Afghanistan’s development is being thwarted by poor aid architecture, as well as by the Taliban-led insurgency and drug trafficking, the country’s finance minister Anwar ul-Haq Ahady warned this weekend.
“We are not complaining about the amount of aid,” Ahady said yesterday in an interview with Emerging Markets. “But the real issue is aid effectiveness.
“What is spent is not competitive, due to high procurement costs.” With more than 2400 aid agencies and NGOs in Afghanistan, the aid infrastructure distorts funding flows.
His remarks came as street demonstrations spread in Afghanistan over the killing of civilians by US troops, which has increased resentment against coalition forces and undermined support for president Hamid Karzai’s government.
Ahady, a US-educated professor, called on the international community to build Afghanistan’s capacity from a donor driven country to government-directed aid. “The government ownership of projects is not there. Money should be absorbed into the local economy,” he said.
Foreign donors have poured $13 billion of aid in to Afghanistan following the US-led toppling of the Taliban regime in 2001. But the aid programme has been criticized for creating capacity constraints and failing to achieve adequate development.
In January this year, donors pledged another $10.5 billion over the next five years as part of Afghan Compact initiative, which assesses aid against security, economic development and governance targets. Ahady hopes to see this aid channelled through government budget.
The Taliban insurgency is hampering the government’s economic programme, Ahady added. “Lack of security always impacts economic activity, and we are experiencing problems setting up programmes in many areas outside Kabul.”
Ahady also criticized the strategy, advocated by the US, of eradicating opium fields at a stroke. “The presence of poppy fields is a failure for all of us but an immediate disappearance will create a hole in the economy and the hole needs to be filled.
“Any strategy should not disregard macroeconomic consequences, as [poppy farming] is a $2.8 billion [turnover per year] sector of the economy”.
But Ahady did not offer a new strategy to address the worsening problem, other than expanding existing donor-led initiatives to provide funds for people to make alternative livelihoods.
His rebuke to the US came after last month’s revelation by president Karzai that the government has held meetings with Afghan supporters of the Taliban, in an attempt to woo them away from foreign militants and Taliban leaders.
Ahady, who left Afghanistan over 25 years ago to return in 2002 as the director of the country’s central bank, denied that political friction with Afghanistan’s main trading partner, Pakistan, is damaging economic cooperation, but cautioned that the present stand-off bodes ill for trade relations.
“Trade with Pakistan reached $1.3 billion last year making the country our largest trade partner. Politics have not affected the economy yet. It may soon, but we hope it will not have any impact.”