Afghanistan Needs Billions in Aid Even After a Peace Deal, World Bank Says

https://www.nytimes.com/2019/12/05/world/asia/afghanistan-aid-world-bank.html

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KABUL, Afghanistan — As the United States urgently pushes a peace deal with the Taliban to end its costly military presence in Afghanistan, the World Bank has warned that the war-stricken country will still require billions of dollars in international aid over many years after a peace deal to deliver basic services and sustain any potential peace.

Eighteen years of expensive American and NATO military presence marked by inefficient funneling of billions of dollars has shaped an economy almost entirely dependent on foreign aid. The country’s $11 billion in public expenditure each year is a far cry from its modest revenues, which even after recent improvements barely reach $2.5 billion, officials and analysts say. The difference, about 75 percent of expenses, is footed by grants from international partners, particularly the United States.

A new World Bank report, titled “Financing Peace,” addresses the idea that American and other international donors to Afghanistan see a potential deal with the Taliban as what one official described as an “out of jail card” to significantly reduce their costs in Afghanistan, particularly on the civilian side. The report warns that even after a settlement with the Taliban the country would still require financial assistance at near current levels, as much as $7 billion a year for several years to come, to be able to sustain its most basic services.

About half of Afghanistan’s public expenditure goes to a security force of around 300,000 members who are locked in an intensifying war with the Taliban. Officials do not expect the size of that force, too large for its own means, to shrink immediately after a peace deal; in fact, it would be likely to grow if part of a peace deal involved integrating Taliban fighters into the security forces.

Meanwhile, the most basic civilian services are already underfunded, with the economy growing at a slower pace than the rate of population growth. More than half of the population is considered below poverty line. That has become a national security concern, as support for the central government is tightly tied to the delivery of services — and that would be even more so immediately after a peace deal, with more people expecting an improvement in their lives when the war ends.

“A sudden and substantial reduction in civilian grants would risk a reversal of the gains that have been achieved, driving increased hardship and poverty,” said Henry Kerali, the World Bank country director for Afghanistan. “While Afghanistan is not expected to be reliant on grants forever, the pace of decline in grant support needs to reflect current realities.”

When the United States invaded Afghanistan in 2001, there was little government infrastructure left after decades of conflict. The capacity to absorb the large amounts of money that came in — about $130 billion so far from the United States alone — was simply not there. Government corruption and a wasteful system of contracting and subcontracting, both inside Afghanistan and in Washington, created an inflated economy simply unrealistic for the means of the country.

Even 18 years later, nearly half of the international aid is still spent not through the Afghan government, which donors say is still marred by corruption, but rather through contracts where a major slice is simply lost on layers of handoffs and the costs of expensive international consultants brought in on projects. Often, the Afghan government has little idea of how much money is being spent at a particular time around the country in its name, struggling to keep tally of all the contracts.

Khaled Payenda, a former deputy finance minister of Afghanistan, said that donor fatigue was understandable considering the war had dragged on for 18 years.

“But for me, and for so many people who believe in better aid, it’s not the levels of assistance that are important, but rather how you spend the money,” said Mr. Payenda. “Five hundred million dollars from USAID could mean two or three big contracts to big U.S. subcontractors, or a lot of good work through the government’s budget.”

The current cycle of financial commitments of international donors to Afghanistan, with just under $5 billion in security assistance each year and $3.5 billion in civilian aid, expires next year. The discussion around the future of aid is happening amid what one Western official called a “perfect storm” — the government in Kabul is locked in a messy re-election dispute and also disagrees with the United States over how peace talks with the Taliban should proceed. In the West, the conversation is more focused on Brexit and President Trump’s desire to reduce costs abroad as fulfilling a campaign pledge of refocusing domestically.

Afghan and Western officials say that while there is little concern about European donors reducing aid, the United States government — the biggest donor to Afghanistan by far — has signaled to expect a significant reduction at least in civilian assistance in the next cycle.

A State Department spokesman said a reduction in civilian aid has been a gradual process over the years, aligned with the American objective of assisting the Afghan government in expanding its “capacity and desire for greater self-reliance.” United States civilian assistance has dropped to $480 million in 2019, from $4 billion in 2010.

“Earlier this year, the U.S. embassy in Kabul led a review of all U.S. civilian assistance,” the spokesman said. “The review endorsed the present strategy and concluded that future requests for civilian assistance will continue to responsibly decrease as U.S. policy objectives are met in Afghanistan.”