Editor in Chief: Moh. Reza Huwaida Sunday, March 29th, 2020

The Nature and Pace of Afghanistan’s Economic Growth in Last Two Decades

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The Nature and Pace of Afghanistan’s  Economic Growth in Last Two Decades

Despite notable progress since 2001, Afghanistan still faces many challenges and considered as one of the poorest countries in the world. More than half of the population lives below the poverty line, and many who are above the line are at risk of falling back into poverty. In addition to the ongoing war factor, Afghanistan has also suffered from natural disaster such as droughts and floods and caused numerous people leave their homeland area. The industrial productivities are also not in favorable condition due to multiple challenges such as power shortages, free market policies and infrastructural issues. The country’s main highway network is still undeveloped, and a crucial north–south link—the Salang Tunnel—is at the end of its useful life. Afghanistan depends heavily on traditional agriculture though it has developed about half of its potentially irrigated farmland.
Unfortunately, the pace of economic growth has been extremely slow in last two decades when we compare to other post-conflicts countries in the world. For example, if we compare the pace of Afghan economic growth to Japan, it had fundamentally reformed its economy from 1950s to the early 1970s within almost 20 years, while we are not able to provide our basics financial needs after similar length of time. In last two decades, the international aid in Afghanistan has not been invested on infrastructural fields and so the Afghan economic growth either has been very slow or had artificial growth.  Even, sometimes there have been some sorts of dissatisfactions between Afghan officials and international donors over how to spend the money. Afghan officials persisted to spend the donated money through governmental projects while the international donors had their own considerations.
From 2001 up to 2013/14 the economy of Afghanistan had experienced some artificial growth as a result of international aid but the government under president Karzai had not any practical economic strategy to exploit from the long opportunity and huge amount of aid. Since 2014 up to date the government has showed some good economic programs but it faces a lot of economic limitations as the international donation has extremely decreased and in some cases stopped. For example, NUG government has been successful in several transition projects, water dams and domestic revenue collections.  The Gross domestic product (GDP) per capita increased from $364 in 2004 to $601 in recent years. Thus, the government has made significant progress in education, health, and the delivery of other public services. Afghanistan has improved from low levels of literacy, school enrollment, and access to basic services such as water, sanitation, and electricity. Despite these gains, major challenges remain. For example, there is about 1.5 billion$ financing gap in the country. In the other word, the domestic income is about $2 billion per year while the financial requirement is far beyond than the mentioned amount.
In short, the nature of Afghan economy was largely been artificial or free ride economy in last two decades. In economics, the benefits which are obtained without any trouble are called free rides. The free ride economy which is based on international funding is good whenever the economy is in its childhood but in the longer run, we cannot rely on foreign aid to do our daily tasks and domestic needs, especially in situations where the global economy is on eve of an unprecedented downturn. Most countries in the world are struggling with economic hardship and they are also under pressure of public requirements of their own country and people. Moreover, the free ride economy is a kind of artificial and untrue economy which causes some unsustainable improvements and untrue expectations. For example, some of those people who used to getting large amount of salary from international orgs are not easily satisfied with lower pay and so would try to compensate through illegal ways.
Given the nature of economic growth in last two decades, the first and most important expectation of people from the next government is to proceed for a practical economic strategy in next five years. The importance of a functioning economy cannot be understated in any circumstance, including conflict conditions, and its direct relationship with conflict prevention and growing stability. A functioning and growing economy will work as a stabilizing force once a peace agreement is signed and implemented. The next Afghan government must act immediately to address banking sector challenges, reform and redirect the attention of economic ministries from politics to economics to incite growth and prepare the country for the effective utilization of a post-peace agreement aid to Afghanistan.
Afghanistan has unique economic future provided that we have strategic plan and give preference to professionalism over political considerations when economic and financial sector decisions and appointments are made. Afghanistan has great natural resources, great geographical location for trade, hardworking people and also young educated/ educating population to advance the economy but extant administrative structure, and several other ingredients required for economic growth. What’s missing is a coordinated and well-managed effort to bring all the ingredients together and to put the country on path to economic growth and sustainability. Geographically, Afghanistan is known as heart of Asia, which could be the best and shortest trade route among Asian countries and also best job creating centers for Afghan and even regional level. Agriculturally, Afghanistan has a good land and huge water resources can feed more than a hundred million people. Thus, it has a lot of mineral resources for economic growth of the country. In terms of mines and underground treasures such as iron, gas, oil, copper and so on it is unique in the region. By and large, the next Afghan government and other political elites should understand that international aid is neither a good economic prescription and nor it will be endless. So, availing the opportunity, we need to replace the existing economic resources and opportunities to a stronger and self-relying economy. It must be warned that current the economic challenges and unemployment conditions is the biggest threat for the country. If the next government fails to change the condition, then, there would be no need for terrorists to attack on people; they themselves will be compelled to tear or eat one and other so as to feed as already has started.

Mohammad Zahir Akbari is the permanent writer of the Daily Outlook Afghanistan. He can be reached at mohammadzahirakbari@gmail.com

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