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Progress and Pitfalls of “Peace-Building”
in Afghanistan
continues......
In the immediate aftermath of war and a devastating drought, and while overwhelmed with the unexpected return of refugees in 2002, the Afghan government and its international partners succeeded in preventing a major humanitarian crisis.
There has been steady though slow economic growth since 2002/3 with a cumulative increase of real,
non-opium GDP of almost 85 percent (29 percent in 2002/3), 16 percent
in 2003/4), 8 percent in 2004/5), and a projected 14 percent in 2005/6. It
68 is projected that real GDP will increase by 11 percent in 2006/7. Good
rains after years of drought, a commitment to a reform agenda, relatively
low levels of inflation, and improved budget management have promoted
good growth performance.
The Government introduced a new currency, ended hyper-inflation, guaranteed the independence of the central bank in the constitution, started private commercial banking, and introduced a single-window system for registration of investments.
Nonetheless, substantial drivers for growth performance are associated with the illicit opium economy, an influx of cash due to military operations, and unsustainable development financing. The high real exchange rate supported by the foreign exchange inflows has made imports cheap, which is popular with consumers, but it has made Afghanistan uncompetitive for either exports or import substitution. Afghanistan has few licit exports. But imports from neighboring countries financed by aid, narcotics exports, and remittances have increased since 2001. Imports exceed licit exports (net of re-exports) by a ratio of eight to one.
Progress has also been made on the infrastructure front. Progress is
well underway in rehabilitating Afghanistan’s ring road and the roads
connecting the country to its neighbors. Electricity systems for all major
cities are under repair.
The telecommunications sector in Afghanistan is growing exponentially, and mobile telephony now connects Afghanistan’s major urban centers to each other. Those urban centres have also seen
massive construction in the past four years, while rural infrastructure has
been built and rehabilitated in thousands of villages throughout rural
Afghanistan through bloc grants to communities.
To be continued.......