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Afghanistan's Economy Poised To Grow But Still Faces Devastating Obstacles

MANILA, PHILIPPINES (9 April 2002) - Following large financial commitments from the international community, Afghanistan's economy is poised to pick up momentum over the medium term but must overcome daunting obstacles in the short term, according to the Asian Development Outlook 2002 (ADO), released today by the Asian Development Bank.

The ADO, an annual publication analyzing and forecasting economic trends, notes that deflation and the devastation of physical and social infrastructure have been wreaking havoc in the country until recently. The events of 2001 were the culmination of a period of hostilities in the country, ongoing since 1979, which destroyed social and economic structures.

Many cities have been reduced to rubble and the makings of a formal economy beyond subsistence farming and animal herding are all but nonexistent. The majority of the population is extremely poor, lacking food, clothing, housing and medical care.

Afghanistan today has the highest infant, child and maternal mortality rates, and the lowest literacy and life expectancy rates in the world. It also has the highest proportion of disabled people.

The ADO says that disruption to transport and communications has fragmented the economy and society. The severe drought over the last three years, coming on top of the hostilities, has reduced food availability. There is evidence of widespread famine conditions and forced sale of livestock.

Prior to the recent conflict that ousted the Taliban regime, an ADB estimate placed Afghanistan's per capita income at $300 for a population of 23 million. However, recent estimates put it at only $200.

According to latest estimates, the bulk of national production consists of agricultural and forestry (53 percent), followed by mining and light industry (28 percent), trade (8 percent), construction (6 percent), and transport and communications (5 percent). These estimates exclude illegal cultivation of poppy and the production of narcotics, known to be major sources of income.

Agriculture is the mainstay of the economy, and its restoration over the medium term will be difficult. Extensive demining and rehabilitation of irrigation systems will have to be combined with livestock extension and repairing the road system.

Afghanistan has large hydrocarbon resources, both oil and gas. With the restoration of peace, there are good prospects for the resumption of hydrocarbon exploration as well as the transit flow of oil and gas to India and Pakistan.

The ADO says that rehabilitation programs will be needed to restore transport, power and communications systems. The country has roads totaling 21,000 kilometers, of which only 13 percent are paved. There are 50 airports but they have suffered from hostilities and aerial bombardment.

The telephone and telegraph network has been destroyed and will have to be redeveloped. Similarly, power generators and transmission systems are heavily damaged.

Following the collapse of the Taliban regime, the new Afghanistan Interim Administration (AIA) discovered that the treasury was virtually empty. The budgetary system is now being restored with assistance from the International Monetary Fund (IMF) as part of the efforts to establish a macroeconomic framework, restore the revenue system and enable the country to qualify for substantial foreign aid.

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