Domestic revenue growth slows down
In an economic update, the bank linked Afghanistan’s economic growth to an exceptional harvest, supported by the launch of first large-scale mining activities.
It said real GDP growth increased from 7.3 percent to an estimated 11.8 percent in 2012, when inflation dropped to 6.4 percent and continuing high levels of aid helped to build up further international reserves.
“So far, transition manifests itself predominantly in a loss of business confidence, reflected in lower private sector activity and a depreciating exchange rate,” the report said.
The situation compounded the already sluggish recovery of the banking sector from the Kabul Bank crisis, which hit the country in 2010.
More on-budget aid posed challenges in terms of the government’s capacity to execute an increasing budget, the bank’s country office in Kabul said.
With growth of domestic revenues slowing due to poor performance in the collection of customs revenues, the medium-term outlook is tainted by uncertainty.
“Political and security uncertainties are expected to limit private-sector growth in the coming years. Increased public spending, however, will continue to fuel demand for services and construction through 2013.”
The World Bank warned the transition process exposed the country to a number of serious risks, such as rising financing for public service provision.
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