In a report issued after a fact-finding mission last month, the IMF said that four years after the removal of the Taliban from government, Afghanistan could see gross domestic product (GDP) growth of “about 14%” between 2005 and 2006 and saluted the “commendable” economic performance of the country.
Good rainfall had seen a “rebound” in the agriculture sector, which represents a third of the economy, although this is largely in the production of illegal opium poppies used to make heroin.
The reconstruction effort continued to drive the construction, trade, transport and telecommunication sectors, it said.
Notwithstanding risks such as changes in the oil market or property rental markets, annual inflation was expected to decline to about 10%.
In a challenging environment, the authorities had “implemented sound macroeconomic policies and an ambitious reform agenda which have contributed to sustained growth and to the stabilisation of the economy”, the report said.
The country still faced “formidable challenges, such as lingering insecurity, the effects of the illegal opium industry activities, and poor infrastructure and institutions”.
Afghanistan is one of the world’s poorest countries due to 25 years of war and is reliant on international aid, which made up 90% of its 2005 budget.
Drugs and violence continue to
The IMF cited a UN report showing that opium production had dropped this year, but Afghanistan is still the world’s leading producer.
After the fall of the Taliban government, which in some years managed to stop nearly all poppy production, poppy growing soard. In 2004, Afghanistan produced 90% of the world’s opium, and the 21% decline in the area producing opium this year can be mainly attributed to concerted eradication efforts in the region around Jalalabad.
This year saw a sharp rise in attacks carried out by fighters and criminal gangs. The violence has killed close to 1600 people, almost double last year’s toll.
The IMF report noted that development spending had been lower than expected this year. This reflected capacity constraints common in post-conflict countries, including unrealistic expectations on the pace of reform.
Focus on reforms
As a result of these continuing concerns, institutional reform is likely to be a major theme of a conference of international donors to Afghanistan in London next month.
The IMF report did not specifically mention corruption, but even the government has admitted it is a key obstacle to reform and a concern for international partners.
In September, the UN’s special representative to Afghanistan, Jean Arnault, called for “new governance”, saying reconstruction was being held back by widespread corruption among officials, many of whom lacked the skills their jobs required or had links to drugs trafficking.
The IMF said it was ready to help Afghanistan focus on a reform agenda through its Poverty Reduction and Growth Facility, which is reserved for the world’s neediest nations.
The programme should be in place by April, it said.