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02/2006
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[ Afghanistan ]
Donor aid bypasses government
In a recent report, the World Bank calls on donor countries to work in closer cooperation with the Finance Ministry in Kabul. The authors criticise that approximately three quarters of foreign aid is not incorporated into the national budget. According to the World Bank report, this compromises Afghanistan’s long-term financial planning and undermines the government’s authority.
The study with the title “Afghanistan: Managing Public Finances for Development” was published last month. It states that local government agencies are overburdened with monitoring all current projects, particularly as they have no control over them and are often given only sparse information. Alastair McKechnie, World Bank Country Director for Afghanistan, argues that it is more effective to manage funds in cooperation with the government and that doing so would strengthen Afghanistan’s long-term prospects: “The credibility of the government is increased as it demonstrates its ability to oversee services and become accountable for results to its people and the newly elected parliament.”
The World Bank study maintains that the national budget should be assigned a greater role, but that governmental procedures would have to be improved for that to happen. The authors call upon Afghanistan’s parliament to assume a constructive supervisory role as provided for in the constitution. Moreover, fighting corruption is also considered essential. The Afghan government is called upon to get more active in this respect.
The report states that Afghanistan has made considerable progress, citing fast economic growth, high levels of school enrolments (including for girls), the repair of important highways and a stable currency. Furthermore, the government has made a commitment to financial transparency and has maintained macro-economic stability.
Nevertheless, budget policy is still facing enormous challenges, according to the recent document. Public spending was especially high in 2004/05, amounting to 57% of the GDP, which, to some extent, results from high expenditures on security. On the other hand, domestic revenue only accounted for five percent of the GDP, which corresponds to only half the level typical of particularly poor countries. The report admits that it is difficult to increase tax revenues – not least because the informal sector is hard to assess and because tax authorities have the reputation of corruption. Nonetheless, it is necessary to increase tax revenues at twice the rate of public spending, according to the report.
The World Bank admits that public service delivery in most sectors is poor, which means it is important to achieve positive results. Solid institutions, accountability and incentives for the providers are deemed necessary. In the health sector, for example, good initial experiences are mentioned in contracting out services to civil society organisations competing with one another. (dem)
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