Afghanistan: Agriculture Sector Program Loan

Sovereign Project | 37046-013 Status: Closed

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Project Name Agriculture Sector Program Loan
Project Number 37046-013
Country Afghanistan
Project Status Closed
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 2083-AFG: Agriculture Sector Program Loan
Asian Development Fund US$ 55.00 million
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Sector / Subsector

Agriculture, natural resources and rural development - Agricultural policy, institutional and capacity development - Agro-industry, marketing, and trade - Land-based natural resources management - Water-based natural resources management

Gender Equity and Mainstreaming No gender elements

The program goal is to promote agricultural growth and poverty

reduction through support for market-based policy reforms,

formulation of public infrastructure investment programs, and

institutional reform and organizational capacity building. The

program purpose is to enhance opportunities for sector revival by addressing key policy, institutional and organizational constraints to the efficient and effective functioning of agriculture and the sustainable use of natural resources. The Program therefore supports the national objective of household food security and of ending Afghanistan s dependence on food aid, and will accelerate the recovery of the broader national economy.

Project Rationale and Linkage to Country/Regional Strategy

The agriculture and natural resource management sector has

suffered from varying degrees of depredation for nearly 25 years. A combination of war, civil conflict, and enforced neglect have combined to leave a legacy of degraded natural resources, especially of forests and rangeland; damaged infrastructure; and fragmented sector institutions. While nongovernment organizations (NGOs) and United Nations agencies have worked effectively with rural communities throughout this period and have had positive impacts at the local level, the severe drought in 1999 2001 has worsened the degradation. Further, although cereal production rebounded dramatically with the improved weather in 2002 2003, crop yields are still very low and overall performance of the sector remains well below its potential.

The main task of sector recovery is to improve sector performance while rebuilding its resilience through infrastructure investment and adoption of technologies that reduce vulnerability to drought.

The process of recovery has indeed begun, but needs to be

broadened and institutionalized to ensure that it is sustained and that deeper inroads toward rural poverty reduction are achieved. A balance between sustainable natural resource use and meeting the needs of a very poor and rapidly growing population will also need to be struck if the sector recovery process is to be sustained. As the economy remains overwhelmingly agricultural, the pace of recovery in the sector will largely determine the overall rate of economic recovery.

The Asian Development Bank (ADB) has worked closely

with the Government and other development partners to

define the required policy and institutional reforms under the

Program. The concessional loan funds will help to meet the

adjustment costs associated with these reforms. The technical

assistance (TA) piggybacked to the loan, ADB s ongoing technical assistance cluster (TAC), and other TA for Afghanistan will further support the reform process.

The Program directly supports pillars 2 and 3 of the Government's National Development Framework, which also serves as the country's poverty reduction strategy. Agriculture and other rural-based activities are the main source of income and employment in Afghanistan, providing livelihoods for nearly 85% of the population. By improving rural livelihoods, the Program will contribute directly to poverty reduction and lead to improvement in a range of other social and economic indicators in Afghanistan.

Impact Promote agricultural growth and poverty reduction through support for market-based policy reforms, public infrastructure investment and institutional reform and organizational capacity building.
Project Outcome
Description of Outcome Enhance opportunities for sector revival by addressing key policy, institutional and organizational constraints to the efficient and effective functioning of agriculture and the sustainable use of natural resources.
Progress Toward Outcome

Compared with neighboring countries, Afghanistan's gross domestic product (GDP) per capita in terms of purchasing power parity (PPP) for 2003 and 2008 was 45% of Pakistan's in 2003 and 48% in 2008; 72% and 65% of Tajikistan's; 46% and 44% of India's; and 51% and 39%, respectively, of Uzbekistan's. This indicates little progress towards achieving this target so far. It is now 2 years since the release of Tranche 2, and it is unlikely that per capita incomes will reach the levels

of neighboring countries within another 3 years.

Implementation Progress
Description of Project Outputs

Sound policy and planning framework developed.

Efficient and effective sector institutions created.

Capacity built for management and planning in key natural resource areas.

Comprehensive land policy and land tilting system developed.

Five-year irrigation investment program developed.

Srategy and action plan for greater commercialization of agriculture prepared.

Efficiency of sector support services improved.

Efficiency of agricultural commodity markets improved.

SOE restructuring plans perpared.

Status of Implementation Progress (Outputs, Activities, and Issues)

Agricultural exports, including livestock products, amounted to 3.2% of GDP in FY2008, and 1.9% in FY2007. Including carpets, all agriculture derived exports

amounted to 4.7% and 4.5% of GDP, respectively, for the 2 years.

20 years ago no data available.

Overall system efficiency in irrigation schemes remainslow although it is expected to improve with infrastructure and management improvements under a variety

of projects. Under the Western Basins project the target is to increase efficiency

by 15% from present levels of 25-30%. Under the proposed Water Resources

Development Investment Program, efficiency gains will build on gains already

achieved under EIRRP and overall efficiency could reach 50-55%.

Divestment of AFTC fertilizer and input distribution now with the private sector.

Exports of agricultural products are handled by the private sector.

Identified constraints to private sector participation were removed as conditions

for release of second tranche of the loan; although these were not major constraints to production and trade, their removal will facilitate further participation of private sector business in agricultural sector trade, marketing and service provision.

Farmers and businessmen, both with and without project support, are investing in

orchards, livestock, improved crop production, post-harvest handling and processing (including cold storage facilities, fruit and vegetable drying and other processing facilities), transport and marketing facilities.

The main natural resource management ministries continue to strengthen their

capacity. MAIL recently completed implementation of the new government pay &

grading system for all staff. MAIL's upcoming change management project seeks to

create a dynamic, well functioning, competent and effective institution through a

process of reform and structural adjustment. The project includes change

management, public sector service development and a program support network.

Ministries with enhanced capacity for sector policy and planning. Per above.

At present 23 SOEs and 3 banks are under liquidation committees or are being

prepared for restructuring or corporatization (3). Of these, 5 or 6 are almost ready to be auctioned. So far, assets valued at about $120 million have been corporatized, transferred to the public sector or auctioned.

The program supported improved food security through measures to improve

sector efficiency. Crop production is highly dependent on weather conditions and annual precipitation, but is gradually rising over time. However, a large proportion of the population remains food insecure, especially in years of poor harvest or high prices.

Food security worsened in 2008 because of the poor harvest, compounded by very

high international wheat prices and a ban on the export of wheat from

Pakistan. WFP, based on their surveys, estimated that, in 2008, 35% of households

were not meeting their daily calorific requirements, 5% more than in 2005. In 2008, a main cause of food insecurity was the high price of wheat and wheat flour. In 2007, 37% of households had been found not to be meeting their food


Production in FY2008 is reported to have been the highest in over 30 years (over

5 million tons), but this has been due to an excellent growing season. Between

2003 and 2008 rice (paddy) production has varied between 260,000 tons and

370,000 tons, but has been above 320,000 tons in every year except 2003-2004.

Agricultural output, especially of cereals, has increased significantly in recent years,

but growth is still highly variable from year to year. Overall growth in constant

prices for the agricultural (primary) sector since FY2003 has been: FY2003, 17.1%;

FY2004 -4.9%; FY2005- 2006, 6.7%; FY2006, 0.6%; FY2007, 24.6%. Growth for

the whole economy for these years was 18.6%, 9.4%, 11.5%, 11.2% and 16.2%

(est.), respectively. Between FY2002 and 2007 the economy grew at an average

of 15.7% per year fuelled by reconstruction as well as the agricultural sector.

While overall growth has been strong, there is so far no real evidence that the rate of growth of agriculture is accelerating. It still remains dependent on annual weather variations.

The three ministries have restructured and developed sector programs. The

progress with each ministry has varied as has their capacity to implement national

programs. MRRD has been the most successful, MAIL is in the midst of a change

management program to strengthen capacity, and MEW has adopted a more

cautious process of institutional reform.

Ongoing and planned irrigation rehabilitation projects, including ADB's Western Basins Water Resources Management Project and Water Resources Development Investment Project, are expected to have positive impacts on improving

irrigation system efficiency in their respective areas.

The Government is also making progress in improving the use, equity, and

management of forest land and rangeland. A new Forest Law has been prepared after an extensive drafting and consultation process, has been approved by Cabinet

and is due to go to parliament in the near future. A proposed Rangeland law is

still in the drafting stage.

The Water Sector Strategy in the Afghan National Development Strategy (ANDS), approved in April 2009, includes the following targets for 2013: (i) 2,534,000

ha under irrigation with 30% supplied from large schemes and the remainder from small and medium-sized schemes, and (ii) 47% of villages benefiting from improved small-scale irrigation. To meet these objectives MEW has a revised medium-term investment plan for $2,468 million.

Major new initiatives in the irrigation sector include the Panj-Amu River Basin

Programme (EC), the Dahla Dam and Irrigation System Phase 1 (Canadian

International Development Agency) and ADB's newWater Resources

Development Investment Program.

The United Nations Office on Drugs and Crime Afghanistan Opium Survey 2009 reports a drop of 22% in area cultivated in 2009 from 157,000 ha to 123,000 ha. This is associated with a rise in average yield to 56 kg/ha from 49 kg/ha and a fall in total production of 10% to 6,900 tons. Farm gate prices for fresh opium have fallen from $70/kg to $48/kg. Falling prices have probably been a major driver of the reduction in area, but pressure from Afghan and North Atlantic Treaty Organization forces is compounding the effect of market forces. Total worldwide annual consumption of illicit opium has never exceeded 5,000 tons but Afghan production has exceeded this level for many years. Twenty provinces (out of 34) are now opium free and a further 4 have only marginal production.

Private investment has increased: in agriculture by producers with significant

expansion in horticulture and other cash crop areas, and by traders and processors in basic market infrastructure to meet the increased demand, and by companies for a number of storage, juicing, dairying plants. A number of new large investments are planned.

The MISFA is an umbrella organization for 15 microfinance partners providing credit to individuals throughout Afghanistan. At 30 June 2009, these microfinance agencies had a total of 442,986 active clients, of whom 60% were women.

Since late 2004, 1.4 million loans with a cumulative value of $650 million have been

disbursed. The average loan outstanding per borrower was $330. The cumulative

repayment rate is 95%. MISFA is also now providing loans for small- and mediumsized enterprises (SMEs), and as at 30 June 2009 the cumulative total was 761 loans with a total value of $22 million. Work, supported by Department for International Development (DfID), is currently underway in MAIL to develop suitable modalities for the delivery of credit to midsize and larger farmers and other rural businesses with larger credit requirements than can be met by

microfinance agencies. The upcoming Change Management project in MAIL will improve MAIL's capacity and delivery services.

A review of the FAO Price Bulletins for August and September 2009 suggest that

allowing for transport costs to more inaccessible areas, the prices of important staples such as wheat, wheat flour, potatoes, beef, and mutton vary between areas within relatively narrow bands. Wheat prices vary by about 50% between the cheapest and most expensive locations, while for beef and mutton the differences are about 25%. For potatoes, the price difference between highest

and lowest reported is about two-thirds. These data suggest that commodity

markets in the country, at least for staples, are working with reasonable efficiency.

No data are available on internal market trade volumes.

The SOE restructuring process is still going on. At present, of 23 SOEs under

liquidation committees, only 3 are designated for restructuring or corporatization. The assets of the others will be transferred to the public sector or auctioned off to the private sector. It is too early to know whether or not the operations of restructured or corporatized SOEs will be more efficient than previously.

The Improved Seed Enterprise, which has been corporatized, still has structural and organizational issues to be resolved and does not yet appear to have greatly increased in effectiveness.

Geographical Location Nationwide
Safeguard Categories
Environment C
Involuntary Resettlement
Indigenous Peoples
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Business Opportunities
Consulting Services No consulting services will be directly provided under the loan, but TA will be attached to the Program to help monitor implementation and support compliance with the second tranche conditions. Capacity building in the areas covered under the Program will also be facilitated by linking program implementation and monitoring with the consultants engaged under the TAC.
Responsible ADB Officer Binsar P. Tambunan
Responsible ADB Department Central and West Asia Department
Responsible ADB Division Environment, Natural Resources & Agriculture Division, CWRD
Executing Agencies
Ministry of Finance
Wahidullah Shahrani
Pashtunistan Watt,Kabul,Islamic Republic
of Afghanistan
Concept Clearance 20 Feb 2003
Fact Finding 12 Oct 2003 to 25 Oct 2003
MRM 26 Nov 2003
Approval 04 May 2004
Last Review Mission -
PDS Creation Date 14 Dec 2006
Last PDS Update 02 Sep 2011

Loan 2083-AFG

Approval Signing Date Effectivity Date Closing
Original Revised Actual
04 May 2004 05 May 2004 05 May 2004 30 Apr 2014 - 16 Apr 2014
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 55.00 Cumulative Contract Awards
ADB 55.00 04 May 2004 51.18 0.00 92%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 04 May 2004 55.64 0.00 100%
Title Document Type Document Date
Agriculture Sector Program Loan Progress Reports on Tranche Releases Sep 2007
Agriculture Sector Program Summary Poverty Reduction and Social Strategies May 2004
Agriculture Sector Program Reports and Recommendations of the President Apr 2004

Safeguard Documents

See also: Safeguards

Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

None currently available.

Evaluation Documents

See also: Independent Evaluation
Title Document Type Document Date
Afghanistan: Agriculture Sector Program [Loan 2083-AFG] Validations of Project Completion Reports Nov 2010

Related Publications

None currently available.

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