Afghanistan faces economic crisis following military withdrawal (Congressional Report)

As foreign governments prepare their exit from Afghanistan (as early as next month, with total withdrawal expected in 2014), the question is how Afghanistan’s government, its nearly non-existent economy and fragile social disposition could possibly persist… if that is even desirable.  Were US $ 18.8 bn sunk into development projects in vain?

“We’ve created a… wartime economy” that is a “huge distortion” of Afghanistan’s revenue production, US Senator John Kerry told The Washington Post.

The main issues highlighted in the Report (as summarized in this Financial Times Article) are:

  • Inflated local wages

The single most important thing the US could do, the report said, was to stop paying “inflated salaries” to Afghans working for foreign governments or international organisations, which were up to 10 times the market rate. This had “drawn otherwise qualified civil servants away from the Afghan government and created a culture of aid dependency”.

  • Dependence on foreign contractors

The two-year study described how misspent foreign aid fuels corruption and actually contributes to insecurity. It also criticised the excessive use and poor oversight of contractors. And although it provided examples of successful projects, it slammed the way that a measure of success is how quickly projects spend their funds.

  • Conflict areas are rewarded (to the point that some communities stage conflict to attract aid…)

One of the biggest criticisms of such spending is that it penalises peaceful districts and rewards violent ones. “The evidence that stabilisation programmes promote stability in Afghanistan is limited. Some research suggests the opposite,” the report said.

  • Development projects have  been largely counter productive

foreign aid – which accounts for 97 per cent of Afghanistan’s economy – could “fuel corruption, distort labour and goods markets” and undermine Kabul’s control over resources.

It seems major foreign powers are stuck in a Catch 22. To withdraw now, means handing over the country to terrorists.

… Ryan Crocker, the Obama administration’s nominee to become the new ambassador in Kabul, said the US could not afford to abandon Afghanistan and let it fall back into the hands of terrorists (FT).

But  according to the Congressional Report published yesterday, foreign military and aid efforts are doing a lot more damage than good. So if the US and others are here to stay, how can they modify their aid to actually contribute to the long term sustainable development of the country?

Development efforts in Afghanistan are not doomed to fail. There are plenty of successful examples of community-driven development in Afghanistan which have been operating for over a decade. Let’s focus on those, and rethink handing over bags of cash to provincial governors.

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