4 years of peace could increase Afghan GDP by 7%: UNDP

KABUL (Tolo News): UNDP Afghanistan on Tuesday launched its latest Afghanistan Country Report titled “Achieving Afghanistan’s Long-term Goals amid Short-term Adversities” in which it estimates that if peace is achieved and observed for the next four years, GDP will increase by 7 percent.

“This will also increase the government’s revenues and ability to fund aspirational development and social programs. However, governance needs to improve and corruption to be addressed head-on, otherwise, things will not change for better,” the report says. The report is the latest of a series of “Country Notes” by UNDP Afghanistan that analyzes the macroeconomic and fiscal situation of the country and offers policy recommendations on the way forward.

The report is part of UNDP’s continuing policy level support to Afghanistan. It provides an assessment of the current situation and identifies opportunities and challenges facing Afghanistan. The report says that market building is also vital for accelerating economic growth and improving livelihoods.

“Combined with lack of progress towards peace and governance, the relatively fast population growth compared to low economic growth in the last decade has resulted in declining per capita incomes and increasing poverty. The report estimates that, while the economy may recover its pre-pandemic level in the next two-three years, per capita incomes may still be lower by nearly 10 percent in 2024 compared to 2019. Poverty rate may raise to up to 70 percent and number of those who would need humanitarian assistance may reach 18 million by the end of 2021,” the report stated.

The report also estimates that improvements in the business environment and the investment climate, easing access to credit, reductions in trade costs, agricultural improvements and strengthening governance, “if pursued individually, each can add between 1.5 and 2.5 percentage points to the economic growth rate. However, if these policies are pursued in tandem, GDP could increase by more than 40 percent by 2030 compared to the business-as-usual scenario.”

The road ahead will not be smooth. The international experience on fragile states suggests that peace may come, but conflict may not go. Low-income countries have a high probability of reverting to conflict within five-to-ten years until they reach a level of per capita income of at least $5,000. To reach that level the economy of Afghanistan would need to grow annually at a steady rate of 8 percent for the next two decades.

If peace is achieved soon, the report says, Afghanistan can “take advantage of its strategic location at the crossroads of Central Asia, the Indian subcontinent, the Middle East, and east Asia, and its wealth of unexploited mineral resources. It has export potential from several high-value products such as carpets, gemstones and saffron, and a vastly untapped human capital due to high unemployment and the limited role of Afghan women in the economy and public life.”

The objective is to provide a framework so that policies, programs and projects complement, rather than compete with each other in order to make the total greater than the sum of the parts, Abdallah Al Dardari, Resident Representative UNDP Afghanistan, writes in the report. He says that the report has estimated the likely impact of several individual policies such in the areas of governance, the business environment and the investment climate, access to credit, agriculture and trade. Each one of them can add 1.5 to 2.5 percentage points to the economic growth rate,” he says.

“The pandemic has necessitated recurrent and development expenditures to be reallocated towards COVID-19 response activities while it has added to the fiscal pressures due to additional funding required to support the health sector and expand social protection while government revenues have been reduced as a result of the contraction of the economy,” the report said.

In Afghanistan, the test rate for COVID-19 is far below that in other neighboring countries, including Bangladesh, Bhutan, India, Maldives and Nepal. As of September 30, 2020, the total cases tested per million people in Afghanistan was around 1,000 as compared to 1,400 in Pakistan, 2,200 in Bangladesh, 2,700 in Nepal and more than 4,500 in India, the report says.