The Challenges of Economic Growth in Afghanistan

H.E. Minister Anwar-ul-Haq Ahadi, finance minister of the Islamic Republic of Afghanistan, addressed a range of issues pertaining to the Afghan economy, including privatization, resources, management, and corruption, at this event.

Discussing the overall situation in Afghanistan over the past six years, Ahadi said that there have been major changes in Afghanistan in politics, society, and economics. As such, the country is still fully adjusting to a market-based system and its mechanisms.

In a reference to Afghanistan’s past in the 1980s, he said that for a long time, the argument that "socialism was more efficient" prevailed in the country. However, commenting on academic theory, Ahadi said that, " The overwhelming majority of academicians would view that economic growth needs the best incentives." In the old system, production was partially done by the state, and partially by the private sector. In the new system, which Afghanistan is now experiencing, the emphasis is more on the "individual entrepreneur," he said. Underpinning any economic activity, he said, is security—"A minimum level of security is absolutely necessary for an economic transaction."

He then discussed specifics of the Afghan economy. As part of its economic liberalization plan, the country has eliminated the capital controls that had previously existed. This accommodation has spurred investment. "Even though a lot of money is leaving Afghanistan," he noted, "a lot of money is coming into Afghanistan." The Karzai government’s move to decentralize the banking system provided a further foundation for economic growth, according to Ahadi. Moreover, private investors have invested approximately $800 million in the telecom sector in recent years, he said. Afghanistan’s GDP has doubled in the past five years and now stands at a 13 percent growth rate, while inflation has remained relatively low. "I think the new system has benefited the people in the sense that services are better now. Services that are provided by the private sector are much better," Ahadi said.

Ahadi estimated that the minimum amount of additional investment needed to rebuild Afghanistan is approximately $30 billion. Over the last five years, donors have pledged about that same amount, and $13 billion has been spent on reconstruction projects in the country. However, he noted, "Our needs are much larger than this." Afghanistan has not started on a national development strategy, save for the "ring road" around the country. Of the six million students in schools, 35 percent are female (in contrast, he noted, under the Taliban, only one million students were enrolled in schools). Thirty-two million people have received a basic health care package. Significant progress has been made in rebuilding state institutions.

Management was another area Ahadi discussed. "We’re in a very poor situation," in that regard, he observed. "The twenty-five years of fighting not only destroyed our country, it also destroyed our educational system." Because of this paucity of human resources, he is "lucky" to find fresh graduates in accounting, and the Afghan government struggles to pay recent graduates with MBAs fitting salaries. He commented that it takes at least five years to see the products of educational reform, and another five years to find qualified human resources.

Speakers

His Excellency Anwar Ul-Haq Ahadi
Minister of Finance, Islamic Republic of Afghanistan
Beth Cole, Moderator
Senior Program Officer, U.S. Institute of Peace

Archived Audio

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