghanis in2018, up seven percent from 2017, while budget execution rates also reachedrecord levels.
The government spent 92 percent of the available national budget in 2018and is on track to repeat this strong performance in 2019, the bank continued.
Growth is expected with improving weather conditions to accelerate to 3.2percent in 2020 and to 3.5 percent in 2021, with the resolution ofelection-related political uncertainties.
Over the longer-term, much faster rates of growth are required tosignificantly reduce poverty from high current levels. According to the report,the potential for much-faster growth exists, but will only be realized undercertain conditions.
'For government, more work is needed to improve the business environment,ensure a smooth election process, and prevent corruption and mismanagement ofscarce fiscal resources over the difficult months to come, said Henry Kerali..
'The international community can also play a vital role in supportingprivate confidence and growth by committing to security and aid support andensuring that this support is closely coordinated and aligned with governmentplans Kerali added.
Any political settlement with the Taliban could bring major economicbenefits through improving confidence and encouraging the return of Afghancapital and skilled workers from overseas.
Realizing such benefits, however, will depend on achieving a sustained andsubstantial improvement in the security situation. (Pajhwok)

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