New report alerts donors to reality of the economy

Afghanistan is one of the poorest countries in the world with a continuing vicious cycle of insecurity, an informal economy and drug trafficking, according to a World Bank report released last Friday. The first economic report on Afghanistan by the World Bank in a quarter of a century indicates that up to 90 percent of the country lives in an informal economy, denying the government much needed taxes and other revenue needed for development. The report - "Afghanistan must break out of a vicious cycle of insecurity, informal economy and drugs" - finds that the country's future prospects depend on whether the political leadership can free Afghanistan from this cycle in which a largely informal economy, the opium trade and violence reinforce each other. "The development strategy of Afghanistan need to be based on the real situation on the ground, so this report is aimed at government donors, the World Bank itself and the wider public as well," William Byrd, senior economic adviser and principal author of the report, told IRIN. He said the report was meant to provide some analytical framework ideas for institution-building and policies. The report stresses that addressing the key problems of insecurity, state building, reconstruction and drugs in a timely, coordinated manner is absolutely pivotal to determining which path the country will follow in coming years. Byrd described the Afghan economy as recovering. "But 80 to 90 percent of it, including the opium trade, is informal - meaning that entrepreneurs cannot become sizeable registered businesses, and the government cannot collect revenue," he said. The report identifies insecurity as the main reason forcing entrepreneurs to stay informal. "In turn, a weak government with insufficient funds and technical expertise cannot provide the economy with the support it needs to grow, nor can it provide the people with the security from violence and the social services they need to thrive." The report indicates that average per capita income is roughly US $315, including the opium economy, and $200 without it. Meanwhile, average life expectancy is given as 43 years, one of the lowest in the world. The opium economy is described in the report as the lynchpin of the vicious cycle "with adverse effects on security, political normalisation, regional relations and state building". "Sustained and well-coordinated international support for the Afghan government in these areas is critical to the future of the country," Byrd maintained. The report underlines ideas and suggestions for development of Afghanistan, including more specific programmes for women.