Afghan economy faces shortfall as Western aid projects disappear

Afghanistan's economy faces a serious revenue shortfall as foriegn aid dries up and a new president is installed.
By Ed Adamczyk  |  April 15, 2014 at 11:37 AM
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KABUL, Afghanistan, April 15 (UPI) -- Afghanistan faces a budget shortfall of about 20 percent of its expenditures, which could lead to a suspension of government workers’ salaries.

Alhaj Muhammad Aqa, director general of the country’s treasury, said the government has $400 million less than the $2.5 billion it was projected to spend in 2014. It comes at a time when foreign funding is drying up and the U.S. Congress approved only half of the $2.1 billion President Barack Obama requested in financial assistance for Afghanistan.

“If we do not receive extra funds in the next two months, we will face a problem with the operating budget, which is mostly salaries,” Aqa said.

Thousands of civil servants could be left unpaid, and important public programs could drop.

U.S. officials say Afghanistan’s revenue would increase if key reforms are implemented, specifically a more smoothly functioning and less corrupt system of taxes and tariffs, and a concentration on revenue-enhancing industries like lumber production, railway fees, copper mining and oil transit.

“Customs and trade volume has been reduced significantly, and I hope it will take an upward trend when the new government is in place,” said Najibullah Wardak, director of the Afghan customs department.

The presidential election campaign currently underway has included a dialogue on Afghanistan’s economic future. Both leading presidential candidates, Abdullah Abdullah and Ashraf Ghani, have spoken about the government’s fiscal mismanagement, and are aware that, if revenue problems persist, spending will be cut dramatically or more requests for foreign aid will be made.

“Afghanistan might have to ask the international community for more money,” said Abdullah in an interview.

[Washington Post]

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