Country Report Afghanistan January 2009

Outlook for 2009-10

Security concerns will remain paramount in 2009-10, but foreign governments will want at least to announce plans for troop cuts by 2010. The outcome of the 2009 presidential election is far from certain, but if the incumbent, Hamid Karzai, runs, he will begin as favourite owing to the fractious nature of the opposition. Parliamentary elections in 2010 are unlikely to alter the balance of power substantially. Efforts to improve infrastructure and education will continue, but progress will be slow, hampered by the poor security climate. The illegal opium-production industry will pose further challenges. Fiscal sustainability will not be secured in 2009-10, although there will be incremental improvements in the public finances. Relations with Pakistan and Iran will prove volatile; escalating instability in Pakistan will present extra security and trade risks for Afghanistan. Continued strong growth in construction will drive economic expansion in 2009-10, but agriculture will be vulnerable to drought.

The political scene

The appointment of an ally of Mr Karzai's, Hanif Atmar, as interior minister in late 2008 reflects the importance of the Ministry of the Interior. A report published in December by a privately funded think-tank, the International Council on Security and Development (ICOS, formerly known as the Senlis Council), highlighted security threats, notably around the capital, Kabul.

Economic policy

Afghanistan moved down one place, to 161st, in the World Bank's Doing Business report for 2009, which rates 182 countries' business environments. It did, however, come 22nd in terms of the ease of starting a business. Several parliamentarians threatened to resign in November over the government's failure to consult parliament over the sale of a state-owned building.

The domestic economy

The global financial crisis has had only a limited impact on Afghanistan's economy to date, although it may affect remittances from Afghans working abroad. The US-funded Famine Early Warning System Network has warned that use of improved seeds and fertiliser appears to have dropped, and that this may hurt harvests in 2009. A major agricultural fair was held in Mazar-e-Sharif in October.

Foreign trade and payments

The Asian Development Bank has announced a grant of US$30m to support the development of the agricultural sector. The government of the UAE has said that it will fund around US$29m-worth of projects around Kabul.

This report covers the following industry codes:
SIC Code: 1;60
NAICS Code: 11;52