Afghanistan at the Crossroads

NATO forces led by the U.S. completed their combat mission in Afghanistan on December 31, 2014 as planned. The new role for the U.S. will involve support and training within the framework of the Bilateral Security Agreement (BSA) and the Status of Forces Agreement (SOFA). Realizing the significance of BSA for his government, Afghan President Ashraf Ghani was quick to ink the BSA and SOFA, doing so on his second day in office.

Last year was both a difficult and eventful one for Afghanistan. Successful security and political transitions were the major developments. The country had started receiving economic shocks well before 2014, partly because of the uncertainty surrounding the political dynamics and partly due to the very real impacts of the dwindling financial resources resulting from the drawdown of international forces. According to the World Bank annual GDP growth dropped from around 12 percent in 2012 to around 3 percent in 2013, remaining at about that level in 2014. With a new government in place, and a recently announced cabinet set to be endorsed by the Parliament, there is a growing sense of optimism that the economy will gradually improve.

Unemployment across the country has been held down by the large number of Afghans engaged in international aid operations. With foreign troops and aid workers leaving the country, an economic impact in inevitable. Yet the repercussions of the NATO pull-out are not all negative. It also means Afghan ownership of the development process and a first step towards efforts for self-reliance, provided that the new National Unity Government is able to fulfill expectations.

For the past 12 years, Afghan economy has been virtually dependent on foreign aid. According to the Ministry of Finance, almost 100 percent of its development budget and 45 percent of its operating budget is externally financed, with the U.S. being our major donor. National revenues struggle to fund even a small share of the national budget. Since 2002, with the new government in power after the collapse of the Taliban, the Afghan economy enjoyed reasonably steady growth. GDP increased from $3 billion in 2002 to $20 billion in 2012. In the absence of a viable economic base, however, there are no grounds for concluding that the reported economic growth was sustainable. With an unstable political environment and deteriorating security, the government never managed to build viable institutions that could have paved the way for sustainable economic growth by tapping the country’s vast natural resources.

Afghanistan also struggled to attract any notable domestic and foreign investment, hamstrung by political uncertainties, excessive bureaucratic procedures, the lack of an adequate legal and regulatory framework, and systemic corruption within the government machinery. The associated risks prevented potential national and international investors from becoming involved in major business ventures.

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Ajmal Shams is President of the Afghanistan Social Democratic Party, or Afghan Millat National Progressive Party, and is based in Kabul, Afghanistan. He was Director of Planning and Policy at the Ministry of Urban Development. He served as Policy Advisor to President Ashraf Ghani when the latter chaired the security transition commission. He mainly writes on political and developmental issues. He has published in Foreign Policy, News International, Gulf News, Asia Times, South Asia Magazine, and others.