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Finance Minister Ahadi Addresses Afghanistan’s Financial Health at Brookings

The Brookings Institution hosted Finance Minister Anwar ul-Haq Ahadi for a public discussion of Afghanistan’s financial health. His remarks focused on fiscal sustainability and touched upon Afghanistan’s application for Heavily Indebted Poor Country status, debt relief, and the implementation of the Poverty Reduction and Growth Facility, an IMF controlled program that limits government expenditures in the interests of fiscal sustainability. The Minister is visiting Washington for annual meetings at the World Bank and IMF.

Minister Ahadi said that the Afghan government was making progress in increasing revenues and attracting foreign investments, but he urged donors to continue aid flows to ensure the gains can be maintained. He asked that more of this money be channeled through the state budget and cautioned that too much aid was being spent on security rather than economic development.

"Our forecast for growth in this financial year is 11 to 12 %. Last year it slowed to 8 % because of drought," Ahadi told the audience. "There is still enormous need for international assistance in Afghanistan. Premature disengagement will lead to previous investments being wasted," he said.

Minister Ahadi informed the audience of policymakers, scholars, NGO officials and journalists that Afghanistan's economy will grow by up to 12 % this year despite the Taliban’s spring offensive. Tax receipts would grow by 30 % next year to over $715 million. He expressed hope that foreign investment flows could match last year's $1 billion.

The Minister listed a number of fiscal and macroeconomic improvements that helped double the Afghan national income in the last five years, including $550 million in government revenues gathered in 2006-2007, up from $180 million in the previous year, as a result of improved tax collection; a customs rate of 5 percent, one of the most liberal in the region; the privatization of firms, including more than a dozen banks; and some of the most liberal investment laws in the region, allowing easy repatriation of profits abroad.

Minister Ahadi said that the narcotics trade continues to be a major challenge for the Afghan government. However, poppy’s current rate of 27% of the gross domestic product is a reduction from almost 40% in recent years. The Minister identified increased funds for alternative livelihoods at the key to reducing the influence of narcotics in the region.

"I think we have a very clear vision" of the future in Afghanistan, Minister Ahadi said. The Minister said that he was confident that the insurgency will be defeated, governance will improve and the economy will be secured with the help of the international community, especially the United States, which has contributed half of the $12.8 billion in development assistance disbursed recently.

To Watch a CSPAN Video of Minister Ahadi's Speaking Engagement, Please Click HERE

To Read a Transcript of the Event, Please Click HERE

 

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