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2032-Yet another deadline for Afghanistan

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2032-Yet another deadline for Afghanistan

deadlineThe International Monetary Fund (IMF) in its recent report has warned of cash crunch ahead of the Afghan government.

In its assessment, the IMF has estimated Afghanistan’s current account deficit at 45% of gross domestic product and has postponed the prospect of “fiscal sustainability” until after the distant year 2032.

While the report would wake Afghan policymakers up to take an action, at the same time the new deadline of 2032 paints a negative picture about the future of Afghanistan just as the deadline 2014 has been doing.

The withdrawal of foreign forces and the winding down of foreign aid will certainly have its adverse effects on Afghanistan’s economy. After all, a major portion of the current national budget, which consists of the core development budget and the external budget, is funded through donations. Afghanistan does not have sufficient internal revenues to contribute sufficiently to the budget.  But does it mean Afghanistan will totally fall apart?

The achievements over the past decade do give us some hope that Afghan government will be able to protect the economy from the predicted crisis.

Significant improvements have been achieved in the tax collection system by the government. The system is becoming more modernized and advanced allowing the government to generate more revenues. The Ministry of Finance had said that in the coming years through a better tax collection system, the revenues generated from minerals, agriculture and infrastructure would increase internal revenues two-fold. The government would be able to become self-reliant by 2025. (http://dev.wadsam.com/afghanistans-budget-deficit-is-rising879/)

A major economic development potential of Afghanistan lies in its mining sector. Afghanistan is sitting on a vast scale of untapped minerals that can transform the country’s economy. New mining laws are currently in the process of approval. The Afghanistan Investment Support Agency (AISA) believes the new mining law will woo investors who are interested in tapping Afghanistan’s natural resources.

Afghanistan’s education sector has witnessed considerable improvements that leave us with this hope that a stronger labor force will emerge. A stronger labor force means more productivity, which is the backbone of a capitalistic economy.

A stronger private sector is needed alongside the strong labor force to ensure employment opportunities for them. Afghanistan’s private sector has been very active in the past 11 years. The presence of various companies and industries and the boost in trade has been quite an achievement for the private sector.

The government must keep its focus on the private sector and provide better security and infrastructure to woo traders and investors to pump in capital into the market. The Afghan Chamber of Commerce and Industries (ACCI) have expressed optimism about the future of Afghanistan in many occasions. At the third Countrywide Summit (CWI III), ACCI Deputy Chairman Khan Jan Alokozay admitted that Afghanistan would be vulnerable to financial shocks post 2014; however, the private sector is coping with the challenges.

The Afghan government has made tremendous efforts to meet the requirement for membership into the World Trade Organization (WTO). It is mostly likely that Afghanistan would obtain its accession to WTO by 2014. The membership will open new doors for Afghan trade and enhance investment. Currently facing transit issues from the neighboring countries, Afghanistan would find alternative routes to carry out import and export business.

Afghanistan’s comparative advantage in agricultural products will continue to be a vital factor for its economic growth and to mitigate the potential risks to which Afghanistan can be exposed in the coming years. The Afghan government must focus on the growth of agri business, given the high demand for Afghanistan’s agricultural products around the world. Two instruments that the Afghan government must focus on in order for a successful agriculture sector are: a) development of physical structure—such as roads, electricity, potable water and drainage, water for irrigation and telecommunications—that connects farmers to markets. b) the role of accompanying institutions—such as land titling on the enforcement of property rights, credit markets, and contract farming; vertically integrated schemes; market information systems; commercial rules and laws; producer and trader associations on economic coordination—that can reduce the marketing risk and transaction costs in the process of exchange between producers and consumers.

Security has been a haunting factor and will continue to be. After all, we are talking about a country that has been in war for decades. The speculations about Afghanistan’s security situation post-2014 have lowered the business confidence in Afghanistan. However, the international community is optimistic about the capabilities of Afghan security forces that have grown considerably in size and number during the past decade. The alliance forces have pledged to provide continuous support, involving training of the Afghan Security Forces beyond 2014, after NATO combat troops withdraw from Afghanistan and Afghan forces take full responsibility. Furthermore, the President of India recently agreed to continue supporting Afghanistan in equipping its security forces and providing training to the Afghan military forces. (http://www.tolonews.com/en/afghanistan/10586-india-to-train-and-equip-afghan-national-security-forces)

To add to the glimmers of hope, President Hamid Karzai has recently announced that the Afghan government is willing to allow the US to have nine military bases in Afghanistan after the 2014, but wants Washington’s “security and economic guarantees “first. The Afghan Foreign Ministry announced last month that the new security pact would be executable from the beginning of 2015 as soon as the two nations agree on the terms and conditions of the pact. (http://www.khaama.com/afghanistan-us-security-agreement-executable-in-2015-mosazai-2348)

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