Economic Gains Prepare Afghanistan for Transition Year

Afghanistan maintains macroeconomic stability, implements structural reforms

Political, security transitions stress importance of prudent economic policies

IMF committed to continued close engagement with Afghanistan

Despite prudent management of the economy and the economic gains made over the past decade, Afghanistan remains one of the poorest countries in the world with very low human development indicators.

To mark the publication of the IMF’s regular assessment of the Afghan economy—the Article IV report—IMF mission chief to Afghanistan Paul Ross reviewed the performance of the country.

IMF Survey : This is an important year for Afghanistan, how do you evaluate the overall economic performance of the country?

Ross: The overall performance of the economy has been good. The efforts of the past 12 years have yielded benefits: inflation and debt are low and international reserves are high. Its budget is balanced after grants and its current account deficit is in small surplus after grants. Also, Afghanistan has managed to implement important structural reforms to strengthen its economic institutions. So I think a lot has been achieved, but there are still risks and vulnerabilities.

IMF Survey : Can you say what are some of the remaining economic challenges and vulnerabilities that the country is facing?

Ross: The risks relate to adverse domestic or regional security developments, political instability, inadequate implementation of economic policies, and donor fatigue. The authorities need to continue to push for prudent fiscal, monetary, and exchange rate policies. They also need to mobilize more domestic revenue for the budget, to manage their expenditure carefully, and to push ahead with structural reforms by passing key economic laws in banking, value-added tax, tax administration, central banking, anti-money laundering and countering of financing of terrorism. Finally, Afghanistan needs to maintain stability in the banking system, and improve economic governance by combating corruption.

IMF Survey : Donor dependency has been highlighted as one of Afghanistan's vulnerabilities Can you tell us how the IMF is advising the government in this area?

Ross: Afghanistan is donor dependent because the country still has a very limited capacity to collect revenues to finance its expenditures. Revenue mobilization has not been particularly strong in the past 12 months, and has declined from 11 percent of GDP in 2011 to 9½ percent in...