Security issues critical as Afghanistan moves to rebuild its economy Chabrier reflects on Afghanistan mission

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Following a series of international donor meetings aimed at helping Afghanistan stabilize and rebuild its economy, the IMF sent a mission to Kabul for four days in late January. The team was led by Paul Chabrier, Director of the IMF's Middle Eastern Department. He speaks here about the country's immediate needs and the IMF's role.

IMF SURVEY: What do you see as the immediate priorities to get the economy functioning again?

CHABRIER: There are four main priorities. First, the security situation has to improve dramatically. The present government is in full control of Kabul, with foreign troops ensuring security, but there are difficulties in the provinces.

Unless the security climate improves, it will be very difficult to move into reconstruction and for the government to perform its traditional functions.

Second, help is needed to improve the work and efficiency of key institutions, such as the major ministries and the central bank.

Third, the proliferation of currencies must stop. At present, there are three Afghan currencies-the official one issued by the central bank in Kabul, one issued by the Northern Alliance,Page 34 and one by a warlord. Plus, there are indications that more are being issued.Unless the issuance of new Afghan banknotes not backed by the central bank is stopped, it could lead to massive inflation and destabilize the economy. Already, it has caused a progressive weakening of the official currency in the foreign exchange market following a rapid appreciation from October to December.

Fourth, Afghanistan must move quickly to establish a budget for the next fiscal year. It doesn't need to be elaborate, but it has to be a budget where recurrent expenditures can be appropriately assessed. The bulk of expenditures will consist of the salaries of the civil service and the army, which haven't been paid in five months. There has been an attempt to partially pay some public servants in Kabul, but payments outside Kabul have been prevented, in part, by difficulties in transporting the cash and assessing the number of public servants.

A budget for 2002/03 (which starts on March 21) is required to establish the needs for external assistance and elicit the disbursement of that assistance.

IMF SURVEY: Is there a dollar figure on Afghanistan's needs for rebuilding?

CHABRIER: The World Bank and other development institutions estimate the reconstruction needs at about $15 billion over 10 years, but it's extremely difficult to...