The World Bank in Afghanistan following its latest economic update on Wednesday informed a robust economic growth in Afghanistan amid security transition process.
The economic updated released on Wednesday concluded that the real GDP of Afghanistan has increased from 7.3 percent o an estimated 11.8 percent in 2012, with an exceptional harvest, supported by the launch of first large-scale mining activities.
World Bank in its update also added that inflation has dropped to 6.4 percent and continuing high levels of aid helped to build up further international reserves.
However the transition manifests itself predominantly in a loss of business confidence so far, reflected in lower private sector activity and a depreciating exchange rate, the World Bank officials said adding that this compounds the already sluggish recovery of the banking sector from the Kabul Bank crisis which hit the country in 2010.
Trends in public finance deserve attention: more on-budget aid poses challenges the Government’s capacity to execute an increasing budget, World Bank officials insited. Growth of domestic revenues is slowing due to lower performance in the collection of customs revenues.
In the meantime World Bank warned that the medium-term outlook is tainted by uncertainty. Political and security uncertainties are expected to limit private-sector growth in the coming years. Increased public spending, however, will continue to fuel demand for services and construction through 2013.
World Bank in its Economic Updated also insisted that mining should contribute more noticeably to growth with the increase of oil production in Amu Darya.
However, moderate rainfalls are likely, which would reduce this year’s harvest to more a regular output and slow GDP growth to 3.1 percent in 2013, World Bank said in its statement adding that group could pick up in 2014 assuming favorable weather conditions and peaceful elections.
The transition process exposes Afghanistan to a number of serious risks, such as rising financing for public service provision, World Bank concluded.
But World Bank insisted that promoting sources of inclusive economic growth, especially agriculture, and strengthening domestic revenue mobilization will be important to mitigate some of these risks.
In particular, a stronger reform effort in areas such as tax policy and customs is required to safeguard past gains in development, World Bank said in its statement while emphasizing on improvements in the legal and regulatory environment of mining could help to secure planned investment.
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