IMF Gives Afghanistan Mixed Economic Review
Source: Voice of
America (VOA News)
By Barry Wood
20 February 2008
The International Monetary Fund Wednesday gave
Afghanistan a mixed economic report card, saying the
country's overall reforms are on track but corruption
and a dramatic rise in opium production pose
significant problems. VOA's Barry Wood has more.
The IMF says opium production has risen by 4,000
percent since 2001 and earns Afghan farmers about $1
billion a year. An estimated 93 percent of the world's
heroin, made from opium, comes from Afghanistan.
Analysts say the Taliban insurgency derives much of
its revenue from the illegal opium trade.
The IMF says a mounting anti-government insurgency,
instability in neighboring Pakistan and rampant
corruption have slowed the inflow of foreign direct
Economic growth, the IMF reports, slowed to six
percent in 2007, mainly due to drought, but is
expected to more than double to over 13 percent this
year. The political environment is described as
increasingly complex with the government confronted by
multiple and competing demands. Jobs remain scarce and
living standards have been slow to rise.
The IMF says foreign aid accounts for a whopping
two-thirds of Afghanistan's gross domestic product.
Afghanistan has been rebuilding an economy that was
shattered during six years of rule by the
fundamentalist Taliban, that was overthrown in 2001.
Since then an estimated four million refugees have
returned while NATO-led peacekeepers maintain security
in the mountainous territory.
IMF Afghanistan mission chief Mohammed Elhage says
trade ties with Pakistan remain strong despite
"There has been some disruption in trade. The trade
links between Pakistan and Afghanistan are very
strong," he said.
Elhage says Afghan wheat exports to Pakistan have
Afghanistan is ranked as one of the world's most
corrupt countries by Transparency International, a
Berlin-based monitoring agency. Because of graft, many
aid agencies channel their assistance through
non-government organizations, a practice opposed by
the central bank. Elhage agrees that an increasing
flow of aid should be disbursed through the central
"We do support the authorities' objective to have
more aid channeled through the central government
budget. But again, we need to take into account the
institutional capacity and the absorbtive capacity of
the central government," he said.
Elhage says privatization of state enterprises is
lagging behind and he called attention to alleged
corruption in the electricity company, saying no
further funds should be disbursed to the company until
an audit has been made.
Despite widespread problems, Afghanistan has
achieved macroeconomic stability and a stable
currency. Its overall economy has doubled in size in
the past five years.