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Annual Report 2001

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Afghanistan

Economic performance

Before the recent war that ousted the Taliban regime, Afghanistan’s aggregate gross domestic product (GDP) was estimated at $6.9 billion, with per capita income of about $300 in 1989. The bulk of national production consisted of agriculture and forestry products (53%), followed by light industry (28%), trade (8%), and construction (6%). These estimates exclude illegal poppy cultivation and narcotics production, which are major sources of income.

Afghanistan’s social and economic structures and institutions have been devastated by hostilities since 1978. At least 5 million people have been displaced within and outside the country. The country’s infant mortality, life expectancy, and literacy rates are among the lowest in the world. Severe drought over the past 3 years has resulted in substantially less food supply. While large-scale food aid and other humanitarian relief have flowed into the country, delivering this aid to remote mountain settlements remains a challenge.

Trade statistics for 1999, the most recently available, indicate total exports of $235 million, the major exports, in order of size, being fruit, nuts, and carpets. Imports totaled $900 million in 1999, leaving a trade deficit of about $665 million. Major imports included capital goods, food, textiles, and petroleum products. Arrears to multilateral creditors total nearly $50 million. Nevertheless, over the coming years, Afghanistan will need large financial inflows to fund humanitarian, rehabilitation, and reconstruction efforts if poverty is to be reduced and sustainable development made possible. The major economic and social issues are food security and provision of basic health, water and sanitation services, as well as shelter and other basic social infrastructure.

ADB operations

Afghanistan became a member of ADB in 1966. Operations began in 1969, with the first ADB loan being approved in 1970. By 1979, when ADB assistance was suspended following the Soviet occupation, Afghanistan had received nine loans totaling $95.1 million and technical assistance grants totaling $2.5 million, all outstanding loans at that time being sourced from the Asian Development Fund (ADF). ADB operations emphasized projects in agriculture, irrigation, transportation, hydropower development, and vocational education. As of 31 December 2001, the total principal outstanding was $27.7 million, with arrears on four loans totaling $15.3 million. These arrears are currently being addressed as a prerequisite to resumption of ADB operations.

Since October 2001, ADB has played a key role in planning and assisting Afghanistan’s reconstruction. At the request of the Steering Group on Afghanistan Reconstruction—chaired by the United States (US), Japan, the European Union, and Saudi Arabia—ADB, the United Nations Development Programme (UNDP), and World Bank jointly prepared a Preliminary Needs Assessment for Recovery and Reconstruction. This document was finalized at ADB headquarters in Manila for use as the basis for international pledges in support of Afghanistan’s reconstruction. The preliminary assessment indicates a requirement of about $1.7 billion for the first year, $4.9 billion for the first 2.5 years, about $10 billion over 5 years, and $14.6 billion over 10 years under a base case scenario. ADB also plays a key role in launching the Afghanistan Reconstruction Trust Fund, which will be managed jointly by ADB, the Islamic Development Bank, UNDP, and World Bank.

The agriculture, infrastructure, and social sectors are crucial for rehabilitating and reconstructing Afghanistan. ADB’s immediate focus will be on restoring irrigation systems and roads that can make a major contribution to rebuilding the national economy while creating local community employment. As all social sector services have collapsed, ADB’s first priority will be to restore basic education, including nonformal education.

Based on the preliminary assessment, ADB is considering assistance in the form of ADF loans and grants of around $500 million over 2.5 years.

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