Afghanistan’s recent economic recovery may be at risk, the World Bank warned in its latest development update on Tuesday.
Afghanistan’s economy had slowly regained momentum as reforms had been implemented and confidence restored after a series of setbacks, the update said.
The half-yearly update recalled the economic shock of the withdrawal of international troops, the associated decline in aid, deterioration in security and the period of political instability after the 2014 elections.
From a low of 1.5 percent in 2015, real GDP growth accelerated to 2.3 percent in 2016, and reached 2.7 percent in 2017. But rising election-related violence, declining business confidence, drought and slowing of economic activity threaten the growth.
For the current year, growth is projected at 2.4 percent, with substantial downside risks arising from the prospects of political instability around parliamentary and district council elections and presidential and provincial council polls in October 2018 and April 2019 respectively.
“The most important priority for the government and its international partners is to maintain public confidence to support growth and job creation,” said Shubham Chaudhuri, World Bank country director for Afghanistan.
“More than half of Afghans now live in poverty. We cannot afford to see the current momentum lost,” he remarked.
The fiscal deficit for 2017 was low at around 0.5 percent of GDP, and a similar deficit is expected in 2018. The deficit will be financed largely from cash reserves, which remain at comfortable levels.
Revenues remain strong, with domestic revenues reaching a new high of 12.3 percent of GDP in 2017. Consumer price inflation remained moderate in 2017, at around 3.1 percent, and is expected to stay at moderate levels through 2018.
According to Chaudhuri, sustaining the recent recovery will require enhanced government efforts to improve the business environment and catalyze private investment and job creation while ensuring smooth election processes.
“Sustaining international support is critical to overall confidence and underpins the capacity of the government to implement the reforms we all view as vital.”
Chaudhuri noted that much faster rates of growth would be required to make a substantial impact on poverty. “Significantly faster growth could be achieved by mobilizing investment in extractives, energy and connectivity, building and harnessing the skills of youth and women, and taking steps to realize the job-creation potential of agriculture.”
Afghanistan needs reforms, smooth poll process: WB
