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Political crisis, virus take toll on growth rate

Political crisis, virus take toll on growth rate

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On
Apr 06, 2020 - 10:46

KABULinfo-icon (Pajhwok): Afghanistaninfo-icon’s economic growth rate will remain unchanged at three percent in 2020, says a new Asian Development Bank (ADB) report.

However, the growth rate might go up to four percent. In 2020, political uncertainty and the Covi-19 pandemic could weigh heavily on the national economy.

The government should focus on enhancing domestic revenue to minimise grant dependence and achieve self-reliance, ADB suggested in its Asian Development Outlook (ADO).

ADB Country Director Narendra Singru said: “Accelerating domestic revenue mobilisation can help Afghanistan become more self-sufficient in financing public expenditure and reducing dependence on foreign assistance.”

GDP growth is projected to rise to 4.0% in 2021, supported by improved prospects for long-term political stability and security, as well as a successor to the Extended Credit Facility program of the International Monetary Fund that reached completion in December 2019 -- and despite a gradual decline in international grants.

On the upside, a successful political settlement and sustainable peace would open a new window of opportunity for Afghanistan and unleash significant growth, raising business confidence and paving the way for prosperity and socioeconomic development.

On the downside, uncertainty and lower domestic demand could ensue from a prolonged period of political transition after the September presidential elections, delays in commencement of intra-Afghan talks and a steeper reduction in foreign aid.

These risks could be compounded by rising tensions in the Middle East or a worsening COVID-19 outbreak in Afghanistan or Iran, a major trade partner and source of remittances, the report explained.

The government should pursue structural reform as outlined in the Afghanistan National Peace and Development Framework to ensure sustained progress towards self-reliance, it added.

“Strenuous efforts are needed to improve governance and public financial management. Policies should continue to work toward strengthening revenue collection, improving customs and tax administration and compliance…”

In the short term, policy actions can focus on introducing digital technology into revenue collection, reinforcing controls and tax audits, strengthening antifraud measures and sanctioning noncompliance.

More excises and property taxes should be imposed over the medium term, the report suggested, saying a fiscal regime for natural resource taxation be developed. Additionally, enforcement and compliance need to be strengthened.

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