Transcript The World Bank in Afghanistan

The World Bank in Afghanistan
Josephine Bassinette, World Bank Office Afghanistan
Brussels, February, 2011
1
Agenda
I.
Afghanistan Country Context
II.
The World Bank in Afghanistan
III.
Program Highlights and Results
IV. Implications for Transition
2
Part I:
Socio-economic Context
3
The development challenge
Human Development
Population (m)
Maternal mortality (per 100,000 live births)
Under 5 mortality (per 1,000 live births)
Life expectancy at birth
Gross enrollment (both sexes)
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Source:
Human Development Report
Afghanistan
29
1,800
257
45
50
Pakistan
185
320
89
67
39
India
1,214
450
69
64
61
Bangladesh
164
570
54
67
52
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Afghanistan is lagging the
region and the world
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Ranked 155/169 in HDI
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Immense challenges of
capacity, conflict, terrain
and governance
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But GoA has made
progress, and in particular
has put in place the
platform for sound
development
partnerships
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Progress in GNI/per
capita, access to
education and health
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Commitment to basic
macro-fiscal stability
Poverty in Afghanistan
Poverty affects 36% of the population: 9m Afghans not able to
meet basic needs
More than half the population is vulnerable to falling into
poverty
Estimated 80% of Afghans live in rural areas, where poverty is
much higher than in urban areas (29%)
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Headcount (%) under
national poverty line
Survey year
Year when poverty line
was defined
Afghanistan
36
2007-08
2007-08
Bangladesh
40.0
2005
2000
Bhutan
23.2
2007
2007
27.5***
2004-05
1993-94
Country
India
Maldives
5
2004
Nepal
30.9
2003-04
2003-04
Pakistan
22.3
2005-06
1998-99
Sri Lanka
15.2
2006-07
2002
Source: *PovcalNet; **Ravallion, Chen, and Sangraula (2009); ***World Bank staff
estimation; ****Chen and Ravallion (2008)
Security conditions
© UNDSS SECURITY INCIDENTS

2400
2200
2000
1800
2003
2004
1600
2005
1400
2006
1200
2007

2008
1000
2009
800
2010
600
400
200
0
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec

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Insecurity increased sharply
from 2005
Conflict constrains
development :
 Accessibility for
Government and
development
professionals/partners
 Increases costs
 Reduces market for
suppliers
 Threatens M&E
Community-based
programming and
monitoring becomes
increasingly critical
Sustainability
Economic Growth
Security, Growth, Jobs all inter-linked
Growth being fueled by private consumption financed
primarily by security economy and off-budget donor inflows
that drive aggregate demand


Contribution to GDP, (Percentage points)
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Sources of Growth Highly Vulnerable
Without external inflows, the economy very vulnerable
to shocks (i.e: bad harvest years, food/fuel price rises).

Real GDP Growth
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Contribution to GDP (Percentage points)
Good News: Domestic Revenues continue to
grow.
Domestic Revenues 2010/11
(Actual vs. target)
•Tax revenues:
• increased by 34% (YTD Q2)
compared to same quarter last year
- Sales tax collection:
24% increase due to mandatory 2%
BRT tax at border crossings and 10%
BRT on services
-Income tax collection:
45% higher, mainly personal and
company taxes.
• Customs duties:
29% increase
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But public spending dependent on external
financing

Domestic revenues only cover 1/5 of public spending

Government estimates external budget at $6 billion 2010/11, donors report $9 billion
Total Budget 2010/11
Note: 2010/11 external budget est. US$ 6 billion, core budget US$ 4.6 billion with an estimated 40%
execution
rate by year end.
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Part II:
The World Bank in Afghanistan
11
Snapshot: The World Bank in Afghanistan
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Opened office in March 2002 following Post Conflict Needs Assessment in Winter
2001
Grown to 100+ with almost 25 internationals + growing cadre of professional
national staff.
Heavy emphasis on in-house capability for PFM, Procurement
Security costs, “footprint”, duty of care hugely complicates normal operations
Two main financing platforms + economic and sector work:
IDA
• Grant financing
• Has benefited from post-conflict
exceptional allocations
• $2.3bn since Fy02
• Project and policy-based financing
• 23 active projects
• Analytical & sector work underpins
operations
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ARTF
• 30 donors; largest source of on-budget
financing for GoA
• Supports scale up of national programs
and other IDA investments
• Stand-alone ARTF financed projects
• $1.7bn of ARTF investments
• $2.4bn of recurrent cost support
• ARTF Incentive Program builds in reform
Strategic Approach
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Mindful of the operating environment:
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Fragile institutions and weak human capacity
Particular absence of institutions/capacity at sub-national level
Corruption, opium, insecurity
Geographic and ethnic divides require equity and resonance w/people.
WB approach:
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Afghan ownership: 100% on budget, with government
In for the long-haul:
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Sustain and enhance core programs delivered nationally, equitably, through local
structures
Build legitimacy and capability of state and other institutions
Invest for growth and creation of jobs – infrastructure, connectivity, markets
Support donor- GoA coherence through use of ARTF and Bank “voice”
Encourage reform and policy dialogue with financial instruments and analytics.
Supervise and Evaluate
World Bank Financing to date
Annual Commitments
IDA
ARTF
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Aggregate Commitments
Afghanistan Reconstruction Trust Fund
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Established in 2002 to provide pooled financing to the
operating budget
Constant evolution to meet changing needs:
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Platform for GoA-Donor shared vision: ARTF Strategy Group
+ 3-Year Financing Strategy
Policy dialogue & reform – ARTF Incentive Program
Main financier for National Programs
Public Financial Management at its Core
As a result, ARTF now largest source of on-budget
financing for GoA – one quarter of total budget
15
Part III:
Program Highlights and Results
16
NSP is IDA’s flagship rural program, co-financed by ARTF/JSDF.
Communities vote by secret ballot…
…to elect 22,500 CDCs across all 34 provinces…
….CDCs prepare development plans…
…. receive a block grant..
…for local infrastructure contracted by communities:
Looking ahead…..
• CDCs are now acknowledged as the gateway to development in
Afghanistan’s communities.
• With JSDF
17 support, CDCs are now clustering at district level.
• CDCs are set to play a stronger governance role as Village Councils.
• NSP has disbursed $700m through block
grants to 21,300 communities
• 48,300 sub-projects financed, 34,800
completed
• 25% transport, 24% WatSAN, 18%
irrigation, 13% energy, 12% education
• Sub-projects have an average ERR of 19%
• The program has an ongoing MIT/Harvard
Impact Evaluation
• Around 17 million Afghans have been
touched by the program
IDA has invested in other rural infrastructure.
Irrigation rehabilitation:
Rural access:
The need for irrigation is vast: total irrigated land pre 1979
was 3.2m hectares. In 2007, this was only 1.8m.
EIRP has rehabilitated
around 750 schemes…
…resulting in 130,000ha
of new irrigated land…
…and a 70% reduction
in water-related
disputes.
600,000 households
have benefited.
Increased irrigated land has boosted yields of staple crops
such as wheat, maize, and rice, as well as of onions, melons,
and watermelons.
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Since 2002 the Bank has supported the government
develop its rural access program.
NRAP uses communitybased contracting for
tertiary roads…
…and contractors for
secondary roads.
Under NRAP, over
10,000kms of roads have
been rehabilitated
….providing 14m labor
days of work, including
training for 2,800 excombatants..
Rural access is critical to reduce time to market for
agricultural goods.
IDA is now preparing a
significant scale up of the
program.
IDA is now preparing a
significant scale up of the
program.
The need remains great.
The need remains great.
IDA/ARTF is increasing access to national service delivery
Education
Health
IDA has developed the basic package of health services
After the fall of the Taliban, only 43 percent of the country’s
boys and a dismal 3 percent of girls were enrolled in schools. model, which is now co-financed by US and EC.
Over 10,000 School Shuras have
been established to administer
block grants for school
construction. Communities
contribute up to 20% in cash or
kind.
School enrollment now the highest
in Afghan history. Enrollment in
grades 1-12 increased from 3.9
million in 2004 to 6.3 million in
2008. Girls now make up over one
third of all school children.
IDA/ARTF is also supporting higher education and TVET
though long way to go
Block grants help upgrade
:
university facilities and
partnerships build faculty capacity.
In Kabul, the National Institute for
Management & Administration
now has 1,700 students.
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IDA finances NGO contracts in
8 provinces, and GoA delivered
services in 3. The project has
also supported the Community
Midwifery Education program.
In the 11 project provinces, the number
of health facilities has nearly tripled from
148 to 421.
Coverage rates rose from 9 percent of
the general population in 2003 to 85
percent in 2008.
20,000 community health workers
trained and deployed.
IDA is also financing Johns Hopkins to monitor the sector.
Johns Hopkins study reveals a 26% drop in under-5 mortality
rate. 3rd party evaluation shows remarkable improvement in
health center staffing, equipment, and supply stocks.
Absenteeism is virtually unheard of, contrasting markedly
with absentee rates of up to 40 percent among public sector
doctors elsewhere in South Asia.
IDA is investing in good business environment
ICT sector
Power sector
Mining sector
Financial Sector
IDA/ARTF
investment in 2002
supported
regulatory
framework
IDA/ ARTF
rehabilitation of
hydropower stations
With IDA support
Afghanistan has
tendered 2 major
deposits
ARTF/IDA has
supported the
establishment of the
microfinance sector
…leveraging $1.5bn
in private sector
investments
….leading to extra
250MW onto the grid
Aynak and Hajigak will
be $2-3bn
investments
1.5 million loans
worth a total $750
million
Telephone access
increased from less
than 1 percent to
32 percent of the
population.
40,000 new
customers and better
service provided to
200,000
Ancillary
infrastructure will
require $2-5bn per
mine: resource
corridors
13 microfinance
institutions (MFIs)
with 304 branches in
26 provinces
New IDA
investment in fibre
optic backbone
under preparation.
Investment in core
backbone of North
East Power System
IDA is supporting the
implementation of
Extractive Industries
Transparency
Initiative
The sector employs
4122 Afghans. Around
650,000 jobs are
sustained by
microfinance.
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IDA is supporting fiscally and economically sustainable development in Afghanistan
Customs
Public Financial Management
IDA is supporting GoA capacity to raise revenue and
manage its finances.
ASYCUDA installed at 4
key customs posts, plus
Kabul Airport. IDA now
financing national rollout.
Policy-based operations
ARTF Incentive Program
IDA DPGs
IMF conditionality
Technical Assistance
IDA has put in 8 years of
continuous investment
Trade volumes have
increased from $2bn
(03) to $8bn, and an 8fold increase in customs
revenues.
Audit, procurement &
treasury operations
National & sub-national
AFMIS rollout
Oversight
IDA & ARTF use
national systems
IDA technical &
fiduciary oversight
ARTF Monitoring
Agent
Regular PEFA
assessments
Afghanistan now has a robust PFM system that is better
than the average of Low Income Countries.
Reliance on outside
support is declining…
$3,000
80%
70%
$2,500
Domestic revenues
60%
$2,000
50%
$1,500
Operating
expenditures
40%
30%
$1,000
20%
$500
10%
$021
0%
2002/3
2003/4
2004/5
2005/6
2006/7
2007/8
2008/9
2009/10
20010/11
% of operating
expenditures
covered
% of operating
expenditures
covered by ARTF
Part IV:
Implications of Transition
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Transition – what might it mean?
Transition goes beyond security – has profound
socio-economic and political economy impacts
 Decline in donor financing for military spending
and aid over time
 GoA will need to widen focus outside of Kabul,
move from emergency to sustainability, etc.
 Shape of the State – center, provinces, districts?
 May be difficult to adjust to just being a ‘poor
country’
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What are the Fiscal Implications of
Transition?
Achieving fiscal sustainability will require:
 Substituting Donor grants to the operating & development budget.
 Assuming external budget obligations on the operating budget
 Investment in O&M- to maintain acquired assets
 Paying for a share of TA , advisors/ consultants performing civil
service functions and building capacity of Afghans to assume those
functions.
Continuing with the Kabul process will require selectivity:
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Assuming large share of the NPPs
Sustainable Security Spending will require ring-fenced donor aid or
massive reallocation:
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Plans to increase forces to 378,000 by 2012 is a 42 % increase.
Donors currently pay for 72% of the security wage bill
100% of the military equipment, training, procurement.
Transition – what might it mean?
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Potential Negatives:
 less money for public sector spending: new investment, O&M for
existing assets?
 may lead to flight of human capital and associated capacity
 size of Government and service delivery will need to reflect less
money ( this has particular impact on security sector)
Potential Positives:
 Better prioritization could improve outcomes
 may improve efficiency of delivery by removing high cost
overheads
 may start to remove market distortions eg in wage rates paid for
TA, allowing more opportunity to move to more ‘normal’ wage
market and removing the parallel civil service
 may reduce sources of corruption eg trucking contracts, fuel and
security contracts
 Opportunity in ownership and capacity building, but responsibility
for results
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Transition – how is the Bank positioned?
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IDA/ARTF already on budget, through Government
ARTF provides important platform
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for Donor-Government dialogue
For continued policy reform
For accountable, transparent donor flows
National programs should remain at core of service
delivery if financing maintained, gains locked in, and
enhancements continually sought.
Analytic work: Sustainability Study; Sources of
Growth
Public Administration Reform Program and PFM
could be at core of Government capacity building
Long-term partner