2006 SPEECH TO THE WORLD BANK (881 Words)

Excellencies, Ladies and Gentlemen: 

It is a pleasure to address this forum again. In the past year, Afghanistan has made significant strides towards achieving our vision of a democratic state, a pluralist society and a market-based economy.

Politically, the newly and democratically elected Parliament convened for the first time, initiating a legislative branch to balance the executive and judicial branches. While still young, the Parliament has already reviewed and passed its first national budget, confirmed members of Cabinet, and sparked a pertinent debate on the role of sub national administration.

Socially, in the past year, Afghanistan has completed the Millenium Development Goals report as well as an interim Poverty Reduction Strategy Paper. Both include a vision of an educated, healthy, economically vibrant and secure Afghan people and provide the basis for which the national budget has become an instrument of policy.

Economically, Afghanistan has continued implementing a reform strategy, aiming to create an environment conducive to private sector investment. This reform has been monitored by the IMF through the Staff Monitored Program, and I am pleased to report that due to good performance under the SMP, the IMF Board approved a Poverty Reduction and Growth Facility program for Afghanistan in June of this year.

Afghanistan could not have made this progress on its own.  In January, the international community renewed its political and financial commitment to Afghanistan at the London Conference. Following the completion of the objectives set out in the Bonn Compact, the Afghanistan Compact sets out the mutual goals and commitments of the international community and Afghanistan over the next five years.

Meeting the Compact’s ambitious targets will not be cheap. With over $16b committed by the international community over the past four years, donors pledged in London an additional $10b to support implementation of the Compact. While both donors and the Government of Afghanistan struggle with low disbursement rates, I maintain that by empowering the national government to manage and disburse funds through the national budget mechanism, aid is spent more cost effectively, more in line with national priorities, and with more capacity building of government institutions. I am working to both strengthen the Government’s capacity to manage aid resources and to bolster donors’ confidence in disbursing more funds through this channel. In order to place our initiatives into an international context, Afghanistan endorsed the Paris Declaration on Aid Effectiveness in March of this year, and Afghanistan was the first country to complete the 2006 round of monitoring in August.

In addition to the continuing development assistance of the international community, our major creditors announced in London that they will forgive 100% of all outstanding debt if Afghanistan reaches completion point of the Heavily Indebted Poor Countries process. After the approval of Afghanistan’s PRGF program, I negotiated with our creditors at the Paris Club for Naples treatment of our debt.  I expect that Afghanistan will reach completion point of the HIPC process within three years. As Afghanistan’s debt sustainability is extremely low, I urge donors to continue to provide grant financing.  I am appreciative of the World Bank’s 100% grant assistance, and I support the Asian Development Bank discussions to harmonize ADF funding with IDA, which would allow for similar terms.

Despite the progress we have made over the past year, there is still a great need for support. As you know, continuing investment in energy, roads, irrigation, education, and health is essential. Alongside new investment in these sectors, we are focusing on developing a strategy to maintain our current investments and to integrate recurrent maintenance costs into fiscal projections.

Success in the two interrelated sectors of security and counter narcotics is the foundation upon which any development can be based, and I am disappointed to report that not enough progress has been achieved in the past year. While together with our international partners we are reviewing the approach to security and counter-narcotics, it is imperative to also consider the fiscal implications of these initiatives. It is a vicious circle with which we are struggling: insecurity significantly affects the costs of development, with security-related costs driving up the price tag of both infrastructure and service delivery programs; whereas the lack of development, including good governance, prompts insecurity.

Corruption is another challenge facing my Government, and I welcome this year’s focus of the annual meetings on “Governance and Anti-corruption”. In Afghanistan, due to weak governance and a weak judicial system, as well as insecurity and a narcotics industry, we struggle with corruption on all levels: taking bribes to perform the duties of one’s job, nepotism in hiring practices, illegal fees, and siphoning money from the reconstruction process. The Afghan public recognizes the issue and demands action. Although every context has its own character, our corruption issues are not unique. I do not believe that adding layers of bureaucracy into procedures or heavy technical assistance and reporting is the solution. I have already asked the World Bank and our development partners to assist Afghanistan in practical and timely methods to identify and enforce anti-corruption measures, and they will start their projects soon.

In summary, Afghanistan has made significant progress in the past year, but we need support to continue our reconstruction efforts and to address the challenges of security, counter-narcotics and corruption. You have been generous with us in the past four years and we hope we will continue to receive your support.   Thank you.