Islamic Republic of Afghanistan

AFGHANISTAN

NATIONAL 

PEACE AND 

DEVELOPMENT 

FRAMEWORK 

(ANPDF)

2017 to 2021

Contents

Vision                                                                                                     1

1.Introduction   3

2.Political, Security, Economic, and Socioeconomic Outlook            4

2.1The Geo-economic Location of Afghanistan   4

2.2The National Unity Government – The First Two-Years           4

2.3Political and Security Outlook       5

2.4Economic Outlook         5

2.5Socioeconomic Outlook 6

2.6Women and Socio-economic Development   8

3.Fiscal Forecast            10

4.Fiscal Strategy            12

4.1Economic and Fiscal Goals           12

4.2Fiscal Framework and Budget Reform          12

5.Development Strategy 14

5.1The New Development Planning System       14

5.2Development Priorities  14

5.3Governance and State Effectiveness             14

5.4Social Capital and Nation Building   16

5.5Economic Growth and Job Creation            18

5.6Poverty Reduction and Social Inclusion         26

6.Development Partnerships       30

7.Development Financing            34

7.1Revenues and Expenditures Projections (base case)     34

7.2ANDPF Scenario Assumptions Table           35

7.3ANDPF⁺Projections Chart           36

7.4ANDPF⁺Scenario Assumptions Table          37

8.Conclusion      38

Annex 1: List of National Priority Programs and Development Councils                   40

Afghanistan National Peace and Development Framework (ANPDF) 2017 to 2021

Vision

The Afghanistan National Peace and Development Framework is our plan to achieve self-reliance and increase the welfare of our people. We will build a productive and broad-based economy that creates jobs. We will establish the rule of law and put an end to corruption, criminality, and violence. Justice and the rule of law require that we step up the fight against corruption, reform our courts, and make sure that ordinary citizens can exert their constitutional rights with confidence. We will change the structure of our economy from one of import and distribution to one where a thriving private sector — from small farmers and urban businesses to large manufacturers — can successfully export Afghan products to regional and global markets. We will make strategic investments in infrastructure, human capital, quality service delivery, and technology; backed by a robust and well-regulated financial sector that can channel money to where it can best be spent. Growth will be inclusive and balanced. As the economy grows, Afghanistan will be able to expand investments in the health and education of our people. Achieving these goals requires a collective effort to overcome fragmentation, increase accountability, and introduce proper policies for sustainable growth.

1. Introduction

The Afghanistan National Peace and Development Framework (ANPDF) is a five-year strategic plan for achieving self-reliance. The sustainable development that will help Afghanistan meet its many challenges, bring an end to poverty, and ensure security and stability for our country will take longer than a single generation to realize. We must plan to move our country beyond its history of war and poverty and begin the long journey to prosperity. 

The Framework presents a long-term development narrative for Afghanistan by providing consistent high-level guidance to government, and other, stakeholders. It articulates our immediate and long term development priorities, highlights key reforms, and outlines priority investments needed to achieve development goals in these critical areas. It sets the economic, political and security context for our approach to development, which is built around agriculture, extractive industries and trade. This context leads to a fiscal strategy that will guide budgetary allocations to support policy goals and ensure the sustainable management of public investment. 

A credible national budget with the ability to improve government performance is the key mechanism for turning policy into tangible outcomes. Making the budget a driver for reform requires complementary improvements not only in governance and citizen engagement, but also significant advances in the rule of law. Finally, the ANPDF provides a framework for our international partners to have confidence that more flexible support to the budget will be matched by increased accountability and improved performance.

Afghanistan’s economic and development forecast is informed by the prospects for achieving peace and reconciliation. The government is deeply invested in the peace process and stands firm on the need to find political solutions to the conflict. While we remain committed to peace, continued expenditures are required to maintain national security, strengthen government control over territory, and combat the spread of terrorism. As part of our national security strategy, we will continue to invest in professionalizing and increasing the effectiveness of the armed services.

Building the people’s trust that their government can provide a better future for them and their families is central to our national development plan. Our people must have confidence in a state that is well-governed through laws and institutions, provides a voice for the people to hold their government accountable, and delivers quality services. Our government is aware that we must secure the nation’s future by conscientiously stewarding natural resources and investing in our children’s health and education.

The ANPDF will help overcome the legacy of fragmentation and distortion that has stunted institutional development in Afghanistan. Improved governance, anti-corruption, and organizational reforms are woven into every section of this document. We will increase accountability and make sure that the fruits of our economic strategy are shared equitably.

We believe that with focused and sustained commitments, our approach to policy formulation and management can deliver results. But we also draw attention to the risks associated with overly rapid reductions in external support for the reform agenda. It will take time for the reforms and investments that will put Afghanistan on the path to sustainable growth to produce results. Carefully calibrated bridge support is needed to make the transition to sustainability a smooth glide rather than a series of fitful and disruptive shocks. Sustaining partnerships to embed reforms and follow them through to fruition are pre-conditions for success.

The overarching goals of our government are to reduce poverty and improve the welfare of our people. In an underdeveloped country, compromises must be made between short-term and long-term investments. This strategy highlights the means for making those trade-offs. It will allow our elected representatives to set priorities, make choices, devise appropriate programs and deliver concrete outcomes. It details standards on inclusion, gender equity, regional balance, and other development goals that provide a basis for making decisions and assessing results.

Our aim is to be transparent about the challenges ahead. There are no low-hanging fruit that could trigger rapid growth and foster self-sustaining development. As a political community, we should be clear about our choices. We must build a national consensus in support of the reforms presented in this framework. Afghanistan is a nation that understands hardship. But we are confident that hope, handwork, and staying true to our values will make our country succeed. 

The ANPDF was developed through consultations between the government and our partners, including civil society, private sector, and international partners. Our aim is to continue this national dialogue. This document will be available in Dari and Pashto. 

2. Political, Security, Economic, and Socioeconomic Outlook

2.1 The Geo-economic Location of Afghanistan

Afghanistan is an ancient place with a rich history and an ethnically and linguistically diverse population. Many Afghans live in isolated communities dispersed in the hills and valleys of the rugged mountainous terrain that defines much of our geography. Overcoming this natural drift towards fragmentation requires large-scale investments in infrastructure development to facilitate transport, communications, access to services and market integration. Four decades of conflict have devastated the country and confounded efforts to build an effective state with well-functioning institutions and a nationwide infrastructure. 

The long-run drivers of growth will continue to be agriculture, mining, and inter-regional trade. But the old ways must be modernized. If effectively exploited, these modernized resources offer the potential for higher economic growth. Afghanistan’s geo-strategic location at the crossroads of one of the world’s most dynamic and populous regions means that it is well positioned to foster growth-inducing economic cooperation with our neighbors. Afghanistan must also foster investment, both public and private, foreign and domestic, and it must over time replace development assistance with sustainable sources of national income.

Given Afghanistan’s history of conflict and lack of investment, achieving acceptable economic growth and social development will take time. Even with optimistic levels of growth, over the next ten years, Afghanistan is likely to remain at the bottom of South Asia’s regional average for GDP per capita. A development strategy for lifting living standards to a reasonable or middle-income level must be measured in multiples of decades; not in years or even a single decade. It is, however, crucial that we lay the foundations for a peaceful and prosperous country now.

Our strategy must be realistic. The prospects for growth in the short run are uncertain. Until Afghanistan has peace, large scale new private investment is unlikely. Public investment, typically driven by a growing economy, will also be constrained. International partners will remain a crucial financier of development in Afghanistan, but their support will likely decline over the next 5 to 10 years. Over time, sustainable domestic sources must replace International support. In the short-term, moving towards a sustainable budget and putting in place the foundations for Afghanistan’s long-term development are our most important priorities.

2.2 The National Unity Government – The First Two-Years

The transition in 2014 had a substantial impact on Afghanistan’s security, political, and economic dynamics. The new National Unity Government faced not one, but three crises as terrorists and armed opposition groups intensified their attacks just as international troop levels declined, the economy went into recession, and a contested election occupied the national leadership’s attention.

The new government discovered that structural problems in the economy were deeper than initially understood. Politicization of appointments had created internal polarization and pervasive corruption, including in such core government functions as banking supervision, public procurement, defense, civil service, judicial and law enforcement agencies. Both security and development were severely fragmented; in effect, they were little more than an aggregation of on and off-budget projects rather than the means to implement coherent national priorities built around clearly stated goals.

The government spent its first year putting in place fundamental improvements to core functions. Public procurement was centralized to force through reforms. A public financial management reform roadmap was produced to bring the budget process in line with national priorities.

Four interrelated challenges – conflict, corruption, criminality, and unemployment – remain significant tests to the reform agenda. While resolving security challenges will require political negotiations and military success, increasing public confidence that the government can provide equitable quality services will increase support for the government in this difficult context. However, without a big increase in jobs, Afghans will continue to resort to desperate measures such as illicit narcotics production, out-migration, and joining violent criminal networks. 

Afghanistan National Peace and Development Framework (ANPDF) 2017 to 2021

2.3 Political and Security Outlook

The prospects for peace are the specters that shadow all development forecasts. We have adopted a five-year National Campaign Plan to increase the mobility and effectiveness of our security forces. Improvements to the ANSF and the police are critical not only for securing our country against armed opposition groups but also for reducing criminality such as extortion, kidnapping, and illegal seizure, which have become huge disincentives to business investment. Presence of landmines and Explosive Remnant of War (ERW) pose a threat to the lives of Afghan civilians and impede development activities.  Each month, on average 100 civilians are victims of land mines and ERW. The Plan focuses on three areas: reconciliation, security, and stability. We have revamped our senior military leadership and professionalized training for officers. Civilian controls over principal support functions such as procurement, financial management, and audit have been introduced. These controls will ensure that our troops receive proper equipment, nutrition, and management. We have introduced tough measures to end the internal threat to force effectiveness caused by corruption. 

Our pledge to reduce reliance on donor aid for the security sector requires cutbacks in LOTFA and CSTC-A funds, with progressively more resources coming from domestic sources. If the cost of security remains unchanged at around USD5 billion per year, this will be difficult to achieve. Nevertheless, to achieve this pledge, we are committed to significantly improving domestic revenue collection, and improving efficiencies through preventing corruption, misuse of funds and strict spending monitoring mechanisms in the security sector.

2.4 Economic Outlook^[1]

Afghanistan’s overall economic outlook frames the context for our self-reliance strategy. The IMF and other economic forecasters anticipate an overall slowing of global growth, which will affect Afghanistan’s ability not only to export but also to attract investment. But the three-year long decline in domestic economic growth has been stemmed. It is reasonable to anticipate a return to a robust, albeit modest, growth trajectory; if strong and effective reforms are implemented. Afghanistan has a limited amount of debt, large foreign exchange reserves, and an effectively managed exchange rate for the Afghani. These provide a foundation for pro-growth macroeconomic policies. However, sharp declines in aid, weak revenue performance, or public finance mismanagement could create damaging budget shortfalls and lead to a deterioration in growth prospects.

Table 1: Macroeconomic Indicators

Source: Ministry of Finance Fiscal Policy Department Estimates

Economic growth is expected to continue improving through 2017; reaching 6 percent by 2020. GDP growth is led by the agriculture sector, with expansions expected in wheat and fruit. As security responsibilities shift to national forces, the share of domestic spending in this sector will increase. This will translate into greater demand for domestic goods and services, which will in turn stimulate economic growth. 

Expansion in secondary processing of materials such as marble, cotton, saffron, food, beverages, cement, mining, and natural gas has been limited. Exports have a better potential to expand once investments in agriculture, horticulture, and transport reach their full potential. We will reduce regulatory and operational barriers to investments and exports to facilitate this expansion. While previous expectations for high returns to mining were over-ambitious, investments in extractive industries will eventually form a core building block for sustainable growth. Large scale investments in mining are likely to be delayed while global prices remain low.

Inflation in 2016 is driven by low rates in 2015 and is expected to remain moderate at 4.7 percent for the rest of the current year. Over the medium to long-term, we expect inflation to moderate to around 5 percent and stay well within single digits.GDP per capita is expected to start rising by the end of 2016 after slight falls in 2014-15, which reflect the slowing activity in the country triggered by the international security transition. GDP per capita is expected to recover to 2013 values by 2017. However, economic volatility is high, and all projections should be treated as indicative. A major variable remains the level and location of the conflict. Afghanistan is also highly vulnerable to natural disaster and weather-induced shocks, whose impacts are magnified by the lack of preventive and adaptive infrastructure and social insurance.

2.5 Socioeconomic Outlook^[2]

A great deal has been achieved over the past 15 years. Important human development indicators including school enrollment, life expectancy, and access to clean water have seen marked improvement.  School enrollment increased from one million in 2001 to 9.5 million in 2013.³  Today, girls account for more than one-third of students compared to very few in 2001.

Between 1990 and 2015, infant and maternal mortality declined by 45.5 percent and 70.4 percentrespectively.^[3]Access to safe drinking water increased from 27 to 46 percent from 2007-08 to 2011-12. Progress towards better access to services continued during 201014, though at a slower pace. Regional disparities remain high, even in well-served provinces. Physical barriers and conflict have had a disproportionate effect on the ability of the poor to access education.

Afghanistan lags in progress towards the Millennium Development Goals (MDGs) and Sustainable Development Goals (SDGs). Clean water remains inaccessible for an estimated 35 percent of the population. This is a major contributor to a range of intestinal diseases, child mortality, and is a proxy indicator for high levels of absolute poverty.

There have been vast improvements to health and education services since 2002. However, inconsistencies in quality are a factor in rising citizen dissatisfaction and must be addressed. Health and education suffer from corruption, poor service delivery, and absenteeism, which can reach levels as high as 50 percent in more remote areas. The government’s 2015 diagnostic on barriers to effective education identified academic supervision, over-centralization, ministerial fragmentation, poor data collection and ineffective management as primary challenges. Internal and external reviews of the health system identified institutional fragmentation and low-quality service delivery as issues in need of attention. There is concern that delivery of health services through NGO partners may prove difficult to sustain post-2020 (though other developing countries can sustain this method) and the government is considering the trade-offs that would be involved in adopting an alternative model.

Income and expenditure poverty remain widespread. Child poverty is particularly pernicious. Afghanistan’s poverty statistics remain unacceptably high, with nearly 40 percent of the population falling below the USD1.25/day global poverty threshold. Poverty rates have increased in the past four years, due in part to geographical imbalances in off-budget spending, as well as insufficient investments in the real economy that could foster sustainable and inclusive growth.

Poverty in Afghanistan is multi-dimensional: it varies by region, by gender, and by access to exit pathways. Poverty is particularly severe in rural areas, where low productivity, poor market integration, and recurrent shocks not only replicate poverty over generations but also render these areas susceptible to migration, warlordism, and recruitment by well-financed operators in the criminal economy. Decades of war coupled with a rising population have deteriorated Afghanistan’s traditional systems for sustainable natural resource management. This dynamic has heightened the impact of natural disasters and contributed to deforestation, over-grazing, and food insecurity. There are more than 2.5 million vulnerable persons living with disability, many of whom suffer from social, economic, and political marginalization. Urban poverty, intensified by people moving to suburban areas without a growing urban economy to provide them with jobs, is also an increasing concern. 

The ongoing conflict constrains Afghanistan’s prospects for reducing poverty. The lack of security affects Afghans every day and hampers the delivery of services across the country’s 34 provinces. According to the United Nations, civilian casualties are increasing, with 2015 logging the highest level of conflict-related civilian deaths and injuries on record. Conflict, criminality, and narcotics continue to be critical threats to personal safety, public service delivery, and private investment. Access to education, particularly for young women and girls, is affected by the fighting and by conflict-induced displacement. 

Afghanistan National Peace and Development Framework (ANPDF) 2017 to 2021

Nearly four decades of protracted conflict have resulted in weakened government institutions and severe social and ethnic rifts. The three most relevant sociological fracture lines concern ethnic and tribal identities; rural versus urban divides; and varying beliefs in the changing role of women in political and economic life. More than 87 percent of women experience some form of violence, particularly domestic violence.^[4]Government institutions and development programs have become primary arenas for contests along these lines, with the attendant risks in how ministries are staffed and their resources allocated.

Afghanistan is going through significant demographic and spatial shifts. While the country’s age pyramid and ongoing urban transition are similar to other nations at the same level of development, Afghanistan stands out for its large number of refugees, the rapidly rising rate of out-migration, and the role that illicit narcotics play in shaping the social and political economy.

Afghanistan’s population challenge is particularly severe. Total fertility rate is 4.8 children per woman. High fertility and declining mortality translate into high population growth rates, which is an estimated 2.8 percent annually.^[5]  Afghanistan has the third largest youth bulge in the world, with 37 percent of the adult population between 15 and 24 years old.^[6]  As a result, 400,000 young people enter Afghanistan’s labor force every year. Afghanistan’s conflict and economic slowdown have generated a large number of IDPs and migrants who can be expected to return as conditions improve; provided that they can earn a living once they are back. The World Bank estimates that even in a high growth scenario, it will be enormously challenging to sustain current levels of employment generation over the next ten years. This is due to the relative low job-intensity of some of Afghanistan’s potential growth drivers such as mining, energy, and long distance trade, which are capital rather than labor intensive. For this reason, our development strategy couples its focus on investing in growth with other programs, such as agriculture, construction and education, that also contribute to the country’s development but also create more jobs.^[7]

2.6 Women and Socio-economic Development

The potential of women to contribute to economic development remains severely restricted by structural barriers, cultural norms, and insecurity. Relevant indicators for women are significantly worse than those for men. Seventeen percent of women are literate, compared to nearly half of men, and just 15 percent of working age females are in paid employment.^[8]

Enabling women to participate in the economy and society to a greater extent is a priority for Afghanistan’s successful development. Globally, women’s economic empowerment has resulted in reduced poverty and economic success. The 2004 Constitution of Afghanistan enshrined women’s equality before the law, the right to an education, and the right to work. Investment over the long term in women’s education, health and skills will increase women’s economic activity, thereby growing the economy and reducing household poverty. In the shorter term, some potential already exists in the small-business space and in agriculture that can be built on to increase the productivity of these sectors.

3. Fiscal Forecast

Afghanistan’s fragile socio-economic, political and security outlook make for a severely constrained fiscal operating environment. We need a strong domestic tax base to help support our move away from donor assistance as a means of driving growth. In recent years, we have witnessed relatively mild shocks such as the security and political transition cause a budget crisis and lead to austerity measures at the precise moment when Afghanistan needed more public investment.

The Fiscal Strategy Paper, which will be approved by the High Economic Council and published annually, will outline progress made on reforms and provide the macroeconomic basis for forecasting revenues.

The fiscal outlook in this document reflects the following assumptions:

▪We will not borrow in the medium term, except on a concessional basis for specific projects.

▪The Government will gradually finance an increasing share of security costs. Reducing international support to the security sector will impact the amount available for development expenditures.

▪Revenues from TAPI and other transit schemes are expected to take effect by 2020.

▪Conservative expenditure estimates, coupled with confidence in aid at or near current levels until 2020, will allow us to ensure that resources will be available in the future to finance new policies.

4. Fiscal Strategy

A credible and coherent fiscal strategy is the irreducible pre-condition for the success of the self-reliance vision. We will adopt a more structured approach to fiscal planning with the long-term goal of ensuring sustainable finances to support economic growth and development. Our approach includes three policy assumptions:

1. We will use fiscal policy as the primary tool for economic management; both to invest in the economy and, where possible, to insulate it from shocks;
2. We will over time collect enough revenue to meet operational and more of our development needs, gradually reducing development assistance over the next fifteen years; and
3. We will balance the budget over the medium to long-term, without borrowing unsustainably. Any borrowing will be concessional and in accordance with IMF agreements.

These three underlying pillars require us to set some aspirational goals in the short to medium-term, which will help decision makers identify necessary investments.

4.1 Economic and Fiscal Goals

For fiscal policy to be an effective economic management tool, we must have clear goals and increase the budget’s flexibility to meet priorities as they emerge. The following three aspirational goals will be pursued:

1. Deliver average growth of 5 percent per year until 2020;^[9]
2. Increase development budget expenditures by 10-15 percent each year as we expand delivery of education and health services in the medium-term; and 
3. Grow domestic revenue by up to 12 percent annually, with the overarching goal of having domestic revenues account for 14 percent of the GDP by 2020.

4.2 Fiscal Framework and Budget Reform

To achieve these goals, we will undertake comprehensive reforms to the way the budget is formulated, executed and reported. Fixing Afghanistan’s budgeting systems, including budget consolidation, requires deep, foundational reforms. A consolidated national budget is the first step towards eliminating the very high degree of budgetary fragmentation. There are too many projects across too broad a scope, leaving the government with little fiscal flexibility to move funds into where they can be spent for results. Low budget execution rates mean that schools are not built, bridges are not finished, and health workers never receive their training. Poor planning and rigid project structures that do not allow money to be redirected from under-performing or lower priority activities to better performers or higher priorities are some of the major drivers of this dynamic. We will work with development partners and domestic constituents such as the Parliament to establish filtering and review procedures to improve project quality at inception and increase our flexibility to align resources to performance.

The government will change the fiscal framework in three ways:

1. We will work towards a consolidated national budget by 2019;
2. We will supplement the current medium-term fiscal framework with a simplified medium-term budget and expenditure framework that sets out the estimated cost of government policy over four years; and
3. We will revise the annual budget process in line with national priorities. 

Over the next four years, this process will create more fiscal space by establishing the cost of current policy, including a standard four-year cost estimate for proper operations and maintenance. We can then align all expenditure financed by domestic revenue and development assistance to the national priorities, including by reallocating funds in the annual budget. Ongoing enhancements to the budget cycle will improve our effectiveness and ability to deliver tangible results across the country.We are reforming public finance management to improve national accountability systems. Flagship reforms can be summarized under three broad headings:

1. Reforms to improve the performance of government investments, leading to better economic outcomes: The newly established Macroeconomic and Fiscal Performance Department (MFPD) will bring revenue and expenditure estimates together and present the fiscal outlook to the Cabinet. A statement of national priorities based on improved macroeconomic and fiscal analysis will guide the preparation of the annual budget. This will lay the foundation for linking policy to the budget. We have reinvigorated the Policy Department to support the Councils, whose primary function is to guide national development priorities. This is a Cabinet Secretariat role, which focuses on establishing robust procedures for the Councils. This will assist the Directorate General of Budget to direct budget submissions towards national priorities with a clear understanding of the fiscal space available for investments and national development priorities.
2. Reforms to ensure that the budget is more accurate, transparent and free of corruption:A range of measures to ensure that the budget is accurate, transparent and robust will reinforce this improvement in the policy setting process. Improved forecasting and establishing of rolling forward estimates will help eliminate the systematic over estimation, of both revenue and expenditure, that has been a feature of the national budget in recent years. Revenue must become a key focus for the Government, with significant improvements already achieved in the previous year.
3. Investments to build the capacity of the state to manage reforms: We will start by investing in human resources, administration, finance, IT and communications. The Ministry of Finance will lead reforms in this area, with key ministries joining the process over the next two years. These reforms aim to reduce fiduciary risks and improve our performance.

5. Development Strategy

5.1 The New Development Planning System 

Aligning the Cabinet, policy priorities, and the budget is at the heart of our national development strategy. This will overcome the fragmentation by using a holistic approach to turning policies into expenditures. The machinery for achieving this has been approved by the leadership of the National Unity Government.

Political leaders set national goals, the President, Chief Executive, and Cabinet set the country’s overall development objectives through a consultative Cabinet process.

Inter-ministerial Councilswill set development priorities, oversee policymaking, eliminate fragmentation of mandates, monitor progress and facilitate measures for development in their respective sectors. They will be responsible for overseeing national priority programs. The Councils formulate and manage development policy and programming and negotiate competing budget proposals. The High Economic Council serves as the umbrella forum for making final decisions on economic policy and budgetary allocations. Inter-ministerial committees will make policy recommendations and monitor their implementation.

National Priority Programs (NPPs)are outcome focused thematic programs that guide ministries towards collective problemsolving. Most involve more than one ministry. Inter-ministerial working groups will synchronize timetables, budgets, and shared resources. Investments proposed under an NPP umbrella should be national in scope and pay careful attention to ensuring geographic and ethnic balance. All NPPs should articulate their approach to reducing poverty and supporting policies on gender. NPPs should be technically sound and follow rules on incorporating accurate forward cost estimates. Funding allocations will be negotiated in respective councils before a final review by the High Economic Council, after which they can be entered into the development budget. 

The national budget processwill allocate resources to NPPs and review their performance annually.

Ministries execute activities. Each minister is responsible for implementing policies, programs, and projects related to his/her ministry. When necessary, a minister will coordinate with other ministries and organization to implement programs. Each minister will periodically review progress on implementation and report to the relevant council and the Cabinet.

5.2 Development Priorities 

Our first objective is to promote sustainable job creation to improve public welfare and support Afghanistan’s progress towards achieving the SDGs. The high growth rates of 2006-13 derived almost entirely from security-related construction and services and their associated multiplier effects. Investments in infrastructure and enabling policy reforms that can help the private sector create jobs must now replace them. 

A growth-focused development strategy is worthwhile only if it is inclusive and leads to improved welfare and effective poverty reduction. Maintaining a tight focus on growth, job creation, and improving the coverage and quality of education and health services will help us avoid extreme disparities that have seen rapid growth in some regions while leaving others under-served. National policies and programs will be reviewed to ensure fair and equitable geographic, ethnic, and social balance. From early childhood development to linking vocational education to market demands, investments to ensure a healthy and educated population will be of particular importance.

5.3 Governance and State Effectiveness

In Afghanistan, security, unrest, and under-development are inextricably linked. Building the legitimacy and effectiveness of the state is, therefore, an important goal in and of itself. This focus on a stable and legitimate state reinforces the importance of advancing peace, building political consensus, and stabilizing security. Clarity of property rights is of particular importance, especially land which is the principal physical asset for much of the population. The Afghanistan Independent Land Authority (ARAZI) is working to meet this challenge by developing the National Administration Titling program. Sustaining the gains made in basic services like health and education, especially for women and girls, requires that we ensure that people feel safe, have confidence in their elected representatives, and can generate enough income to sustain their families.

5.5 Economic Growth and Job Creation

Afghanistan occupies a very competitive neighborhood, where countries not as adversely affected by conflict and fragmentation produce and sell many of the same things but at a lower cost. To build a competitive economy, Afghanistan needs to advance regional integration, improve governance, and transform its productive sectors to effect growth-inducing reforms and investments. We must adopt pro-active policies and support programs, particularly for labor-intensive agricultural cash crops and processed goods. WTO-allowed procedures should be used to prevent Afghan producers from being driven out of the market by cheaper imported products. 

The High Economic Council has approved a 70-30 split in investment between growth and social sectors. This means that the bulk of available incremental funds will be allocated to investments that increase productivity and growth. Social service investments will not decline, but their share of the budget will remain at or near current levels for the foreseeable future.

In the short term, the economy will require “bridging” strategies that provide jobs. In the long-term, Afghanistan will have to begin from its comparative advantages in labor-intensive and commodity-focused activities while building up the capital infrastructure and skilled labor force that will allow it to move up the value chain.

Generating growth is not as simple as making budgetary allocations to the most productive sectors. Afghanistan’s economic growth potential is constrained not only by the conflict and its attendant insecurities but also by poor policy, corruption, and mismanagement. Our performance-oriented approach to budget management will ensure that those sectors that can show credible investment ideas, have a history of good performance and the governance reforms needed to bring them to fruition will receive larger shares of our scarce financial resources.

Moving Toward Self-Reliance: Using the NPPs to increase national productivity

Afghanistan’s model for job-creating growth is reflected in the design of the NPPs. Each prioritized sector will produce an investment pipeline aligned to outcomes proposed by the Cabinet and in line with available resources. As part of the annual budget process, a detailed sectoral vision for each NPP, along with a ranked set of interventions, quantified outputs and a reviewed budget, will be included in investment proposals presented by each ministry to the Cabinet and the High Economic Council. 

Most NPPs will take longer than five years to reach their full development. By starting the feasibility and design work now, we can gain a sense of required financial and organizational resources, provide a framework for sequencing, and set priorities based on informed assessments of costs. This will provide line ministries with the tools they need to prepare detailed designs and costings. 

a) Comprehensive Agriculture Development Program

Afghanistan’s GDP rises and falls with the performance of its agriculture, which is a source of jobs for at least 40 percent of the population and makes up a significant share of our current exports. Inherently a volatile sector, growth in Afghan agriculture is hampered by underinvestment in water resource development, poor quality inputs such as seed and fertilizer, natural resource degradation, and weak systems for domestic and export marketing. Climate Change is causing the snowpack to melt three weeks earlier than historical averages. This creates too much surface water in the early spring, increasing the risk of flash floods and mudslides, and not enough water in the dry summer month. Precipitation now appears as increased rain, and not snow, creating a need for more water storage facilities and flood control measures. During the war, large plots of productive agricultural land were turned into dangerous minefields. Continued support to de-mine farmland will return fertile land to farmers and reduce the risk of landmine injuries and fatalities in poor communities across Afghanistan.

Increasing agricultural productivity requires significant multi-sectoral investments in irrigation resources, water management, improved planting materials, and best practices. Value chains must be developed to provide producers with greater incentives to invest. Increased wheat and cereal production, and expanding the depleted livestock herd, will provide food security for the country. Improved urban-rural linkages that provide inputs to buy, process and store farm products will lead to enhanced urban and transformative rural development. 

Public investment will focus on agricultural sectors that show the largest potential for economic growth. Improved seeds, better farm technology, and more storage and cold chain facilities will help smallholders increase food security and move from subsistence to surplus production for domestic and export markets. There is a long-term potential to change Afghanistan from an importing and agrarian country to an agro-industrial exporting nation. This can happen by promoting agro-industry, improving quality control, expanding cold chain facilities, and introducing better packaging that reduces waste and spoilage.

Creating jobs, increasing yields and opening markets for farmers

Over the next five years we will:

▪Expand the land under irrigation from 2.2 to 2.7 million hectares; and

▪Increase wheat production from 4.5 to 5.9 million metric tons.

We will achieve these goals by:

▪Increasing investments in water management, with rehabilitation of more than 1,000 irrigation schemes, developing new irrigation networks and building small water reservoirs;

▪Implementing the national wheat program to increase yields to 26%, adding 110,000 hectares of land under cultivation, halving post-harvest losses, and developing a standardized wheat seed market;

▪Improving livestock management, applying phytosanitary entry criteria and WTO-allowed tariffs to prevent subsidized imports from competing with our smallholders;

▪Increasing horticulture capacity from 180,000 to 230,000 hectares, supporting investments in value-chains, establishing export certification procedures, and increasing support to women-owned agri-businesses; 

▪Rehabilitating the strategic grain reserve and establishing a Grain Reserve Board to support farmers;

▪Expanding agroforestry and reforestation with over 60,000 hectares that support environmental conservation and income generation for farmers; and

▪Restructuring the Ministry of Agriculture to become a decentralized and farmer-centric institution that regulates and encourages private investments. 

b) Private Sector Development Program

Creating an enabling environment for the private sector is another pillar of our growth strategy. Peace, an improved investment climate, and more reliable infrastructure have the potential to attract some of the private capital that has been expatriated to the Gulf and elsewhere. We will reduce red tape, clarify property titles, facilitate exports, provide reliable supplies of electricity, facilitate access to transport, and ensure the personal safety of entrepreneurs and businesspeople.

At present, excluding military imports, Afghanistan imports nearly ten times more than we export. This imbalance includes a large number of products that are or could be produced locally; given better infrastructure and an improved investment climate. Small and medium enterprises (SMEs) have the potential to become an engine of the Afghan economy and create millions of jobs. Our SME-focused policy will concentrate on satisfying local demand, promoting import-substitution in areas where Afghanistan should have a comparative advantage, supporting exports through access to credit and reducing red tape-driven obstacles.

Not everything that we do to enable private sector growth and create jobs requires funds. Often the government can use its regulatory and rule-making power to provide incentives for investment, reduce risk and uncertainty, and unlock resources so that they can be invested. Afghanistan has some examples where changing the rules has led to spurts in investment and improvements in service. For example, the astounding growth in telecommunications that enabled the licensing of private telecoms. Reforms to energy regulation will soon see independent energy producers selling power to the national grid. Government regulatory processes often contain acceptable principles, but their practical application involves multiple steps that create openings for bribes and inefficiency. We are committed to reforming business processes and plan to simplify administrative and service delivery procedures in major line ministries. These rigorous initiatives include one-stop shops that consolidate dispersed services into a single location to speed up registration by orders of magnitude. These efforts will be complemented with selected e-administration reforms that will improve efficiency.

Regulatory reforms can also unleash investments by the poor. We are offering incentives to the urban poor to invest in their houses and small businesses through a national program for land certification that provides tenure security in all large and medium-sized cities. In the future, mobile banking and e-payment facilities will reduce transaction and interest costs for poor or isolated communities otherwise excluded from the financial system.

Vibrant and habitable cities

Our Main Goals for the sector are:

▪Creating a network of dynamic, safe, livable urban centers; 

▪Turning urban centers into economic growth hubs, cultural centers, and social inclusion arenas; and ▪Decentralizing urban planning and establishing participatory urban governance mechanisms. 

The Urban NPP will:

▪Improve the legal and regulatory framework, implement devolution of power, and strengthen the rule of law in cities;

▪Build urban infrastructure – principally transport and drainage;

▪Integrate cultural heritage into urban development plans;

▪Upgrade urban neighborhoods, provide and enforce zoning rules, and promote affordable housing;

▪Certify and secure land tenure rights, improve urban services to the poor, and increase access to employment; and

▪Promote mass economies, establish urban economic zones, and integrate urban hinterlands into metropolitan development planning. 

5.6 Poverty Reduction and Social Inclusion

Our strategy for poverty reduction combines investments to improve growth and productivity with targeted programs to help the poor improve their skills and access opportunities. There has been an absence of poverty-focused investments over the long years of conflict. Corruption hampers the ability of the poor and vulnerable groups, including persons with disability, to access services and opportunities. Social factors such as localized violence and criminality, land tenure insecurity, illegal land seizures, gender mores, discrimination, and poor service delivery, lock entire populations into inescapable poverty traps. We are committed to tackling these challenges by ensuring that provisions for helping our most vulnerable citizens are mainstreamed into our activities. 

Improved security and better policing are the bottom-line pre-conditions for successful poverty reduction. It is no surprise that improved security tops the list of concerns for the poor.

A central pillar of our anti-poverty approach is ARAZI’s planned National Priority Program on land administration. This NPP will incorporate ongoing multi-agency urban land certification programs that are providing legally recognized occupancy certificates to irregular urban settlements.

a) The Citizens’ Charter

Afghanistan has concentrated on expanding access to health and education. This focus will continue with financing already secured for basic health and education services through 2020. We envisage three modifications to our current strategy. First, health and education must now focus on improving quality, not just expanding coverage. Second, current financing models are not sustainable, particularly for health services. Both ministries are preparing reform plans to address these challenges, including improvements to the basic package of health services and programs to increase literacy in remote areas. Third, the disjuncture between the education curriculum and the needs of Afghanistan’s job market means that nearly two-thirds of recent college graduates are unemployed.

The Citizens’ Charter National Priority Program will improve mechanisms for service delivery in education, health, basic rural infrastructure, and agriculture services. The aim of the Charter is to reduce poverty and break the cycle of fragility and violence, using Community Development Councils (CDCs) as the entry point for both governance and development activities at the micro-level. The Citizens’ Charter is key to our development vision. It is a whole-of-government effort that will link rural communities, districts, provinces, and the central level, to promote inclusive development and help overcome the fragmented development approaches of the past. The Charter will put communities at the center of the development process, provide them with the tools and mechanisms to monitor service delivery and decide on development priorities. Communities will play an integral role in beneficiary identification, demand creation, as well as operation and maintenance. The Citizens’ Charter will build the capacity of CDCs and put in place necessary downward-accountability measures to help ensure that vulnerable groups, such as women, returnees, IDPs, widows, and persons with disabilities are included in the development process.

6. Development Partnerships

A first objective of the Realizing Self-Reliancepaper is to reduce Afghanistan’s dependence on aid. The strategies presented in this framework will allow job-creating growth and private sector investment to gradually replace reliance on foreign aid.  As reforms and growth-enabling investments begin to produce results, it is reasonable to expect Afghanistan’s reliance on extraordinary contributions from the international community to decrease from the current level of around 70 percent of government expenditure to some 40-50 percent by 2020. 

We believe in the globally agreed principles for Aid Effectiveness — ownership, alignment, harmonization, managing for results and mutual accountability — but the government and its partners have been lax on both sides of the mutual accountability compact. Donors can play an extremely constructive role in advancing the Self Reliance agenda by helping policy get on the right track, reversing current problems caused by fragmentation, and using funding assistance to drive better performance and accountability. Afghanistan’s reform agenda rests on the government ability to use a consolidated budget as the primary instrument for carrying out policy. Our international partners have increasingly been testing the waters to assess the realism of using budget-based support to channel their aid. Channeling donor funds through the national budget is not only a more efficient, cost-effective use of money than off-budget programming is, but supporting the Afghan budget process is a necessary step towards a successful donor exit strategy. 

The efficiency of both on and off budget investments needs to be improved. Complex procurement, poor budgeting practices, and weak contract management lead to lengthy delays and unnecessary cost increases. The government needs a more structured project review system for its on-budget projects to weed out projects that lack precision. We will also provide more efficient, problem-solving support for partner projects that create jobs and contribute to our development, beginning with streamlined approvals and simpler procedures for licensing. Improving security for large construction projects is also a priority.

But the biggest potential for using funds efficiently is to use national systems wherever possible. Using government systems not only reduces unit costs but is an essential pre-condition for the government to take full responsibility for performance. Furthermore, given the security situation, off-budget programs face increasing challenges to providing adequate site supervision, a problem that could be solved by increasing the use of pay-for-results on-budget financing.

Going forward, we will work closely with our international partners to use aid as effectively as possible. Our strategy for achieving this concentrates on the following steps:

▪Commitment by donors to pool resources behind this strategy, particularly support for the medium term expenditure framework;

▪Agreement on the pre-conditions for expanding on-budget support, either directly or through the ARTF;

▪Improve dialogue and review procedures to ensure alignment of all financing with government priorities and regarding quality of preparation;

▪Increased use of reimbursement for delivered results and the successful implementation of strategic reforms; and 

▪Strengthened mechanisms for audit and accountability.

Despite considerable progress over the past 15 years, Afghanistan’s donor partners have raised reasonable concerns over the fiduciary integrity of our financial management systems. The following measures, proposed for 2017-19, would go a long way to increase trust levels and provide credible evidence of improvement: 

▪Implement the national anti-corruption action plan and legal framework;

▪Pass laws criminalizing corruption in line with the UN Convention Against Corruption;

▪Expand public disclosure of asset declarations to cover law enforcement, customs, and tax administration;

▪Expand the use of electronic payments and e-procurement to line ministries; 

▪Strengthen the Supreme Audit Office; and

▪Update Afghanistan’s Public Expenditure and Financial Accountability (PEFA) rating, which is an internationally recognized instrument for assessing fiduciary risk.

Making the Afghan policy-to-budget process the centerpiece of the dialogue will guide both on and off-budget partnerships since the goal for both is to build up Afghan systems.

Afghanistan National Peace and Development Framework (ANPDF) 2017 to 2021

The government will continue to support direct donor financing for human rights workers, press and media development, targeted programs for vulnerable groups, strategic private sector development initiatives and other activities critical for national development. There are also specialized investments, particularly in large infrastructure, where the Afghan government lacks technical or managerial expertise and would be better served by partnerships that can build capacity through hands-on guidance and oversight. But even where donors and the government agree on the value of off-budget support, financial information should be recorded on the budget as early as possible using standard budget categories and reviewed as part of Development Council work plans.

Both as watchdogs and as partners, civil society organizations (CSO) and the media make significant contributions to Afghanistan’s stability and development. We will continue to value and advance their role in our national development. Key issues to resolve are how best to protect civil society operating space, ensure the freedom and safety of the press, and sustain dialogue on an evolving partnership. In 2015 the government signed an MOU with civil society organizations to define an overall partnership framework. Dialogue with CSOs will continue on issues of mutual concern such as protecting and optimizing the civil society’s monitoring and advocacy functions, introducing innovations in service delivery, and resolving partnership issues such as the management of withholding taxes on behalf of the government and any interference or corruption in CSO registration.

7. Development Financing

Afghanistan’s development needs are large and will remain so for decades. Afghanistan must aim to achieve sustained high levels of growth to raise incomes and meet future demand for quality services. Afghanistan’s prospects for sustaining high rates of economic growth face significant constraints: limited human capital, poor infrastructure, high population growth, a lack of investment, and a fragile operating environment.

The Afghan state will have a significant role in supporting growth. Improvements to fiscal management and public procurement will play an important part in fostering an environment for creating jobs and sustaining growth. To assess our financing needs, we have prepared the following scenarios with three assumptions.^[10]

1. Progress will continue on macroeconomic stabilization to minimize the risk of shocks;
2. Domestic revenue collection will increase in line with nominal GDP, which is projected to be 5 percent on average per year until 2020. Once legal and regulatory frameworks are in place, revenues from transit and major mining projects will be realized by 2020 and beyond; and
3. We will increase investments in education, health, infrastructure, and energy. 

Afghanistan aims to increase domestic revenues from 10.3 percent of GDP in 2015 to about 14.0 percent by 2020. Transit projects will contribute 1.1 percent of GDP, and mining 1.02 percent, in additional revenues by 2020.

7.1 Revenues and Expenditures Projections (base case)

While long-term fiscal prospects for Afghanistan must be sustainable, in the short to medium-term we will be unable to meet budget financing needs solely from domestic sources. To continue to deliver minimum services and address development challenges, Afghanistan will need USD 3.9 billion on average per year until 2020.^[11]

Afghanistan National Peace and Development Framework (ANPDF) 2017 to 2021

7.2 ANDPF Scenario Assumptions Table

 in % of GDP, unless stated otherwise 

Source: Ministry of Finance Fiscal Policy Department Estimates

ANPDF⁺

Tables 7.3 and 7.4 show a more optimistic financing scenario (ANPDF+) that could be pursued if reforms are well-implemented, and the economy can absorb more funds for growth. This scenario assumes that peace and relative security will lead to increased confidence and a resumption of private investment. Such an environment would yield an improved fiscal outlook, but growth sustaining investments in priority sectors would be needed to drive progress. We anticipate significant investment in energy and infrastructure to provide an enabling environment for business investment and ensure sustained growth. A significant share of any growth will be used to address the health and education needs of our growing population.

7.3 ANDPF⁺Projections Chart 

Source: Ministry of Finance Fiscal Policy Department Estimates

Afghanistan National Peace and Development Framework (ANPDF) 2017 to 2021

7.4 ANDPF+ Scenario Assumptions Table

8. Conclusion

Afghanistan is entering a new era. The shock of transition is giving way to a visionary and forward-looking strategy for self-reliance. This framework focuses on a reformed development architecture anchored in a budget process that demands discipline, focus, realism, and a pragmatic approach to solving problems. 

Success lies in striking the right balance between advancing reforms and reducing development assistance. Development partners reassessing their assistance to Afghanistan must be careful. Afghanistan is a country at war. Conflict not only imposes enormous costs on the country but also carries the risks that additional shocks will plunge the country back into chaos. While we are confident that Afghanistan will succeed, the risks of failure are all too real. Too sharp a cut in levels of aid will stoke further unrest and violence. Afghanistan’s longstanding conflicts are not of its own making; there is a shared obligation to see the transition through in a responsible way.

Over the past year, we laid the foundations that will make this framework succeed. The reforms to our security forces are slowly reducing citizen insecurity and our country’s vulnerability to attacks. As we re-assert and sustain control over the whole of the national territory, the process of rebuilding can begin. Comprehensive reforms are underway to reduce corruption and build a legal system that can enforce the law. Planning for parliamentary and national elections is advancing. Public financial reform is re-building a budget process that reflects the cost of policy decisions and provides the means for the government to take responsibility for oversight on expenditure. Our fiscal projections are credible and realistic. We have launched an ambitious program of growth-generating investments that will create jobs and reduce our dependence on aid. Dialogue with our private sector continues to improve. 

This framework began with a wish for peace. But peace is not just a matter of signing agreements to end the fighting, important though such agreements are – Peace must be sustained. Our people must have confidence that their government can give them better life chances than a return to insurgency will, that their children will be healthy and educated, that they can trust in the law. They must have faith that their government will be able to match its promises with real actions that inspire hope and improve their lives. 

The Afghanistan National Peace and Development Framework will not solve all of our country’s problems. But it does provide the means for our leaders to guide our march towards self-reliance.

Annex 1: List of National Priority Programs and Development Councils

High Economic Council

Ministry of Finance, Ministry of Commerce and Industries, Ministry of Economy, Central Statistics Office, Da Afghanistan Bank, Afghanistan Chamber of Commerce and Industries

High Council on Reforms 

Ministry of Finance, Ministry of Economy, Ministry of Health, Ministry of Justice, Ministry of Commerce and Industries, Ministry of Agriculture, Irrigation and Livestock, Ministry of Labor, Social Affair, Martyrs and disabled, Ministry of Mines and Petroleum, Independent, Independent Civil Service Commission 

This council will concentrate on reforms to the civil service, including devising appropriate rule and regulations; ensuring nationwide rollout of civil service management systems. establish a transparent system to process complaints made by members of the civil service, and the implementation of the CCR Capacity Building for Results (CBR) program

Afghanistan National Peace and Development Framework (ANPDF) 2017 to 2021

Acronyms 

Afghanistan National Peace and Development Framework (ANPDF) 2017 to 2021

All Images from UNESCO 

Nationwide Crowdsourcing Photo Competition

The Afghanistan We Are Proud Of

Cover photo:  Kabul Carousal  

© Ali Hamed Haghdoust  

Pages 21 & 21:  Framland in Ghazni  

©Fardin Waezi

Pages 28 & 29:  Baluchi Embroidery in Baghlan  

©David Marshall 

Pages 32 & 33:  Students at Kabul University 

©Aziz Azizyar

Page 41:             Shepheard in Kandahar  

©Hamid Reza Rahmani

Pages 44 & 45:  Traditional Atan dancers  

©Feroz Muzafri