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Minister of Finance Ahady & Governor of Central Bank Fitrat Conclude World Bank Spring Meetings

Afghanistan’s Minister of Finance Anwar ul-Haq Ahady and Governor of the Central Bank of Afghanistan, Abdul Qadeer Fitrat concluded yesterday their official visit to the Spring World Bank/IMF meetings in Washington, D.C.

In private meetings and a public event at the Center for American Progress, the officials gave a detailed update of Afghanistan’s economic profile. They highlighted China’s recent investments to develop the country’s copper deposits and identified Afghanistan’s nascent natural resources sector as a key source of future revenue. The 2007 fiscal year growth rate was 6.1% for fiscal year 2007, but is expected to rebound to 13.5% in fiscal year 2008 (which begins March 21 in Afghanistan). Domestic revenues were $685 million USD (compared against $118 million in 2002) and are expected to reach $887 million in fiscal year 2008.

The officials acknowledged that security concerns had affected international private investment, and that narcotics continued to subvert agricultural production and the development of alternative crops. However, they forecast steady growth and continued investment, as well as improvements to the foreign aid mechanism. “One third of the resources has been spent in Afghanistan has been spent through the national government. We believe that the effectiveness of aid is much larger when the money is spent by the national government,” said Minister Ahady in an interview with

Governor Fitrat received commitments from the IMF to provide technical assistance towards providing a sound legal, regulatory and supervisory framework for Shariah-compliant Islamic Banking. Governor Fitrat also received assurances from the IFC—as the private sector arm of the World Bank—to scale up equity investment in private commercial banks in Afghanistan.

“We had very useful discussions with the IFC. We got some promise of between $15-$25 million in medium to long-term lending for SME (small and medium-sized enterprises) and mortgages," Governor Fitrat told Reuters on the sidelines of the World Bank meetings. Governor Fitrat announced that the total assets of the banking system had reached $1.56 billion USD, a 55% increase from February 2007. Central Bank Governors from the region (Turkey, Pakistan and India) also signaled their desire to continue supporting the Central Bank in capacity building with a particular focus on risk management, internal auditing, accounting and the establishment of a credit information bureau.

Responding to inquiries on Afghanistan’s tax collection system, Minister Ahady discussed the government’s attempts to modernize revenue collection and raise the level of the share of domestic government revenues to total GDP. Currently, government revenues constitute approximately 8% of the total GDP and are projected to reach 10% within two years. The Minister identified recent political instabilities in Pakistan, severe winter weather restrictions on border crossings, and inadequate infrastructure for road tolls as obstacles to economic growth.

“We are not a normal poor country,” said Minister Ahady. “Afghanistan faces great challenges given the lack of public capacity coupled with major security concerns.” The Afghan government will enhance growth in the coming year by strengthening enforcement measures, withholding tax on the construction sector and developing alternative to road tolls. Minister Ahady outlined the challenges the Afghan government faced in regards to the global food crisis and stated that 500,000 to 600,000 tons of wheat will be needed by late summer/early fall to meet domestic demands.

Preliminary discussions were held on the upcoming June 12 Paris donor’s conference at which the Afghanistan National Development Strategy (ANDS) will be presented with a costing analysis. “Thus far our estimate is that the ANDS will cost around $41 billion,” said Minister Ahady.

During their visit, Minister Ahady and Governor Fitrat met with senior U.S. government and multilateral officials including US Deputy Secretary of Treasury Robert Kimmitt, USAID Administrator Henrietta Fore, World Bank President Robert Zoellick, and senior officials of the US State Department, White House, and OPIC, as well as several members of the U.S. Congress.

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