Political instability clouds growth outlook: IMF

May 25, 2014 - 12:39:17 am

Washington: International Monetary Fund (IMF) says political instability, regional security dynamics and slow application of policies cloud Afghanistan’s growth outlook despite enormous progress.

In its latest report on the country, IMF says growth prospects “remain clouded by considerable downside risk” although the country has moved forward in reconstruction, development and per capita income. 

The report cites adverse domestic, political instability, inadequate implementation of economic policies and donor fatigue clouds its prospects. The uncertainties over the last two years, and the pull-out of international troops and weak institutions continue to constrain Afghanistan’s growth.

 “These uncertainties reduced confidence and discouraged private investment. Growth slowed from 14 percent in 2012 (boosted by a bumper harvest) to an estimated 3.6 percent in 2013. Inflation was 5.6 percent year-on-year in March 2014,” says the report.  On 2014 prospects in post-Hamid Karzai era, the report says, “The outlook should be positive, assuming smooth political and security transitions, continued reform and donor financing.”

Large security and development expenditure needs and a limited domestic revenue capacity mean Afghanistan will remain dependent on donor financing for an extended period. In addition to donor support, macro-economic stability, structural reforms, and political and security stability are needed to ensure durable and inclusive growth. Risks to the outlook are mostly on the downside, the report said.

 On measures Afghanistan needs to take to boost its economy, the report stresses a fiscal regime for the natural resources sector, enacting VAT Law swiftly and reaching domestic revenue targets.