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Business

World Bank sees Afghanistan 2017 economic growth too weak to ensure jobs

KABUL: Economic growth in Afghanistan will pick up slightly this year but not enough to provide the jobs needed by its g

25 May 2017

KABUL: Economic growth in Afghanistan will pick up slightly this year but not enough to provide the jobs needed by its growing population, leaving it dependent on foreign aid for years to come, according to World Bank and IMF forecasts on Thursday.

In its latest Afghanistan Development Update, the World Bank forecast growth of 2.6 percent for 2017, up from 2.2 percent last year but well below the rates of 9 percent and above seen in the decade before 2012.

"With an average annual population growth rate of 3 percent and with an estimated 400,000 Afghans entering the labor market each year, much higher growth rates are required to improve per capita incomes," the report said.

In a separate report, the International Monetary Fund said growth could reach 3 percent in 2017, up from 2 percent in 2016.

While the United States and its NATO allies decide whether to increase the number of troops assigned to Afghanistan, the forecasts underline the fact that the economic fundamentals underpinning security and development remain dire.

Last year, donor countries, who contribute the bulk of Afghanistan's budget, agreed to provide some $15 billion in development aid to the country over the next four years.

But there is little appetite for open-ended support stretching indefinitely into the future.

In addition to the worsening security situation, the lack of jobs has been among the main drivers of the wave of migrants and refugees leaving Afghanistan. It has also ensured an ample supply of recruits to the Taliban and other insurgent groups fighting the Western-backed government in Kabul.

The World Bank report estimated that Afghanistan's unemployment rate stood at 22.6 percent in 2013/14.

The situation has been worsened by the sharp rise in refugee returns from neighbouring countries, with some 800,000 Afghans sent back from Pakistan and Iran, many of them left to rely on subsistence income in rural areas or low-paid work in the towns.

The World Bank noted that the government of President Ashraf Ghani had made significant improvements to Afghanistan's fiscal position, lifting domestic revenues by 15 percent last year, partly by strengthening tax collection.

But it said the longer term picture was more difficult and the country faced "dire prospects" in achieving fiscal sustainability unless foreign donors maintain their support.

"The long-term fiscal outlook is discouraging, with current analysis by the World Bank showing that Afghanistan will not be able to meet its public spending needs without substantial donor funding for the foreseeable future," it said.

 

 

Copyright Reuters, 2017