Kabul, April 6, 2021 – Today, UNDP Afghanistan launched its latest Afghanistan Country Report titled "Achieving Afghanistan’s Long-term Goals amid Short-term Adversities”. The Report is the latest of a series of Country Notes by UNDP Afghanistan that analysis the macroeconomic and fiscal situation of the country and offers policy recommendations on the way forward.
The report is part of UNDP’s continuing policy level support to Afghanistan. It provides an assessment of the current situation and identifies opportunities and challenges facing Afghanistan. In addition, it also proposes a series of programs that are aligned with the objectives and priorities included in the ANPDF II and the NPPs, and identifies funding requirements and the institutional constraints. The report outlines that the response to the development challenges facing Afghanistan can best be anchored to the SDGs for which the Government, UNDP and other development partners have already established priorities and worked out implementation modalities.
The report is prepared based on the existing official data using Computable General Equilibrium Models developed by UNDP for Afghanistan. It is intended to provide the policymakers with the evidence to better understand the policy trade-offs, and provide policy recommendations to ensure informed decision making in the face of shrinking resources.
The report estimates that, if peace is achieved and observed for the next four years, GDP will increase by 7 percent. This will also increase the Government’s revenues and ability to fund aspirational development and social programs. However, governance needs to improve and corruption to be addressed head on, otherwise things will not change for better.
By the same token, Market Building is vital for accelerating economic growth and improving livelihoods. Combined with lack of progress towards peace and governance, the relatively fast population growth compared to low economic growth in the last decade has resulted in declining per capita incomes and increasing poverty. The report estimates that, while the economy may recover its pre-pandemic level in the next two-three years, per capita incomes may still be lower by nearly 10 percent in 2024 compared to 2019. Poverty rate may raise to up to 70 percent and number of those who would need humanitarian assistance may reach 18 million by the end of 2021.
The report also estimates that improvements in the business environment and the investment climate, easing access to credit, reductions in trade costs, agricultural improvements and strengthening governance, if pursued individually, each can add between 1.5 and 2.5 percentage points to the economic growth rate. However, if these policies are pursued in tandem, GDP could increase by more than 40 percent by 2030 compared to the business-as-usual scenario.
The road ahead will not be smooth. The international experience on fragile states suggests that peace may come, but conflict may not go. Low-income countries have a high probability of reverting to conflict within five-to-ten years until they reach a level of per capita income of at least $5,000. To reach that level the economy of Afghanistan would need to grow annually at a steady rate of 8 percent for the next two decades.
If peace is achieved soon, Afghanistan can face the future with optimism. It can take advantage of its strategic location at the crossroads of Central Asia, the Indian subcontinent, the Middle East, and east Asia, and its wealth of unexploited mineral resources. It has export potential from several high-value products such as carpets, gemstones and saffron, and a vastly untapped human capital due to high unemployment and the limited role of Afghan women in the economy and public life.
Peace cannot be anything else than an Afghan-led and Afghan-owned process. However, Afghanistan is not alone in its efforts to break from the past. UNDP proposals are anchored to the ANPDF II and the SDGs for which the Government and its international partners have already established priorities and worked out implementation modalities. UNDP is ready to support Afghanistan along the road ahead working with domestic stakeholders and international development partners to make the journey as smooth as possible.