Afghanistan - Current economic position and prospects

RESTRICTED Report No. SA-22a This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION AND PROSPECTS OF AFGHANISTAN January 12, 1971 South Asia Department CURRENCY EQUIVALENTS Af per $ per Af 1000 Official rate (June 1970) kg 22.22 Bilateral rates (June 1970): USSR 60 1t.67 Eastern Block 518.18 Export surrender rates (June 1970): Woo1 h41s+awn1 1. 2___ Wool (multi) 5 18.18 Coon at + hL 20.83 Cotton (multi) 70 14.29 Kar.kul (rnl +A 1t; Free marke. rates Kare-h 21, 1961 99 4 March 21, 1964 72.22 13.85 Moarh 21 1970 78.77 12.70 June 1970 81.56 12.26 Mmhns 91 - 107n RC9 11-71a N.B. Because of the Multip'u City 1-o exoange rates... X-& oL difficult to have a consistent method for converting foreign exchange into afghanis and vice versa. -n this report, in general, the free market rate was used for expressing domestic magnitudes (e.g., income per head) in dollar equivalents; the appropriate surrender rate for converting export values; the official rate for converting financial flows; and it was attempted to convert import categories at the rate actually corresponding to them, i.e. the official rate for official imports, the free market bilateral rates for imports from the USSR and Eastern Europe, and the free market rate for most other imports. This report is based on the findings of an Economic Mission which visited Afghanistan in May-June 1970. The Mission was composed of the following members: A.R. Abdel Meguid - Chief of Mission W. Lewis (Consultant) - Fiscal Studies F. Stubenitsky - Economist T.S. Rackham (Consultant) - Agricultural Studies M.S. Ai-er - Industrial Studies B. Kavalsky participated in the drafting of this report.  CURRENT ECONOMIC POSITION AND PRO3PECTS OF AFGHANISTAN M AmY AW ev"BTARTM0 BASIC DATA SUMMARY AND CONCLUSIONS .. ..... . .*.. . i iv I. THE BACKGRDUND . . . . . . . . . . . . . . . 1 The Land . . . . . . . . . . . . . . . 1 The People . . . . . . . . . . . . . . . 1 The Economy. . . . . . . . . . . . . 2 Past Patterns of Investment and Growth .. . . . II. EXPLOITING THE POTENTIAL . . . . . . . . . . . 6 Agriculture . .. .. . . . . . . . . . . 6 Livestock . . . . . . . . . . . . 10 Exports 0 0 . ... ... .... 11 Industry .. .. ... 14 Mining .. .. . . ....... 16 Tourism . . . . . . . . . . . . . . 17 III. MOBILIZING INTERNAL RESOURCES . . . . . . . . . . 19 The Financing Problem . . . . . . . . . . . 19 Increasini Revenues . . . . . . . 21 Deficit Financinir . . .-.- .-- -- -- - 23 IV. OVERCOMING THE CONSTRAINTS . . . . . 27 Attitudes and Skills ..... . . . 27 Development Administration ... ..... . 28 Central. Conmerci;1 and Develonment B-nk-ina 29 RTATrTrAT. APPnTTY MAT)06DV A AT-raTM AurT WX4 X&4 LL'U.1 AUi±j L 1.LU4 ANNEXI A SyRf.pm nf' NatinnlAl Antrnm1n.%t fner Afcrhanjcz.n  BASIC DATA A o. a 14,gifnn k-m2 = 63 million hectares A o. -11. --;-1m-1.4114on heta O Soo . AJ4 +'J+J- Cropped: 4 million hectares ( 6% of total) ropulation: ioual: 14. U mUL-Lion k J-)Py Rural: 10.3 million (1969) Rate of Growth: 2% (19o7-o9) Population density per square kilometer: 22 Population density per f3guare kilometer of arable land.: 1v Population density per square kilometer of cropped land: 368 Political Status: Constitutional monarchy. Gross National Product at current market prices (1969)s US$ 925 million (at free market rate) Real rate of growth: 3.1% Per capita GNP: $66 Gross Domestic Product at constant factor cost (1966/67 prices): 1967 1969 $ 775 m3lion $ 865 milion of which, in percent: Agriculture h1.7 42.2 Livestock 9.8 8.9 Mining & Quarrying 0.4 0.7 Manufacturing & Handicrafts 11.7 10.8 Construction 1.6 1.5 Trade & Transport 19.7 19.4 Government Services 4.3 5.4 Housing 6.0 6.2 Other Economic Sectors 4.8 4.9 Percent of GNP at 1967 market prices: 1967 1969 Gross Investment 12.9 10.7 Gross Savings 7.1 7.6 Resource gap 5.8 3.1 Government Taxation Receipts 5.9 4.9  Resource Gap (Percent of Investment): 1967 45.o Money and Credit: Conversion - Official rate Af 45.3 = US$ 1 Free market rate (May 1970) Af 81.3 = US$ 1 (May 1969) Af 75.5 = US$ 1 Percentage of (Millions of afghanis) At March 20 Change from 1970 March 20, 1969 Total money assets 14,134 + 13.4 Claims on Government 9,068 + 19.2 Claims on private sector 2,863 + 9.1 Foreign assets 2,203 - 1. National price index - 1.2 Free market exchange rate - 7.7 Annual Rate Government Overations: 1965/66 1969/70 of Change % Revenue receipts 3,963 4.817 + 5 Non-development expenditure 2.903 Ih.692 + 11 Revenue surplus 1,060 125 Capital expenditure )i-270 3, Ano 3 External assistance 3,277 2,383 - 6 of which: Prolect aid 3277 1 8o6 Comodity assistance 727 600 - 4 External Public Debt: (Millions of US$) As of DecA1 1969 Total external public debt 6h9 Net of undisbursed 493 Total annnal debt service (1969/70) ?0 of which TnterARt 7 Amortization 13 Deth rvie ar i nf f2r3.8n exchange earnings 23.8 Balance of Payments: (Millions of US$) Annual Rate 1965/66 1969/70 of change % Total merchandise exports 70.0 81.7 + 4,.0 Invisible receipts (net) - 1.5 2.8 - Total foreign exchange earnings 68.5 84.5 + 5-4 Total imports 128.2 138.6 + 2.0 Current account deficit 59.7 54.1 - 2.2 Official exchange reserves06fth) 45..1 29. - 7.8 Net use of IMF credit 5.6 17.1 Commodity concentration of ft m.) 1 expw*tss Livestock products 29..7 +28.5 Fruits & nuts Vh_0 +33.9 SUMMARY AND CONCLUSIONS (i) Afghanistan's prospects for economic development are dominated by its arid conditions, rugged physical terrain and remote geographical location for trade. About 11 million of Afghanistan's population of l million live in rural areas, 2 million are nomadic and 1 million live in the cities. Since only 5.5 percent of the land area of 635,000 km2 is cultivated in any one year, density per unit of cultivated land is high, 368 persons per km2. (ii) Politically. Afghanistan is not yet a cohesive country; tribal and regional differences persist. The government is a con- stitutional monarchy. in actuality the King exercises consider- able influence. In recent years, Afghanistan has been engaged in an exneri-ment aimed at c.reating a demne,rati- narliamentary system. and considerable attention has also been given to social and political reforms under the 1965 const.iit.ion Tn the ahsenrs nf nnl1ti(a1 parties, representation is local, at best regional or tribal. Both the e-ecui+ve and lePIslat.Iv brannhe of the cvPnrnAmnt. rnnfinn to carry out their functions in an uncertain and seemingly undirected wnv The le-ilati+ve n-rocess is exceedingly slow whbch.bhas h-Ad q serious effect on the pace with which the investment program is being lanned ani i-lmoe r o assessment of economic conditions difficult. However, there are 4 ,, .i4 4 -4 4,~ -U-,, 4- ----r.w - - - n " cn ,-A44-1ti ns ..' 1av4eiv ,r, in recent years: both the primary and secondary school systems were expandu -u- ue1- u-g-wa, -4our 4-1 -a ---m- n-- u un 4 -o-m w-_4-_ -- - --A -u and improved; the production of wheat and export of rice have increased, and natural gau iU beiug exporeud To RuBsia. These improvements have so far had little effect on the mainstream of economic activities. Based on fragmentary udta, per capita incoMe appearso bV aou $50 to $70. Essentially, the economy remains in static equilibrium at a level of productivity as high as can be achieved in the envaronment. Abject poverty of the kind found in India is absent, but there are no strong sources of eeonond c expansilon, either. yiv\ Economic backwardness carries its omn complexities: the low level of income reduces the ability to save and limits the tax base; the lack of sidlls and other complementary inputs reduces the productivity of investment and the rudimentary stage of public administration compounds the difficulties for the development effort. Under these conditions, the problems in devising and implementing an effective policy of development would be difficult enough in any event. The government's inability to provide sound economic management or to devise and follow a strategy of development compounds these difficulties% Specifically the government finds it exceedingly difficult to identify and prepare high priority investment projects and to manage their efficient execution. - ii - (v) Afghanistan has relied heavily on foreign advice, loans and aLU ii tA LUU±i JL U~ _LL~ UMJIZI, LU kJ. Ur . CUIL . iJU1.L11r .liu ±LL U Uau t-,u Zjullut $650 million of foreign aid and loans as well as technical assistance programs, averaging nearly %P4U mIL-LnU anU1Ly, financeu anu helpeu implement the government development effort. The government also relied neavily on vorrowigs frum toe centra vUn L& U uanc P one lo(ai currency component of the investment program. As a result, there was a 111 percent increase in prices, and a t percent depreciation in the free market rate of exchange between 1962 and 1967. In 1965, the government was lorced to take harsh stabilization measures which succeeded in lowering prices and stabilizing the rate of exchange, but at the cost of a drop in development expenditures, a decline in inaustrial output and a rise in unemployment. (vi) Over the past six years, revenues have increased by about 4u percent. However, current expenditures, particularly because of rising expenditures for education and defense, have increased faster than revenues. Moreover, there does not appear to be much room for economies in non-development outlays. There is, in fact, an urgent need to increase civil service salaries and to increase expenditures on health and education. Thus a further effort to increase public revenues is essential. The budget, which was presented to parliament last March, included a number of new measures designed to increase revenues, but to date, the budget has not been approved by parliament. Even if parliament approves it before the end of this fiscal year, it must be recognized that the expected increase in revenues would also require a more efficient administration for the assessment and collection of taxes than exists at the present time. (vii) Thus, the outlook is not bright for any significant increase in public revenues in the near future. At the same time, the Government sees no possibility of pricing resources for development by reducing expenditures not related to development purposes, in particular military outlays. Thus, there is the very real danger that public development outlays will be squeezed increasingly severely. The consequences of such a squeeze could be regrettable as Afghanistan would have to go very slowly i7 undertaking those projects and programs that would help bring into the pcoductive process the large overhead capital facilities created in the past and thereby could lead to an acceleration of economic growth. In addition, however, it could well mean the end of all efforts to strengthen the developmental effects of public outlays, by concentrating on small, well selected projects and programs which are badly in need of encouragement. In short, inability to raise resources through additional taxation may well deplete attention from what is clearly the most important task in Afghanistan today, namely, to get development going in a meaningful way. If this were the orice to be naid. for the stalemate on new revenue measures, the Government may well consider recourse to deficit financina aq a means of financing such nrnient. and nrnwramq tn h th. less costly alternative. -- iii - UiarJy, Such a course u-L acUJ-VLI WULL-U 1uUu . VuI V.L LwUUU _LUO UUIL Uuou, in terms of rising prices, and would require supporting measures elsewhere, e.g., in the Governmentis excha.ge rate policy. Moreover, the risks involved are evidently worth taking only in conjunction with a thorough re-orientation of the public development program. (viii) Afghanistan'S Danking and credit system fails far snort of meeting the banking needs of the country and is even more inefficient as a means of mobilizing and channeling savings for development. Normal banking services are confined to a very small part of the economy; loans and equity participation are available only for the larger business firms, primarily to finance foreign and domestic trade. Small and medium sized enterprises in both agriculture and industry have no commercial source of credit other than money lenders in the bazaar where interest rates are high, maturities are short and lending is based on personal contacts, family connections and collateral. (ix) The balance of payments continues to show a chronic deficit. In recent years, the size of the current account deficit has fallen consider- ably from its peak of $83.5 million in 1966/67 to $51.9 million in 1969/70. However, this cannot be taken as an indication that Afghanistan's ex- ternal financial position has improved in substance. What has happened. is simply that development imports have declined as a consequence of falling disbursements of external assistance which, after having reached a peak of $84.1 million in 1966/67, came to only $55.0 million in 1969/70. (x) Customs returns indicate that export earnings increased by about $10 million over the previous year to about $82 million in 1969/70. Most of the increase was attributable to increased sales of natural gas to the USSR. Ekorts of natural aas to the USSR (which only began in 1967/68) increased sharply to $12 million in 1969/70 and are expected to reach $1h million in 1970/71. The number of tourists increased aix-fold over the last five years and with the improvement of Kabul airport and the provision of better accommodation and internal transnortationn this growth rate could well be maintained. Earnings from tourism are expected to increase from about $h to $5 million at present to 17 million in 1971/7q. Traditional exports of agricultural and livestock products have increased only slightlv over the last ten years. This was mainly due to fluntmations in weather and harvest conditions.and in domestic price ratios and effective exnort exchnnop rates. However, the Inng run nrnnar-ta for qnmp of +.he major export commodities: fruit and nuts, karakul, cotton, wool and live- qf.nnk nrAe goodi prvi(ip( thAt MAs i res are taken to Jnrease.qQq output1 andi improve quality control. (xi) Merchandise imports other than those financed under foreign aid, amounted +. nme $70 million in 1960/70 anr have nn+. increand egnJf4cn+ ly over the past five years. Consumer goods (a great deal of which are "rin +ano4+." i Pakia+.nn) mn-n. for A0 percan+ of +he mpn and producer goods for the balance. There are few quantitative restrictions compete with locally produced substitutes in spite of large un-utilized. ca aC 4- L ~4 IUtS -JA. A----+IS - ~ -; -A - - T?_ - -1 -.4 4____4-_~4~ _4IIJU L __~U?,.L LdV - iv - as high as $6.h million (1966/67) and some $10 million of textiles and $2.0 million of shoes and bicycles are being imported. There is a need for imnrnving the unality of domestic nrodntion and al.n for a tariff structure that would support domestic industries. However, cPnna for the lnt.ar is rvy limited riven +h av-+.in nrnblems of policy formulation and enforcement. (xii) Afghanistan's external debt has been growing rapidly in the nne cdo nrd Aln+n+.nnri4neg rnubli Ash inh+ ludn. ,t4 v trA undiburnad nmrainna to $649 million as of December 31, 1969. Despite the generally soft terms of external loans and a three ya?. mOe/?7 moanrn"im n all long-term Russian credits, repayment on foreign debt have been rising sharolW The sowwe ratio was 2 erocen+ 4n IOAO/70 compared to 17 percent in 1963/64. It should be noted that 75 percent of interest r.-A w+4-f+4^n nf4m.n+a 4a +- aenww4r^ Dij.e4 ane Un+,a1 an -WA.. VlIL . " JCOV.L& J** ,fY * . L.. ( A U '. U W C .L . C -1 3W.~ I.,OWAlL1 flta -- ~ exports to the USSR (with no alternative outlet) now cover two-thirds oP Draa4 Ank+ anRuLsia Chebtn+v .nAh 1070 ,411 V- al.n+ a--P4^4_n+ to cover these payments. (xiii) On balance, Afghanistan remains one of the least developed countiso in tne world. VAounoMi4c performance hCas been poor and prospecto are not good. While there is considerable potential for economic develop- men+, +AL A.4 U.LnA polt+ia l nvAonMen+t74 V.&A .k wlh or +Mtme vekng19 political roles appear to have somewhat higher priority than economic u",vt;LVVpmenX11 cAU CLUmLJuILoursave iuaunquauc mntak a susta-uuraev economic growth very difficult to achieve. (xiv) In the absence of determined economic management and given the existing inadequate inUtiuional environment, tne realitic Uevelopment effort is necessarily limited to establishing new institutions and strengthening those existing ones capaole of development in the circum- stances. Thus, for the time being, at least, the thin edge of the development wedge should be sound project identification, preparation and implementation and to move wherever possible step by step towards more effective development policies. CURRENT ECONOMIC POSITION AND PROSPECTS OF AFGHANISTAN I. THE BACKGROUND The Land 1. The prospects for economic development in Afghanistan are dominated by the physical terrain and geoaraphic situation. The mountains of the Hindu Kush range extend for some 450 miles diagonally from the northeast to the southwest and together with the lesser ranges and the deserts of the south and west, limit the arable area to 22 percent of Afghanistan's 634,551 Km2T, with only 5.5 Dercent actually cultivated in any one year. They also revresent major barriers to internal communications, though an encircling road system, connecting Kabul. the canital. with Kunduz and Mazar-i-Sharif on the fertile northern plain, Herat in the west and Kandahar in the south, has been completed wi th Ampyi nsan snd Runiqiqn ai d- VFrim thqA nti P-.q thprA iq annc to the transport systems of Afghanistan's neighbors, Russia in the North, Iran in the Wes0+. anA PakitQn in the East. Mest o +.he ountry+.'ra rriclti deands on irrigation. The three major river systems which drain the country are the Afn..ofl wun Znd 4 a +4w4haiardam An +hnm h h a Walman theauthwt and i -, - it he-- - - . in -he.. . ..-e the Kabul, a tributary of the Indus, in the east. 2. Afghanistan is landlocked and remote from world trade routes. Its Irna n-tha7-n hnysada with tha Tnw ne%+ Av4vo i4won 4 itnntrinT% 4mna%+.nnk- _nr has undoubtedly induced aid flows from both the Soviet Union and the U.S., greatly in excosan of what ita ahare m4ht hae beow n ha o_a +he ha4a +ha ux o a Its other major boundaries are with Iran and Pakistan. Although Afghanistan *4 ~ "L J. LA..UVWyaJ U V alu LUAAU J.L. ~U 1L1LLtJ. VJL4J.V"L W&V U & )L1J V. JJ =Q CMLA LLOALAO.t .L UVW Spin Boldak provide access to the Pakistan railway system and the port of Aaracub. LLW Vuxva LULg uUrumr0 makcu rS6u eg-LaLtLu1 uA.L.LUU]t to enfuurc and considerable smuggling takes place. The border with Iran with its level terrain is especially difficult to police, but the mountainous border with Pakistan restricts the number of trade and smuggling routes. The presence of Pashtoon tribesmen on either side of the border, left largely to themselves by the two central governments, makes for fairly unrestricted movement between the owu UuntrAes Afghan Lams on "rasVoonusan in s teriorial uspute with Pakistan did however lead to the closing of the border for much of the early 17VV . Is rMLatiUonship Uas tu3ueqLLULLy improveu, though tOe IuLe remains unresolved. The People 3. Afghanistan's population of arouid 14 million, consists of about one million living in cities with over 25,000 population, two million nomads and the rest living in rural villages. A population this size represents a high density of 3oo per Km2 of cultivated land. Although almost entirely Muslim, the population is tribal and ethnically varied, with some way to go before a cohesive national identity emerges. It is difficult to summarize a complex social structure in a few general phrases, but it is usually charac- terized as traditional, custom-bound and hierarchical. The elite is composed of tribal chieftains, landlords and religious functionaries allied to the military and professional groups in the urban centers. Recently a small entrepreneurial group has begun to emerge. -2- 4. Afghanistan became a national state in the middle of the 18th century. T+.~ a rammc Puni.h+iiv ihum~an izho st.1ll Constitute the most influential element in the population. Afghanistan's independence from Britain was proclaimed in F'ebn, 1010 Wr i(ir% nanillnh The frilt connstitution was adonted in 1923. but it was overturned in the disorders and civil war resulting in King AmaniAllhtn A-1a in 1090 naer wan n-an+inh1i=had hv NadM Khan- there- after elected king by a tribal assembly. Upon his assassination in 1933, him snn annaded him Tin 10A- n nw t-nn_ttutMon was annrnvAd shinh intar alia barred members of the Royal Family from holding responsible positions in the government. Thin ennntAtiotin rAnrents a major onlitial Aneriment - an attempt to replace what for all practical purposes had been an absolute mnrchy, with a dammrnti nav1imntary svtAm, deliberativ and nAnCAful1v within a short period. At this stage, cooperation between the legislative and avarm+va hnnnhe of the gnwarnment. I ati11 nrtial, and the King retains de facto a great deal of power. The failure to permit the organization _.p al4+4-ol -1-b4 o h1a8 MGM+ +hn + +hain 4 l e h S-v%e+4r%%,e1 4 h n W. yw v % JJU. & 1.I -G4O &V ... VW -- 55. ~ -~- genuine national focus. Representatives have tended to react to proposals in -LIU 4J. &A1 U 1LU VL .6~~ 1P A. U -A 1" O~L,I 4 .L.L W1L followers. The Economy 5. Per capita income data for Afghanistan can only be guessed at.Vl An pprop"date rauge woui.lu LIV 9,7V oo PV, ..L oun Lraw maLmou LaLL#%3 Laa used to convert the estimates of gross domestic product. Our best estimate of tm groAn u.L Uumvu"u p.uuIUL Uv auu un %m ar V waA.0 o U tJ;S ywlman=Lu annually over the past decade, as compared to the estimated 2 percent per annum growkh of population. EssentalLy, the tUnIy rCan An stati equilibrium, at a level of productivity about as high as can be achieved in the environment. Abject poverty of the idLnd found in Infa is absuv but there are no strong sources of economic expansion either. 6. Agriculture accounts for 50 percent of national income and 75 per- cent of the labor force. Of the 14 million hectares of arable land, 3.8 million are under crops of which about 2.5 million are irrigated. Dry land agriculture is limited to low intensity, low yield farming mainly or winter wheat where there are suitable soils and where the amount of rainfall sustains crops in most years. The irrigated areas of Arghanistan are in large part served by surface water diversions from streams or by groundwater withdrawals from "carezes" I/ and in some areas from wells. Data on surface water diversions are limited and the estimate of the irrigated land area is very rough and almost certainly overstates actual availability by a very signif- icant margin. The existing irrigation systems are traditional and not capable of serving as the basis for modern, year-round cultivation. Surface water systems are generally primitive. They divert part of the flow of a stream and distribute it to adjacent lowlands which can be served by gravity 1/ Using existing data, an attempt was made by the mission to construct a system of national accounts for 1967 and 1969. This is described in the Annex to this report. / A careze is a traditional, largely underground structure serving to adduct water from mountainside underground springs to areas suitable for irrigation. flow. These are not necessarily the best lands. Also since the diversion U J.f. .LX L C" 0"JJJJ"V% L A .1 L4L V.J. 16O~ L .L ~ -, . A..IJIVOY LI, VUU_LLV Gu~l" VVJ.UA1K-,' O.L diversions are determined by the flow characteristics of the stream rather than by Ue water requLremenUs 01 the crop. LrrLgation UvelupmUenU on land served by carezes resemble that of surface water systems. DLscharge tends to decrease during summer months in response to the decline in the water table. In the absence of seasonal storage farmers have to adopt cropping patterns which are heavily weighted toward drought resisting varieties of low water-use and early maturing crops. 7. On the whole, irrigated agriculture in Afghanistan, though very old, is in a very primitive state of development. The basic constraint of izTigation is the lack of assured and timely water supplies which results from a lack of storage and the primitive traditional conveyance systems used. Farmers are unable to improve and remodel the existing irrigation structures and except for a small understaffed and underequipped irrigation construction team in the Ministry of Agriculture there does not appear to be any construction capacity in the country able to design and carry out improvements or build modern irrigation works. 8. In recent years, the overall rate of growth of agricultural production has been low. The main crops are wheat, cotton, fruit and nuts. Wheat fields account for 65 percent of the cultivated land and wheat comprises 60 percent of foodgrain production; production is mainly for subsistence with only 20 percent of the produce marketed. The average annual production of 2.2 million tons is insufficient to meet demand. Cotton, which is growing on less than 2 percent of the irrigated land, is the major cash crop. Cotton output declined sharply between 1963/64 and 1966/67 and has held a steady level over the past three years. Livestock products account for 25 percent of agricultural production and 40 percent of recorded foreign exchange earnings. The major products are karakul skins, wool, casings and meat. Fruits and nuts are the next most important foreign exchange earner accounting for 35 percent of the total. 9. Industry accounts for some 12 percent of GDP but of this handi- crafts and small manufacturing establishments account for 10 percent of GDP and factory production only 2 percent. The latter is expanding rapidly however, at about 10 percent per annum between 1964/65 and 1967/68. Cement production increased rapidly in response to the demand generated by foreign aid financed infrastructure projects. The main commodities produced other than cement are shoes and cotton textiles; sugar, wheat flour and vegetable oils are produced in small quantities. Mining accounts for a further 1. per- cent of GDP. Salt, coal and more recently natural gas which is exported to the USSR are the major items. 10. The inadequacy of social services is perhaps as important a fact of economic life as anv other. The literacv rate in A-fhanistan is about 11 percent with less than 5 percent of the total population attending school. Health nroblems are nervasive; facilities are ninritive and nArsonnel scarce. There is no family planning program. Urban unemployment is emerging as a serious Droblem. The oroblemns of develonment in such a situation would. tax even the most sophisticated and able set of administrators. Past Patterns of Investment and Growth 11. During the last decade some $650 million of foreign aid and loans and the equivalent of $00 million of Government development appropriations, as well as technical assistance programs averaging nearly $20 million annually, financed and helped implement the Government development effort. Gross capital formation in total has been roughly 11 to 14 percent of GDP during the decade with private investment accounting for perhaps a third or the total. In the light of this fairly formidable total for a country at the stage of development of Afghanistan, the sluggish growth rate of the economy has been viewed with disappointment in many quarters. 12. Some 40 percent of investment has tended to go into infrastructure projects. These projects require ancillary investments, sometimes in additional infrastructure (e.g. feeder roads) and sometimes in productive capacity,before they yield their full potential returns to the economy. This ancillary invest- ment has been lacking, because aid donors prefer the large visible projects as indeed do local politicians and because there has been little planning and preparation of an appropriate investment program. As a consequence, Afghanistan has acquired extremely unbalanced collections of both infrastructure and productive facilities. 13. For instance: Kandahar International Airport,.modernized with U.S. assistance, is completely outside international air routes and has only minor internal traffic. The Mahipar power project, 66 megawatts of power, constructed with the help of a $24 million loan from West Germany, is at a standstill, and the maximum extent of operation achieved was 4 megawatts for six months of the year. Even excluding the local currency component, the capital cost per kilowatt is extremely high. The Nangarhar agricultural project, which covers a fairly limited area has so far absorbed $50 million of Russian assistance and will finally total over $80 million, as a result of the "discovery" that a sizeable part of the project area is rocky soil and the consequent need to "import" large quantities of topsoil by truck to the proJect area. The Helmand Valley reclamation project: The U.S. has provided a total of $130 million over two decades. From the outset. the Droject was beset by the problems of attracting suitable settlers to the area and prov Iling adequate extension services to them once they arrived. The areas chosen for initial development were of low fertility with saline soils; the latter was compounded by inadnuat drainnao avatm. ThA Hlmand Valley hna ah.qorhAd more than a third of total public investment in agriculture over the period since its inception. -n -upt1 f10,00tn per a-u. of whea has been attaned which is about 4 percent of total wheat production. The circular highway, the.'S~JJ compete secion of iffdvd CbLL1.. c 'JJ.- of aa St-can.Wrd.J ' fca."r weyn -W"Law -1 -IJ0 necessary under present and foreseeable future traffic conditions. 14. A large proportion of investment has therefore been absorbed by pruoect waVVLoe retun to ne eonoumy nIavWe -0 P__ vw-u m4-u%ma% 0ume VP J9LJJV.IJ VU'.JV .OID..LAO J ILL~~I.JUU1J 0 V~ U - kM%;U IJ~ 1"LLAJ.OI OLUZU V.L these projects, like Kandahar airport and the high standards on some of theroads,LUZ LLaIWt tLY-%3LItLY beenL diAtedU9" bJy staei osdrto Some have been the product of genuine errors and faulty planning and some must be relegated to.u ne category of the totally inexplicable. In audition, most of these large projects have been carried out in a highly capital intensive fashion with import content as high as 75 percent in a number of cases. Usually everything but unskilled labor has been provided by the donor country. 15. Altogether these factors have effectively minimized the impact of these projects on the economy. The government has tended to view these projects as somewhat outside the normal run of its responsibilities, and attemots to coordinate the aid program and tie it in with overall develop- ment objectives have amounted to little. "he Third Plan contained references to the government's recomnizing the need for shiftine investment from infra- structure to productive projects, but this remains a paper intention at Dresent. The real choice. however, is not between two broad categories labelled "infrastructure" and "productive" respectively, but between annronriate choices within these categories which are geared to the overall development needs of the country. Donors appear to place less importance on AfahaniAtan in more recent vAarn and aid romritmPnts haviz f;11An.- Utilization of aid has fallen from a high of $100 million gross in 1966/67 to about AC nAllion in 19I/A-no-ry hacus of the link of winntAq of past projects and shortages of local currency counterpart funds. Afghanistan's foh-+- +.r of na cr+.nh evmeintprgnri wm%is Ao n gn inceaiivsi +.hng+ lhc form part of a coherent development program is becoming an increasingly 11. EXPLOITING THE PUTENTIAL 16. The record is not an impressive one. Afghanistan faces the seventies with the highly dubious mix of infrastructure and productive capacity. Nevertheless there are some areas of potential, often impressive, which given appropriate policies and investment patterns could provide a motive force for growth. It is the contention of this report that an appropriate investment program which concentrates on utilizing the infrastructure already created in irrigation, transport and power facilities, through carefully planned and properly supported small- scale investments, could raise the rate of growth of incomes well above that of population. Ag riculture 17. The agricultural sector's contribution to national income amounted to about Af 33 billion in 1969. Agriculture therefore represents over 5o per- cent of Net Domestic Product. In this sector, two relatively exclusive activities are involved - cropping and livestock; the first being basically subsistence and the second more commercially oriented. The cropping sector has received most attention, and some progress has been made in the form of additions to arable land and improved seeds and, where cash crops have been introduced, opportunities for commercial production. Meanwhile this develop- ment, particularly on dry land, has impaired productivity in the livestock sector as a result of encroachment of grazine land. Altogether the azereaate changes in agriculture up to now have barely maintained a growth rate in output that is sufficient to supply a growing population's consumption needs and potential export demand. 18. Of the total land area of about 63 million hectares, 22 percent or lb million hectares are considered arable. An estimated 7.8 million hectares are cultivated and 6 million hectares are in permanent meadows and nastures. 'Of the 7.8 million hectares cultivated- Only about half is cropped in any one year, the remainder being left idle or fallow. With present facilities, only about 2.5 million croo hectares can be irrigated, in some fashion, in any given year. Another 1.3 mil- lion hentAeP of wheat and ha-ley are dry-farmed. While it may seem stranae to qualify a figure for irrigated area which is almost two-thirds of the n va n -r,own %Al +he3 wvq tinvil-tI 1+ hna +% ha i-amamharad +hnt fArmincr is impossible without irrigation in most parts of the country and that the +a 4 4 +4n A4cus-d _WUeaA -a.e4 rSw +"aA4+4%nn1 a mhma wh4rh no very far from providing an adequate and assured supply of water. In many tion systems and practices; many of the diversion structures are unable to -&- 4&water leve.1 A.VQ CIL%% WL-0V kDe r=-Jrea nor -a-41+ anenalw T the meantime, almost all of the massive investments in irrigation have been %AJ.rtowed toVs-Vd NS nw1 'Large scale pro.j w.i.tPh JmLU&44L= wwV +ma+ 4n +h- existing irrigation network. 19. Over 12 million people, some 88 percent of the total population of AfgUanistan, are eUngageU in agricultural pursus. 1They iLLude oUme 2 million people who migrate from permanent winter quarters to sumer -6 - - 7 - pastures with their lvestock. Crop production, which has been historic- ally subsistence farming, is slowly becaning market oriented. The production of cash crops, mainly fruits and nuts, has been increasing more rapidly than the production of foodgrains, i.e., 20 percent and 6 per- cent respectively between the FLrst and Second Plans.I/Methods of cultivation are traditional and the implements used are hand tools or primitive animal draft equipment. Farm labor productivity is low because of the small size of plots and the limited amounts of complementary inputs combined with it in the production process. The use of chemical fertilizers, pesticides, etc., is only just beginning. 20. Agricultural output has not increased at a rate consistent with the heavy capital investments and massive technical assistance efforts in the sector over the last decade. Between 1962 and 1970, total Government development expenditures in the agricultural sector amounted to almost Af 4 billion in local currency and some $200 million in project aid (mostly in the Helmand Valley and Nangarhar projects). In addition, ordinary expenditure appropriations for agriculture and land development amounted to Af 720 million and about $10 million per annum of technical assistance. 2/ 21. While the production of wheat, the country's major crop, experienced no real increase between 1962/63 and 1967/68, and in fact fell back temporarily in two of these years, some very significant increases have occurred in the last two years. In 1968/69. wheat production increased by 5 percent and, despite some setback due to poor weather, it is expected to show a further increase of about h percent in 1969/70. These increases have taken place more as a con- sequence of increased yields on existing crop area than through any significant increases in new acreage. The most significant factor in the growth of wheat production has been the introduction of Mexipak seed, and the greater use of fertilizer and imorovement of water supply have also been important. On I percent of the total wheat area, as a result of an intensive package program, yields in 1969 rP,r.he 2-h8 mt/ha comnared to an average of 1.35 mt/ha for the rest of the irrigated wheat area and an average of 1.1-1.2 mt/ha on all wheat cropped 22. If availabilities of wheat in 1970 are to be maintained, about 200,000 tons will have to be importWe. The uIrs priority wiLl be to achieve seI.-sufficiency and the record suggests that adequate distribution of improved seeds and inreased use of fertilizer could lead to this being achieved in the near future. Surpluses in wheat production are likely to emerge and while these would have no export market, they would provide some relief on the price front. Prices of cereals rose by 130 percent between 1962/63 and 1969/70 as compared to a rise of only 13 percent for non-rood items. Shifts in relative prices and the switching of wheat land to other uses particularly restoring dry land to grazing, is likely to be an important aspect of agricultural policy as surpluses emerge. 1/ 1957/58-1961/62 and 1962/63-1966/67, respectively. SIe argumet in Un5 pi-aragraph is unuer±ined by the following rough calculation: In this period total public outlays in agriculture, for investment and current services. amounted to about Af 22 hillion in the ;crgrecyat.e. while value added in aUricultAre in 1970 was, according orugesti s n A .0 - b.5 billion higher than in 1962. 01~~ ~~~~~ 8.. . -.. L ' ±.ncreaea prouuction o wneat ana otner cereals is the immediate priority. About 1.5 million tons of corn, barley and rice are grown in aUdUon to U1nU over 2.5 miion tons of wheat, making a total or 4 million tons of foodgrains. Barley is grown on dry land; rice and corn are planted On ±rrIgateu LanU, often folLowing wheat in the same year. 11elds of rice and corn have risen sharply in the past three years, and even on low ofGicial estimaTes, output has risen by nearly 4 percent a year. In the long run, however, a more diverse crop pattern will have to be developed, with cash crops and especially fodder and grazing for livestock likely to replace cereals as the leading growth items in the agricultural sector. The main cash crops are cotton, fruit, vegetables and nuts. 24. Cotton production, while declining from a high of 110,000 mt in 1963/64, has maintained a steady level of 69,000 - 72,000 mt per year since 1966/67. The fact that the decline has not continued is surprising in view of the considerable pressures on the farmers to switch to food grains and other crops. Prices at the farm level have been depressed as a result of both the unattractive situation for cotton exporters and the very strong competition from imported and smuggled cotton textiles on the domestic market. Cotton exporters do not receive the full free market rate of the Afghani for their exports. Although the fixed surrender rate was increased very significantly in 1967, from Af 45 to Af 70 to the dollar, it is still well below the free market rate which has fluctuated between Af 80 to Af 85 during the past year. In addition, cotton textile manu- facturers are facing increasing competition from smuggled Pakistani tex- tiles which. despite their lower quality, are grasping large portions of the market with prices 10 percent, or more, lower than the price of the domestic product which averages about Af 10 per meter for coarse cloth. Smuggling of cotton textiles from Pakistan is encouraged both by the free convertihility of the Afghani currency and by the Pakistani Government's export bonus. While no statistics are available, it is fairly certain thAt this <muppling has been steadily increasing. partly because of the increase in textile production capacity in Pakistan and the further weakening of the runmp 2To^el 4neaoc! the p7rduction of coo+.en_ +.hp (on-xPrment last yXear raised the guaranteed price to the farmer by about 20 percent. On this basis, =rduction of cottoNn is expnecteod to ShowT an increasez of 20 - 25 percntf in 1969-1970, to about 90,000 metric tons. At the same time, however, this the textile manufacturers to compete with smuggled textiles. A partial However, this still leaves the difficult situation of incentive prices .Lor the farnuIers andi proiUILLLvecot fo theJ ISAomes.L V &V-LL L4.±0 hile any effective controls against smuggling are very difficult to implement, the Government shouad seek opportunites for increasing the productivity of cotton farmers and the efficiency of textile manufacturers. The most effective improvements are likely to come with increased pro- ductivity of the farm land through better cultivation, irrigation, extension, etc. -9- 26. The solution lies first in investing in order to improve the profitability of growinp cotton and of producina en-ton +.YtilA and second in increasing output of other commodities so as to lower their price relative to cotton. These aDDroachea would nermit the rmqui-rd differential between the guaranteed price and the international price to be established, at an adequate level of supply. Bhth thee uwa am important. There is no magical solution to be achieved through manipulat- ing the price mechanism. The answer is that the Jnvestment effn i agriculture has to look much further than the immediate goal of self- oufficiency in cereals. 27. Goverment development expenditures in agriculture constitute almost 50 percent of the total development budget. These expenditures are mai-nly dirated to thA large-scale proiects in Helmand and Nangarhar. Relatively small amounts are provided for small-scale improvements in. InnA znnA 47--icn+An nnd q+t.nff -6virk-In n.t +.hp r-nmmuinitv qnd indivi:"inl producer level. The pre-occupation with large scale developments which have alongr a=an+rn nodA hh roed to ba n nnnr iia nf fiindq n.v'ted with quicker-yielding projects (the Pakhtia project - a comprehensive develop- ment sheme Pr a lm+Ad ara3 - mO bA rearded as an examnle of +hr ate.r) It is easy to say that the funds should have been spent on smaller projects, h1n+ n'+ hugh ae+reaw nfrma+4n io available nn nnQmJ'mh414tn aQ in xrn_nY-iiru areas, few specific projects have been worked out in detail and are ready -" 4 .m,lm an+4 T1he irownm+ mne4Mn r -P +.lha +nalr mn,a f1rnTnan1l strengthening. 28. In the long run, investment in the expansion of the cultivated ~~ W. ~LJO Cul 0. 1 4.PVI~)i .LCU PC-.LV W-L Z"LLC0LAL"QVC.1L 0 C661_A.%'L&J.U O-L wu. A V %X JVJIA'±.J Major irrigation developments will have their role, but for the moment the approp'ate ouurse is o make mtfan more effec" ve ous ofe1s"ngschenmes .p.E-.L L .L b U d'. am UL La L U .L.L JLL i LW . AJJ.L,.L~ L±~ and the traditional irrigation network through the small investments referreu to above. Thue potent±Al for increasing prouuuivIy uy eu .-.us and maintaining permanent structures, and establishing control over water flow anu allocaTon, in eXJdsting irrigation areas 1 conUierable. A number of experts have made the following estimates: (i) Water use efficiency could be inrae by--- a facto of 25-4- ercett 4.0 re nt _4_non 220,0 ha -uitable -for small scale project developments. Assuming an overall 30 percent increase in efiLLUecy of waVter use, an WALitUInal UUVV ha U irrigable land now ly.Ig fallow each year could receive water. EnlargLng canals would further extend the area by 30j,000 ha; (ii) Exploitation of shallow groundwater by pumping would add 75,000 to 100,000 ha to irrigable area. Further small water- retaining structures would add 10,UUU na; (ii) Of the 2 mi-Uion-plus na irrigated annually, one quarter would benefit by diversion, canal and laterals improvement. This would extend irrigation to another 56,000 ha. Therefore, thb total potential expansion of irrigation by these low-cost means iLs estimated to be of the order of 240,000 ha. At the present rate of implement- ation, within a time-span of 15-20 years, only 100,000 ha can be brought into irrigation under large-scale development whereas these lower cost improvements could have extended irrigation by 2h0,000 ha. - 10 - 29. The wheat program has shown an impressive, achievable potential. improved seeds have been extensively tested and reports indicate that a doubling of yields is not unusual. This, however, rests on the "package" of improved practices introduced with the new seeds as well as on improvements of the irrigation system and adequate extension. The impact of this program alone, if pursued systematically and vigorously, could result in raising wheat output by 20 percent above the current level on the same planted area. This would be equivalent to 400,000 to 500,000 ha of new land brought under irrigated cultivation at present traditional yields. For this to take place, however, a much better means of channeling the input package to farmers needs to be evolved. All the usual problems of this type of operation are present in Afghanistan. What they amount to is that the right things are rarely in the right place at the right time. The distribution of fertilizers, seeds, pesticides and credit and the availability of marketing outlets for crops all leave a great deal to be desired. Much of the credit is provided by moneylenders at 20-70 percent interest; rural cooperatives do not exist; the Agricultural Bank has been largely ineffective to date. The inadequacy of the agricultural extension staff can be taken as given in a country like Afghanistan. Livestock 30. The livestock sector provides 40 percent of Afghanistan's recorded export earnings and 10 percent of GDP. The country has 22 million sheep (6.5 million karakul), over 3 million goats and 3.6 million cattle and buffalo. The livestock sector is marked by the fact that producers, particularly sheep owners, are responsive to commercial incentives and manage their flocks to gain the maximum net benefit. However, poor techniques and facilities, and a hazardous environment, make efficient production management very difficult. Livestock is arguably the most promising sector; it is unarguably the most neglected. 31. Over the centuries the range lands have been seriously overgrazed and in years of low rainfall, winter pasture is insufficient. The ratio of over 2 sheep per hectare is higher than in most countries, and malnutrition is a serious problem. In the wintering areas the cold climate coupled with the malnutrition. exact a heavy toll of sheep and aoats, with losses of 25 to 4O percent. In a bad winter such as that of 1969/70, high mortality rates have a direct effect on the crop of karakul pelts as farmers restock their flocks. High losses also occur in the lambing season when a lack of fead and low temneratures kill off both was and Tnhs LonnAs of 12 to 15 percent are normal. Livestock in Afghanistan suffer from almost every di.an.p nrvalAn+. in South Asia - shean nox scnh rindernnnt- font. and mouth disease, external and internal parasites, etc. Veterinary services are Pither unavailable or inndeante. A aerioa effn+ hna to be made t tackle these problems. Range lands need to be protected, and waterholes water. Supplemental feed has to be available both in. the wintering areas and on t he stockin V ~ts*1eeh~wwsw e utb m.,A -.w-A 1 combined with dipping, drenching and vaccination. 32. These measures are only the beginning of the exercise however. Marketing of livestock proucts is primitive, except for karakul for wuich the Karakul Institute has introduced improvements in breeding, curing and sale of pelts. Transport of sheep for meat is often on the hoof with - 11 - hi4h A 1s n wpi ght due to scarcity of water and feed along the way. wool shearing is done by hand, and results in uneven length of wool; wool cleag and souring is nadequate,. and the raw wool therefore fetches a lower price on the international market. Low quality wool also affects the ^144,'r Af'rrhan Tmaq- Again credit is a Droblem with owners paying very high rates to moneylenders for credit for winter-feed purchases. The re-mediesac e aPrv obiLous. There is a need for slaughter-houses and packing plants for meat production. Cleaning and scouring plants for wnl, toathAr with imnrnved shearing technioues would result in sub- stantially higher returns to farmers. The Government is taking steps to devalop the sctonr and foreign assistance is being snupht Perhna the mns+. important requirement is for trained Afghan pe.sonnel. A start is being made nh aITDP n"ian+ in +T vptrinQry fil whch nrludi nin program associated with a research station in Baghlan. The scale and e%van" n v4vin "rnaa +.e hs rto bnaniAl ir i ntranan 4 ? A fhanj a+.nn Jc + e% 1h nha to exploit the potential for a development program in this sector. Exports 33. Afghanistan has a promising mix of exports. It is not dependent on - mA.A. nOW-PAO of +r-4+4 a1 a ma4+-To-. rh4 k Ch n -C -a _+ w Anl4 n demand. Recorded exports form only a part of the total, since much of the into Pakistan and Iran. It is perhaps a little unfair to use the term smugg"ig for some of these eXortu whica are simply a contLnuation of traditional trading activities. 34. Customs returns show that total export earnings increased by $1 million n 1670 o a Leve' of $ui muit,Lon after stagnating since 1963/64. Some of the increase in the current year over 1968/69 ($3 million) IS a COnsequence oul Igher natural gas exporus to une Ooviet union. 1.is now totals $12 million. For the rest there were some increases in a number of otuer cUMommu"es whicn nau been temporarily lower in 19o/y. In practice, the export levels are almost the same as in 1963/64, with two major exceptions. The first is natural gas, of which export only commenced in 1967/68. The second is fruits and nuts, which has grown from $14.4 milLion in tyo3/6 to nearly $o million this year. This is now the leading single export item, though if the various categories of livestock products, such as karakul, raw wool, carpets, hides and skins, and casings were combined, they Would be slichtly arger. Raw cotton exVorts declined sharply from a peak t t*h VVu W) '.7 m o1 1n 0ua/ by an are expected to snow about the same level from 1969/70, 35. For most commodities the stagnation in export earnings can be attributed to limitations on internal supplies rather than external demand. vith regard to karakul the decline in recorded exported pelts appears to be related to the rapid rise in meat prices, the export tax levied on karakul pelts, and in some years to slack external demand. The first of these has contributed to an effective meat-karakul price ratio that tends to encourage meat production as an alternative to karakul. The second factor is probably responsible for extensive smuggling of pelts as a result of the difference (i.e., the export tax) in the exchange surrender rate for karakul of Af 65 to the US dollar, versus the free rate of around Af 85. In some years the production of pelts may decline when, after a severe winter, flocks have to be built up again; this was the case in 1968/69 and also appears to be a factor in 1969/70. Output is estimated at about 1.6 million - 12 - pelts in the past two years, compared to some 2 million in 1961-64. Domestic policy decisions could greatly arrect export earnings Irom karaIl, Programs for livestock development such as providing watering wells, supplemental feed and veterinary services could reduce death rates, and increase meat ana peLT production though probably not until after the 1974/75 season. A lowering of export duties, however, would certainly increase recorded exports by reducing the incentive to smuggle karakul. The impact on recorded export earnings could then be quite substantial, wniLe the ToTal export tax proceeds would probably not decrease proportionately. 36. Raw wool exports have remained more or less stationary at around $7 million over the last 7 years. The proposed livestock development programs should include wool handling improvements, more wool scouring and better procurement procedures on the part of the wool institute, if they are to have an impact on wool quality and the quantity available for export. 37. Carpets are said to have declined in quality and are unsuitable in size, color and design for overseas markets, which would explain the decrease in export earnings since 1966. Increased competition from Iran and India, and from tufted carpets is also a factor. In the absence of proper marketing and a clear Government policy on quality control, the value of exports will at best only increase marginally in the near future. Exports of hides and skins and casings have remained stationary. 38. Raw cotton export earnings have declined sharply between 1966/67 and 1968/69, from $11.3 million to $5.9 million, and are expected to maintain this lower level at about $5.7 million for 1969-1970. The reasons for this have been discussed in paragraph 24. Cotton exporters have been lobby- ing for the removal of the differential between the surrender rate for cotton exports and the free-market rate and, in anticipation of this being done, have accumulated stocks. The delay in Government decision may have seriously affected the level of production. The application of the free-market rate to cotton exports is an obvious and necessary step in their promotion. 39. Fruits and nuts are the single biggest export item valued at around $28 million in 1969/70. Much of the expansion is due to the introduction of modern, clean fruit-drying in the early sixties which opened European markets to Afghan supplies. The steady growth in these exports over the past few years is expected to continue. Vineyards and orchards are still being expanded in the South, as land is provided with adequate drainage and dependable sources of water for irrigation become available. There is also some possibility of further exploitation of the extensive pistachio forests. narticularly in the Northwest. ),n nilaPAd rnor+. anrnings have fintuated widely in the lst qAVVn years, reaching $65 million in 1965/66, $1.0 million in the poor harvest u=nvy nf IQ0A/(i7 nnA Y-Qiine neonin +-r 4,1 1 mnillirm 4-n 1()(A/AO- Trienm-ocn+c to farmers and improvement of marketing and processing would increase and ishaili. n-.i+t Thim wuld imnrve the utiligaaioi+i1ithn+Apnrnef +.hec capacity in processing, increase exports and reduce the present reliance on at around $3.5 million in 1969/70. Export earnings could easily be much L1L,. V , A___~kL .4_ __J. - _LA.A 41 . -- __U 4 - - - LUD. J 'A. (.P--~1 ~LJ UI.&.± *UJ 'a 13 - leatner gooUs), organuzng markeuing outeus i:uu UiP1Uvtt PCLUMA16, transportation and preservation (of vegetables and fruits). 42. All in all, export earnings should increase from around $86 mil- 1Lo10 1 -L>U9/{(U to some $11) mililo y 7(4/ [p a AuLuu" rw.U cUZ U-I almost 6.5 percent. Therefore, the prospects for some of the major export commodties are relatively good, provided that certain bottlenes- can be remedied. Changes in the surrender rate exchange system are in order. Other much needed action pertains to cotton production and quality control on wool and carpets. 43. In the long run, a number of new export products should contribute to income growth. One product that holds promise for a large market in the neighboring countries is mutton; exports of live animals are now prohibited b,r law, but smuggling to Iran takes place, involving possibly 1 millon sneep. Tn3 potential for legal exports would appear quite favorable. Bilateral financing is available for slaughterhouses and packing plants. In the minerals sector potential exports include copper and beryllium. Exports of natural gas from the deposits being exploited presently are expected to level off at about $14 million in value. Exploration for new deposits is continuing. W4. Recorded flows in Afghanistan do not reflect the actual quantum of international trading activities as sizeable transactions are taking place through smuggling. Illegal or unrecorded exports of Afghan commodities appear to be mainly restricted to karakul, sheeA wood, wool and lapis lazuli. The last mentioned is probably not a very significant component, but karakul andsheepexports appear to be quite sizeable. Karakul finds its way to both Iran and Pakistan, and it is said that some of the best skins are smuggled. Estimates of the number of pelts thus exported are fram 200,000 to 600,000 skins (recorded exports fluctuate around 1.2 million to 1.7 million skins), but these figures are probably much exaggerated. Exports of sheep are il 2gal in Afghanistan but nonetheless sizeable numbers of sheep appear irresistibly attracted to the grass on the other side of the Iranian border. A slaughter- house in Meshed (Iran) with a capacity of 800,000 head a year has been constructed and is mainly supplied by Afghan sheep, reaching that city mostly on the hoof. The estimate on sheep export to Pakistan is around 200,000 head a year. Illegal or unrecorded exnorts of imnorted goods range from radios. rayon cloth and yarn, tires, tea, razor blades, shoes, cigarettes and matches, watches. gold and Jewelry: in short. mainly goods nroduced in Iran and Pakistan under heavy tariff protection or an absolute ban on imports. The marnitude of this "transit" trade has never been established. but it may well be sizeable. 46. The loss to government revenues on account of smuggling activities is substantial. There is no active attemnt to control smuggling by proper policing of the borders. There is a loss to the economy as a whole through the difficulty of setting un nrocessina in Afrhanistan for notPntti1 enorts. given the kind of premiums available on smuggling out the unprocessed product. The system of surrender rates means that the premium is larger as the afghani depreciates. For many products the level of the surrender rate needs adjustment. Possibly some systn of non-specific rates, i.e., something like an ad valorem export tax tied to the free rate rather than the official one, would help to achieve a speedier response. j7. In the long run, the export sector holds much promise despite Afghanistan's distance from international markets. The development of high value products particularly off-season fruits, nuts and vegetables for the European and South Asian markets should continue to be important while the livestock and minerals sectors have good prospects in the longer term. Industry 8. The emergence of factory-scale industrial production in Afghanistan is fairly recent. The establishment of the Bank Melli in the 1930's was the beginning of organized industrial development. The Bank sponsored the growing of cotton in the North, the setting up of a cotton ginning and oilseed pressing industry in Kunduz, cotton textile plants in Puli-Khumri and Jabul Seraj, and a sugarbeet factory in Baghlan. The Government's industrial ventures began around 1954. Since that date, the number of industrial enterprises has increased five times and industrial employment reached an estimated 32,000. Major public sector industries include cement, metal products. envineerin. textiles and food processing. h9. The value of potential factory scale industrial production from existing capacities is estimated at Af 6 billion. The present level of production (1969) is only around Af 2 billion. contributing some Af 850 mil- lion value added to the national income. While this is a contribution of only about 1.3 Dercent. it should be noted that over the last decade industrial capacity and production have increased very fast, although a number of industries. particularly those whose output is an input to construction activities, have declined sharply since 1967 following reductions in investment activities on maJor infrastructure DroJects. A slow recovery is presently under way. Fast growing industries are rayon ano woolen t.rtilan thp fnrmpr start-d in 1961 qi 0-2 million mater-r risinn to 1.6 mil- lion meters in 1970; the latter from 0.3 million meters, increasing to about o. The Vlo rec ver 4c n-nr emr-n."c ^ b4iv ,I should not, however, divert the attention from a number of factors that are niln i r nfa + nc +I,a n- r n 11+-; 14 a +n qnvon paar4+x 1kacn include: (a) Suply of inputs: The major raw materials are agricultural cases supplies are irregular and well below requiremnts. Cotton ginning coaty, fVo -emp--I was increased in -966/19u7 to 130,000 tons -h11e cotton is estimated at only 90,000 tons. - 15 - (b) Coordination of inter-related industries: The most serious example of this is in the Mazar-i-Sharif area where the natural gas is to be used as the basic input to a 105,000 ton fertilizer plant (to be comiissioned in 1972), and for a gas-fired steam-generating power plant. The latter has been designed to supply both the fertilizer and a new textile plant completed last March. Absence of transmission and distribution facilities to the textile plant led to the ordering of diesel generators by the $6 million textile plant for its own use; the plant will therefore be idle for 12-15 months, and seven megowatts of capacity of the gas-fired plant which will be commissioned in 6 months will be unutilized. (c) Competition from imported goods: In the absence of effective customs protection, a number of industries such as textiles and bicycle manufacture are not in a position to utilize their full acpacity. Thus, the privately owned Afghan Textile Company, with a capacity of 85 million meters has 30 million meters in stock (out of a production of 50 million meters), because cheaper, but lower quality, Pakistan cloth is smuggled into the country. A similar situation prevails in the Government-owned bicycle factory whose output faces severe comnetition from legally imported bicycles. (d) Over-investment: i&th the past emphasis on large infra-structure nrn4ojct- +.he Eni1io ml+.il ndiriina Arnndid tn nrnvidl_ the remired construction inputs. Following reduction in investments requiring these innni+ - 1Vjn hi A r4 no m+y*'i inl indnf r a on-r M nin-rl -ivT nr-Aman+. - rp nrndiini nc and will continue to do so for some years to come, at a much lower capacity than that achieed in 1967 Similarly, in thena ef nowr_ reltivelvr excessive investment took place in power generation in comparison with transm.ion and d 4+t tb- n fac-14 .ieS. 4 On-+ nin4 A AcA nv* T" ub%fan+c2 +.110 design of the project and subsequent procurement of equipment are such +h4-n+ -u-11 rnhA ao-4 n 14- -4-1A I km% + 7b 4a particularly true in the case of the Mahipar power plant and the Kandahar k-L I vWL4,1I4 0. Inexpe,J -Lnc % &U0ALd%V.IUVIAV U .LQ JJ.LMWCX.L.J CL %,%JIIUIJ%JA1 denominator in most of the major industries in Afghanistan; responsible for _LuW JIVoUt.U.LV.IL, ZJ.UW UAYWIMLOn auu .VuW kUL nt%, ega.V;J prUA..tU.LLVy. VPY few industries have proper bookkeeping systems, records of production or costs of Inputs. In some cases capacity has vbe V4IanutU wIAout assurace of adequate raw material supply and in others without market studies. 51. These factors have resulted in resources being utilized un- econuomically 'U -maat- have semew iu pinciple to be proum"siug inusutrial activities both by the public and private sectors. The Ministry of nudustry recognizes theue proulems and is in the procits of negotiating with an international firm of consultants to undertake a comprehensive survey of industrial enterprises as a prelude to systematic improvement in managerial and technological performance. 52. Following the Private Investment Law of 1967, 49 industrial plants have been opened in the last two years (as of April 1970) with about 5 mil- lion already invested; total investments in these plants is to eventually reach some $14 m-illion. Other projects are under way; the total number of applications being 191 (June 5, 1970). If all these projects materialize as planned, additional employment for some 20,000 people would be generated and the total sale value, as anticipated by applicants would be Af 3.4 bil- lion. About half of the approved applications are for rayon, raisin processing and metal fabrication. Even if only one half materialize, as seems more likely, a significant change in the industrial scene would take place. 53. The large number of new industries started, or applied for, under the Private Investment Law, is evidence of the existence of industrial opportunities for the private sector and its willingness to invest. Hitherto investors have been mainly interested, or allowed to operate, in real estate and bazaar banking dealing with foreign exchange and money lending. While this is a favorable turning point in private investment, it would be pre- mature to forecast a trend on the basis of early applications under the new Law. Already, signs of weaknesses in the Law and its administration are beginning to appear. Some of the "over-generous" terms provided by the Law in the form of exemptions from the personal as well as corporate income taxes are generating opposition. 54. On balance, although Afghanistan is hardly an ideal setting for an industry-based development strategy, the immediate outlook is promising. Despite the miniscule internal market and the fact that the most logical markets, Pakistan and Iran, are both engaged in import substituting and are unlikely to be sympathetic to Afghanistan competition, the industrial base is really so small that there are still some lines where local demand warrants expansion. In addition transport costs do afford a measure of built-in nrotection. Given the lively interest of the private sector. the short and medium term prospects are reasonably good. Mining 55. There have been numerous studies on minerals in Afghanistan ainA +1,0 co-+- n -n1 or a-vra-l trn.n,w4 VI mbr appar t-nnc have )f' a_.a far, limestone (for cement), coal, lapis lazuli, salt and natural gas have beein expi,-t-A. --n- --4o-+- +^ 4-h IMCDT --4-4 n+ 1 A -1-14 --,+--- &JO~L Va~AJ . 1A 6athi t)WAjJ . UJ fl ww st VIA Lj WLAid )VA.t i, t .W4& .V - * J.~JJ ' W.1* ' iIAt- M)UtJ in 1969 and are expected to reach 3 billion cubic meters in 1972. Additional -A nea" s - - 4-- -i4-4- 4. - ,.44an e44 ,.1a 'a 1a .nv.-a .1n, -P^ n- iron ore, copper, bauxite and beryl. Estimation of ore reserves of copper by the USSR; Japanese companies have since completed pre-feasibility surveys aUd are now conduCtug feaslu ity oudis p u uW Leue t be finih at the end of 1970. Bauxite was also found last year and the export possibilities for alumina are being studied by a Japaneae company. Beryl deposits were also explored by a Japanese group under a grant from - 17 - the Colombo Plan and a feasibility study is now expected. The ore contains about 12 percent beryllium oxide. Drilling is being conducted by the USSR for netroleum and other mineral deposits. <6, The Uaiionk iron ore denosits are estimated at 2 billion torts (62 percent average iron content). Also 75 million tons of coal of vhich anout 90 w114n. +nnye clim . he oft b nkinur ana-itv have been dis- covered on the other side of the mountains from the iron ore. (Total eStimated reewrres of coal a about bi Ilon tons4) Tmestone and dolomite are also said to be available in the vicinity of the iron ore P-a +.e n t-linia nrnviQnon for a qpteel Tlt SL.fl.)& .hJ* ±.S, A. V -. ------ ~- - -- -- -- -- - in the Fourth Plan. The cost of a 150,000 ton plant has been estimated at ao+ JO mllon4.11n rw the Afghan mnL,ar. fnw Q+.pl iq only ahoit 10,000 to 20,000 tons per annum. Thus, the plant, which is well below the min4mum tec+nolog±cany1 optimum size, wuld be much too ln-re for Afghanistan's own needs for a considerable period of time. 57. The cost of exporting iron ore to Karachi for use in an .- AIU.J.J. A L_. ItJnd _A + -4m-es +".h + -P n +-- o ore imported to Karachi by sea. Even if the capital costs of infra- structure are exclued from the caLculation, transport costs reman prohibitive. tven if Pakistan decided to construct a steel mill in the North, 4+ w -'IlA '-e -14L--l- 4+h,+ A-Paken --- --rAld s w o m + +4r A-1l -;_ a.1 + _L V VUA LA-. tAJiJXJL ZL,,auLA WA. "s. P JJ WV -S'4.-p.u .U.p V W - ' sa.. export prospects for Afghan iron-ore do not appear bright given the very neacvy IuLkuouve. usI exno0r 1.ovS oftnnsivt osms T-n the nc+ f4iv ean s recored- A +ouis+ +"PP 'n P o tan has increased six-fold, to some 63,000 arrivals in 1969; it is expected. +hn+ M^__ +h- or On 1A +o,,w4s+s rAlk 4-A k-I -,-4--< 4-I)nn m development makes tourism one of the fastest groming sectors. The .JLP-.aAn.LSi VDL U A J.L frmA ACLZ"OUCidi± LJWVkV U. WAU tUC LoV LN L l UIkYU UV" goods unavailable at home, rather than to see the sights. Arrivals by air which account for about 20 percent of all arrivals, give a clearer idea of genuine tourism, increased by over 50 percent in 1970. Given the many VusU avtrctions in Afghniwsan, anU the rapU expanUon u international travel, there is excellent potential for continued rapid g.L'JVUAIV 1L .Sirease .1- tJut".L0111 Wdl"I%v uao Uutul UUIIoUrV.UU.LVt:IY UZL mated at 10 percent per annum, to reach some $7.0 million by 1974/75. Curr'It.Ly wnu wnJugo Jron, VUmLuOM are VOIa6eu a1 arounu qL.> i- lion. 59. The development of Bamiyan, a serene valley with gigantic rock-carved J)UUIa figures, is considered a major tourist project. Nearby are the ruins of an ancient city, destroyed by Ghengis Khan; and some 7. im Irom Bamiyan are a series of beautiful lakes (Band-i-Amir) set in one of the most ruggedly scenic areas. Further possibilities for tourism exist in the northern area. Attractions in this part are the famous mosque in Mazar-i-Sharif, the burial site of the fourth - 18 - Calif Ali; the ruins of Baigh, the Mother of Cities; Tashkurghan, a center of handicrafts tradition with a famous covered bazaar and many villages where Afghan carpets are woven. 60. To capitalize fully on the potential it will be necessary to improve Kabul airport and to provide for clean, well-managed accommodations in the provinces as well as transportation facilities from Kabul to the major places of interest. Airport improvement is being studied under a UNDP project. Ill. MOBiLZING INTEiNAL RESUURUE The Financing Problem 61. The need for additional resources for investment is almost an axiom of development. All too rarely is the use to which the resources are to be put, seen as part of the same coin. In Afghanistan both these sides need to be analyzed. The inefficiency of past investment raises serious doubts about the usefulness of increasing resources to the public sector, to increase public investment, expecially if this is to be done partiallv at the expense of private savings. 62. Local currency development expenditures in Afghanistan have grown by 3.5 percent per annum since 1963/64. During the same period, prices rose by about 6 percent per annum. On the basis of likely resource availabilities, projections for 1971/72 indicate a substantial fall in development expenditures.from the 1970/71 budget level. This accompanies, and is linked to, a decline in foreign aid from its peak of nearly $100 million (i.e. excludina commodity assistance) to about $60 million this year. These declines have had serious consequences for utllization of nanacity in sPctors such as emnAt and nower. and for the level of employment. 63. Afghanistan's undisbursed balance of committed or pledged but unutili7ed loans or cretS iS cur enty n+ the level of about $200 ZOrIllo a a-_ to have been rising. All these commitments are for specific projects in va_?n ou- Sca a res nf avat-qjrion mt- f n-r c+iirM Ahoan+. n100 ni iii nn in fnr projects financed by the USSR and nearly $30 million for projects fivnn -ai I-vr Mn-Jn1 --mi rM -rn m- T'ha -rmninejav- I _ ffy"-n" r il on1 nnA~ n-, under way financed by the U.S. and Germany, France and others. In fact, c4SAAf n4 11 4 n 4o a nhahw r nna 4 Anoh1 a navoe++ -nmnn+ ..o 4 + 4 nlrainAm projects which are not likely to be executed at all, such as the e%AUualbl.ovu proje Lu .Lw VAn..L1 VILV .LJJXL Q.LVUJ.v nA, LJeen ma%Ae. n1UWVV V1 development of the sectors discussed in Chapter II will require a considerable amount of further investmetU. Infrastructure is by no means adequate in fields such as roads, electricity distribution, e A- -lj.LJ 1 L U ,Ld.iL VL - 3.2 LD4.1I1 0.1 -JU U.dJ 11t . Y4 dUA3JdA,L if programs are devised to use existing infrastructure, as LI"'souos seaU1 previouly., uVnL W.L.L navi Ce A"61L a UgInu, MaILLLy JAL Luouca1 currency, and yet, given their low visibility, may be of limited appe"-)L L-I0 U010V CvU41l±'Les. vL4. ±uvemn, p±.damo are no .ue OI.Ly Lcdua.mant on resources. At Afghanistan's stage of development, and especially in relation to the A-Muu o1 111UE011mulu PIOrWa wau VuLL 1-WepoVpe, P11reU5u currr- expenditures will be required. Current expenditures in economic fields, i.e. communiaiUonI, transport, public works, agriculture, etc., have been the slowest growing category of current expenditures, growing by 6.5 per- cent per annum as against 13 percent per annum for all current expend- itures since 1963/64. Education and health expenditures have grown at about the average rate, but health expenditures remain at abysmally low levels, and education expenditure is equal to about half of defense expenditures. 10 - 20 - 65. It may be difficult for an outsider to see how a country with 11 npreant liti tprn-v r!nn nn-ihlv nvrP-nnd nn ndn-i nn ThPY- i c however, some fear in Afghanistan that this is happening and a distrust of thp qncial and onn ial imnlinntionq of hi,ha -r adeiiintinn in nTi ni! This is a problem of the nature of the educational process. There is a limit tn th number of arts graates who ann h nrfithly nhanrbd and the experience with foreign donors who introduce inappropriately high st.ndnrd. fe%r nhvc zin_n1 facilities hnQ nnt hann a n mnin no bit expanding primary education so that people are at least able to read the lahl on af1izlier ncket, and utilizin uncrninvad granates by giving better salaries and allowances to go into rural areas, are the kinds of actions on which the pae of develonment in tho Inngav +am im unMna +n Annand -eve- n o f de m seo --enu, va-; 4,,,-- -76-4v owns -V -a -- ff - -e -4- of the current budget is a matter for careful thought for the Government. the army's possible economic contribution should also be considered. Two-year m.ILtaxy seZViLe Lb UV1PU1'uY _U a1UL3, 1UU Ula.vU00 most of whom are illiterate, are given no training either in literacy U UtiLWL DAAl..J.esk LO, VZ .L . LLdLUeL L AZ J A.0MCM UA . VILO CUJUy LU± VCU"JG..ViL" and a new scheme for using them in the agricultural drive appears L.L- . U_ZU11I,L;VVR:X. o6. *ssing reveniue nave barely kept pace wctn current expenditures during the sixties. Lth a determined effort to increase revenues, the surplus reacheu a peaK of AL 1.1 Willion Ln _L16/U, conUutributg nearly 60 percent of development expenditures in that year. However, it fell to AL 30 million in 1968/69 and only Af 126 million in 9yoy/70 or 18 and 6 percent of local currency development expenditures respectively. 68. The balance of development expenditures must be met through foreign exchange aid expenditures, commodity aid (mainly PL 0u) ana deficit financing. Foreign exchange aid expenditures are a separate, and in a sense, self-balancing item. Commodity aid has contributed on average Af 800 million a year, but the success of the food self- sufficiency program will cut heavily into this amount. It required deficit financing of the order of Af 1.4 billion to avoid a sharp cut in expenditures in 1969/70. This is illustrated below: Financing Development Expenditures (In millions of afghanis) 1962/63 1966/67 1967/68 1968/69 1969/70 1970/71 (Est.) (Budget) Development expenditures in local currency 1,h46 1,728 1,708 1,911 2,026 2,332 Financed bZ: (a) Current Surplus 35 1,100 745 359 125 363 (b) Commodity Assistance 112 889 705 880 600 1,100 (c) Deficit Rinancinz 1.299 (261) 258 672 1.301 869 Source: See Table 2.4, Statistical Appendix. - 21 - 69O Met of the norma grow+h in w_aa 11 he nr- emnted bv increased current expenditures. Additional sources of revenue will have to,- be~ f-,J "Jm" , 7tfa4n vw Ar1-',4~,rmmrtA4 +--r ! Q +nf,- 'Fhom nn come from tax increases aided by better administration, and recourse to 70a. a ~~ In avhe pt see yv rate of over 12 percent. By no means all of this increase was an automatic repos of,- existing. 'Wxe toa inCMU 6-rVo-WL..-. A _-P,. ____ ,.4 l,45t .a. -_ to increase revenues, including a comprehensive reform of the import duties aU te beginning U the SeconU rive-Year PlaU several SuDuqutaut icreases in import duty rates; increases in the prices of commodities sold by Govern- ment monopolies such as sugar and gasoline; the introduction of tols on the use of major highways and a subsequent increase in rates; the introduction of a national licensing system for motor vehicles; and several other measures including improved administration. The elimination of the traditional livestock taxes by Parliament was a step in the opposite direction. Further- more, a major drop in revenue (Af 690 million in 1969/70) resulted from several cuts in exchange profits on major exports as a result of attempus to improve export incentives. 71. The following table shows the pattern of revenue collections: Revenues (In millions of afghanis) 1962/63 1966/67 1967/68 1966/69 1969/70 Income Tax 114 390 187 160 190 Corporate Tax 77 123 144 89 55 Land Tax 46 89 92 68 80 Indirect Taxes 1,127 2,645 2,645 2,084 2,321 Government Enterprises 389 378 613 827 882 Other 367 629 _08 1,193 1,282 Total 214 4,19 4,41 41 About half of the total comes from indirect taxes which are almost all related to foreign trade, either through import and export duties, or the exchange surrender system. Direct taxes are only about 7 percent of the total, but income from government enterprises is becoming increasingly important. The rise in the residual category is almost entirely on account of proceeds of natural gas sales to the USSR. 72. Revenues are in the neighborhood of 7 percent of GDP; this is lower than other South Asian countries, but given the size of the subsistence sector, comparisons with more fully monetized economies are not entirely appropriate. The qualitative evidence of unequal income distribution suggests additional taxable capacity especially through direct taxation. - 22 - There are severe political and administrative constraints, however. Indirect taxes are evaded through smuggling, but better administration could raise yields substantially. Indeed this is often used in Afghanistan as an argument against tax hikes. It is of little use to talk about the corruption, inefficiency and inadequate salaries of the tax administration. These are not unique to Afghanistan, nor is the fact that in a highly personal society with a small elite, in a situation where the application of a law is likely to hurt the influential, that law is unlikely to be applied. 73. Income tax revenue in 1969/70 represented about 5 percent of total Government revenue as compared with 9 percent in 1962/63. The Ministry of Finance is currently attempting to implement the progressive income tax legislation enacted in 1965. Revenues under so-called "income taxes" will depend importantly on the older "fixed taxes" levied against retail shops and other establishments on the basis of a seldom-changed assessment based on criteria designed to indicate the general level of activity. Last year, a 50 percent increase in upper bracket income tax rates (raising the top marginal rate from [0 to 60 percent on incomes net of exemptions and deductions over Af 2.5 million) was enacted. With present practices, income taxes are probably collected from relatively few people on anything like an accurate basis, so that these high rates are rather unrealistic. In the long run, moves towards simplification of income tax at more realistic rates, coupled with improved enforcement, could have substantial revenue potential. 71. Aside from exnort duties and exchanae surrender rates levied on most agricultural exports, the agricultural sector is relatively lightly taxed. Dirnt land taxpi c-urr.ntly vield only ahout Af 80 millinn. whil total agricultural production (1969) excluding livestock products amounts to Af 25-30 billion- RtA of tax vary noniderqhly from nlan to nann, but are nowhere very high, and considerable land is not on the tax rolls at all. The unPvPnnesR of tratment is a mainr har-ier to a-thA_ board rates increases, although one such increase (resulting in a rough doublino of rvpniuq) wa madp. a fpw vear aon Por many vears, hnne for increased revenues from land tax rested on the completion of nationwide adastral surxy, and a number of andantr- surveans have been +.vinad. More recently, efforts have shifted to a quicker "land inventory" approach. Leislation has been bfore thne DoW14 nmet or me time that would, ove a five-year period, move to a uniform classification system in conjunction on existing rates subject to a minimum tax of Af 10 per jerib 1/ and a ma.umum of Af 120 per Jerib (coupared Wa present average of A" 6 or 7 per jerib and a maximum in one province of Af 45 per jerib). This program wOuLd quadule or quiUtuple yAelu over a L.Lve-yuar periou, ouC is given little chance of early passage. 1/ 1 jerib = 0.20 hectares - 23 - 75. Livestock taxes, which traditionally yielded Af 80 million to Al 90 mllion annuallv (thae matorls net output in 1969 is estimated at Af 5-6 illion) were abolished by Parliament four years ago. Uneven enfnmPnt. inltina in mutinlo taxation of some flnrk nwnArq and tax freedom for others, made the traditional taxes inequitable and resente.d -T hould he ansble tormid%rn4 anforcemmntrnrcQ-nrur, and to couple presentation of livestock tax proposals with the initiation that reinstitution of these taxes would become politically acceptable. 76. Taxes on the external sector are the most important source of revenue, accounting for ove-r n5 percn+ of AmnafA ravanuas (nl1ofnnz come to about Af 24 per dollar of import or some 30 percent of the value of comecAl import W at V0V%ACwthe effecWive rate *In ___bix to smuggling, there is also, undoubtedly, erosion of revenues through under- statement of impjort4 values. rMlfO-1-0-mt-Ut haS m-1arkedly im1Apro-ved' recentl.. In the year ended last March, import tax collections were up by 19 percent in a year in wInch imports increased by only 11 percent. If. Ine Government could unaoubtedly get a nigner retum on its investments in commercial-type undertakings through improved management, accounting and price policies. A fairly signlicant portion of electrl1i6y rates, for example, go uncollected at present, in part because of poor recoru keepiug anu in part Decause rates kreiav.ve to income) are too high for many consumers. Also, considerable capacity in textiles, cement and electricity is unutilized at present. In the case of electricity alone, sale of full potential output coupled with successful collection of rates could yield AC 100 milion to AC 200 millon additlonal revenue, even at rates considerably reduced from the present nominal schedule. 78. It is difficult to put a figure on the total impact of the changes referred to. The political obstacles are very great but at least past levels of revenue growth should be maintained. This would permit the needed expansion in current expenditures but leave little surplus for financing investment. The programs awaiting legislative approval such as the land tax rise could therefore be a very important factor. Perhaps most important of all is the unquantifiable impact of better tax admin- istration. Deficit Financing 79. This brings the discussion back to the question of deficit financing through credit to the public sector. The money supply almost exactly doubled between March 1963 and March 1970, an average annual growth rate of 10.5 percent. Net credit to the public sector was at about Af 900 million in 1963/64. During the subsequent stabilization the government reduced its outstanding credit level by some Af 650 million. Increases resumed in 1967/68 however, and reached AC 900 million again in 1969/70, with the prospect of a still higher level in 1970/71. About 60 percent of the Af 4 billion increase in the money supply since 1962/63 is on account of net credit to the public sector. - 24 - 80. The monetary figures include, in addition to the figure for deficit financing by the government, the net effect of the operations of the government monopolies. The malor proportion of the activities of the monopolies and other government entities is included in the budget but a significant proportion is only recorded with a difference in timing from the monetary data, or not included at all in the budget. Thus in 1969/70 for example, while the budget shows a deficit of Af 1.4 billion, the monetary data indicate that this was offset by a net contraction in the money supply of Af 500 million on account of higher deposits and lower credit levels of government entities (mainly as a result of the sugar and petroleum monopolies selling off accumulated stocks). 81. In trying to determine the impact of these increases in the money supply in the context of very slow expansion of GDP, we are handirannpd hv the unreliahili-tv of the data. The nr c data euraAnt that over the last seven years prices have also risen to almost double the 192/0 Ive " A nOne of the most reliable 0ndiPr- ic %zthe fran market on which the price of a dollar is now 40 percent higher in terms of afLhanis. An there also was inflation abroad. the nrice of a fixed bundle of imported commodities has risen by about 65 percent. 82. Since 1967/68 prices have fallen by about a quarter and the exchangA rate has bAn maintainvd at a fairlv stable 1vPl of nonund Af 75 to the dollar, though rising to Af 85 during the past year. The Rhifts in n-ins. hoever. in.nfqr .z thA data reflante th real situation, are largely accounted for by the good harvest of 1967/68 follow- ing the nrovini bad naw Ti has b%en neavrA +hat h11!3w +maa abn that the economy is able to absorb monetization of the subsistence sector he,nah cncn4ona4Aha+ninmonarr ainnl-P un m+ chn-1+ 1A nerm-a+ In+ +V4n- a..,,, **4%A.tJ 112-.J --. -1, -~ (-Lf -- P.~ ,W± W-iAU LJ. higher levels such as the 15 percent increase in 1969/70 tend to put pressure 83. Inferences about "safe" levels of deficit financing may or may not be correct, but they cannot be drawn simply on the basis of available data. The initial impact of all deficit financing would be to raise demand and prices. As we know very little about the rural social structure, in particular tenurial relationships, we do not know how the majority of the population would be affected by price rises. Also, price rises are hardly calculated to promote savings and over the longer run, this would constitute a problem. 84. One must also consider the impact of increased money incomes and prices on the demand for imports. Most food items are unlikely to be substituted by imports. Transport costs are prohibitive. However, meat production might be switched to the home market thereby reducing exports. A rise in the demand for manufacturers might provide a stimulus to domestic producers but - 25 - would certainly put pressure on the exchange rate. A depreciation in the exchange rate could provide an incentive towards restructuring agricultural production towards exports if the Government allowed this to be translated into export incentives. Past experience seems to suggest that the exchange rate can best be protected in a situation of low growth. This is a high price to pay for stability. 85. From a purely financial point of view, deficit financing has certain risks. The important question is therefore, deficit financing for what? It has been noted elsewhere in this report that much of the past twenty years' public investment is making a very small impact on production and incomes. If a fiscal deficit is merely to finance more such projects, then the financial risks described above are clearly not worth takine. In particular, the diversion of savings from the private to the public sector, however minimal thp &lersion and however limrited the -roductivitv of nrivate investment too. would not be worthwhile. 86. Yet there are plenty of productive investment opportunities, if nnly thpv rnn he -ranlAtpd into nbiunl nrnien and nrnornms. Relatively small but well-selected development projects could bring into + n-ntaace +-h ivn vahn anni+n1 fool-414 1++Aoiz the past, which are now so vastly under-utilized. Small feeder roads to bring th hPnN+.nr +.f tha rnaon,4vo main roadA +^ +h poulation unay; distribution facilities to use the existing generating facilities; minor +gabion wrs to better use the ua nr ow41hi. h Aansle ment of extension services and of fertilizer and seeds distribution ,,+rsn nie +n amnda +hno han aP4-+a ccl nt nrvv 4cul +nu,.. + nnhbrn c4 no* +hia creation of facilities to better use Afghanistan's huge flocks: all .L L .A. V'U.J rAi.J %JLJ ±L VL. , espec.6C"LJV W1L~ %AAIJ9. ".L pC&QJ~OU p1J V4J,J UO i, yet expenditures which, if well designed and carried out, may well draw 4LLs~pro-portJ.U1att:LY IghL benefi.LU. U.f VrLLJ'uk=ru1ore, ilu ruuiliiu vU LIne huge Lurtgnl 1.ia1u pinveuJo of the past, certain investment producing facilities have developed. work force. While it would be wrong to make investments merely to use underemployed capacities and workers, their avalility certainly reduces the cost of these investments. 88. Finally, one must note - sadly - that most foreign aid givers are particularly interested iu large, idt-MUn1abe, ASILe projCtOs. Those projects, of course, also have a local currency component, to be uinanced out of the LIverment-s uevelopment buUgue. There is a real danger that, in a future resources pinch, these partly foreign financed large projects woulu be the LaU t to ve cut out; an M at koUvereLy, small, largely locally financed unspectacular but highly economical Uevelopment eXPeUn ures, of the type uescrUeU above, woulu suter worst. If that is the alternative, deficit financing is certainly a better path. But it is a better path only iX worthWhile investments have been carefully prepared. IV. OVERCOMING THE CONSTRAINTS 89. The areas outlined in the preceding Chapter - increased food production through better supply of inputs and use of existing irrigation facilities; quality improvements in livestock and processing; a number of possibilities for industrial production for the local market; exploitation of mineral resources; export agriculture and tourism - represent growth points which could ensure a growth rate of GDP well in excess of that of population over the next 10 years. However, this will in fact be achieved only to the extent that Afghanistan concentrates its efforts on overcoming the very major constraints which the country faces. Attitudes and Skills 90. The constraints on development in Afghanistan begin with the structure of social and economic life. The rural structure with the powerful malik and the extended family provides security for the individual but robs him of initiative and forces a conformity to social norms. A major characteristic of these is the observance of a tradition which regards status and wealth as pre-ordained. 91. The dilemma is well illustrated by the manner of functioning of parliament to date. The parliament, in the absence of binding national object- ives and without political parties, is largely representative of traditional leaders whose power is regional and clearly linked with the existing social structure. Given this representation, a great deal of progressive legislation has either been rejected or appears to be stalled. Of 146 Bills presented to the Afghan parliament as of June 1, 1970, only 5O have been passed. These consisted mainly of ratifications of foreign loans and the budgets. Those not approved have a disproportionate significance to the institutional changes necessary for the overall development and efficient economic management of the country. Cooperation between the legislative and executive branches of government remains wholly inadequate. 92. Except in the cases of a few ministers, economic develonment is not seen in Afghanistan as the most imnortant or even one of the most important goals of the society. Yet, economic change does not necessarily have to unit. nO+rhn n nnk +.n nkto rnede it. T+. will itself be a factor in changing those attitudes. And attitudes are chai ng~ ri - nowj or nrt erv-ii~na av- =mn.4 e my" +h'M 'nr 04 +4 ^" n~f T.r^ nn 4 c being improved, and new ideas are filtering in through travel. 93. However, even with the most favorable social climate, Afghanistan would still he limted hy a shortg.ne of pnn1p wi.ith the trinina qnd experience to man the development effort. There has been a slowing down in thp numbAr of Afghans aning overmaR for trnining enenmtly and the problem of finding suitable Afghan counterparts for foreign technical npannnel is an qovious Q. aver- Rvn whan !n anitabl A-rthn, j availuhlo for the job, aid-giving agencies have been reluctant to provide adequate o e c advisers an epr per4j capita ofe any coust Tu e of foreign technical advisers and experts per capita of any country. The - ef - - 28 - need for a re-thinking of the role of the educational system has already been referred to. There is also a need for better use of manpower available. These weaknesses largely explain the partial failure of planning in Afghanistan. Development Administration 94. The most serious barrier in the way of mounting a development effort in Afghanistan is the weakness of its central administration. The chain begins with the pitifully low level of salaries, which makes it difficult to attract able overseas-trained Afghans into the civil service. Many who do join have independent means or have to spend a good deal of their time and energy on earning supplementary incomes outside the government. The civil service does not have the status it has in the Indian sub-continent, for example, where a "position" is the apex of the average man's ambition. 95. The lack of capable people is compounded by the inadequate framework in which they function. Thus, there is an almost comlete absence of determined and focused management of the economy. Develop- ment has indeed been thought of as somethine rather outside the scope of the administration, a matter of discrete projects selected in deference to the wishes of foreiLn donors. The canacitv to see the various stages of a project, starting from its relation to some view of a national economy. and continuinv with the various stens needed to organise and implement it, has to be built up. 96. These problems cannot be solved overnight. Once the limitations of the administration are recovnised. attention has to be Liven to a selective approach. Key ministries, regional and project authorities .ni muitidA dP_vlAnnumPnt i nsti tuti ons have to hA dnal t with i nt.Anqi vel v and geared up to tackle some of the problems. This emphasises the uaful vrle which +.he bink4na n +.m and develpmnt hank-sWhich re not subject to the specific constraints of the existing administration, 97. The planning process is central to proper development admin- LOU] L~A . J..V ,L U1 W LW LIL UU.LLII I.VJ.. ~ ~.LI u sia~ .L &U"L1k0JWq-L, and the need to respond to the project proposals of aid-givers and oriented directions, the planning process in Afghanistan has a crucial 7. Liuce so Lupoun the approacu to planUig has proceudu along two almost independent lines. In the Ministry of Planning efforts were concentrated on reporting the state of the economy and the effect of public sector finance on money supply. In the key development ministries, programming took the form of listing projects financed or to be financed by foreign donors. The aggregation of these projects plus some overall projections, not determined by the consequence of these projects, - 29 - represented, more or less, the Five-Year Development Plans. As a resuit. nnnning as a tool of economic management has not been effective. The need for more rigorous planning is presently leading to systematic thinking reardng the +Evnp r-f infrmnyn,i-Jnn thA svtem of collection and presentation as well as the analytical use of these data in the Plan oR ~ 'h rI ~(?hi++ n1nnie uAllT J11 ~Y tho i n+.oP_cr_qr on f th macro-economic work of the Planning Ministry with the detailed project are as yet strong enough however. The major problem is still on the will provide links with the planning ministry and some possibility of a is import.ant that the basic institutional framework should be built up more rapiuly. This will have to star with the banking system. Credit is a scarce resource in Afghanistan. While the bazaar ad three commercial banks, one of which also functions as a central bank, operate in the market for credit, the size, scope and terms of credit are not oriented effectively towards stimulat- ing economic development, and the central baniVng functions are not adequately performed. Commercial lending services are used by only a relatively small nuver of individuals and business frms. * ne bazaar interest rates are as high as 2t percent and this factor almost limits the use of cazaar credit to the financing o haigny proitable smugging operations. A number of changes are called for. The objectives of these would be to clarify central bank functions, expand commercial banking, ad establish specialized development banking institutions. 100. To achieve these (i) New central banking legislation should be enacted to express more clearly the general monetary objectives of Da Afthanistan Ba k (DAB) and to authorize the use of more effective tools to achieve these objectives, including authority to change reserve requirements, to affect bank credit expansion and to inspect commercil banks. (1i) Arrangements for the continuation of DAB's commercial operations under separate management should be madec so that the DAB as a central bank should not be involved in commercial banking. (it) A general banking law should be enacted to regulate the operations of banks, organize the establishment of new banks, introduce reserve requirements against deposits and regulate the terms of loans and advances. 101. FoBllowing the reorganization of the Agricultural Development Bank, an increase in its effectiveness in providing short and medium term credit to the agricultural sector has been achieved. The industrial sector is still denied a similar credit institution. The Legislative Committee of Parliament has now approved an Industrial Development Bank Bill . The early establishment of an Industrial Development Bank is critical at this stage of Afghanistan's economic development. - 30 - 1u2. A vevelopment B=anK is neueu to C-t- Mn -nu prospective foreign aid to private sector investments which are too small for foreign bilateral or multllateral agencies to develop and process efficiently on an individual basis. It must be stated that there was unanimous agreement on the part of those Aghan olficials with whom the mission discussed the question, that a financial intermediary, of the kind What an Indubtrial Deveopment Bank woula represent, is urgently needed at this stage of development, and that such an instit'tion should have objective, competent, and therefore, in the initial stages, necessarily foreign management, and should be free from Government pressures to undertake specilic projects. In fact, the Bank is desired even more for the objective feasibility analysis it is expected to provide, sadly lacking in some past public sector investments, than the source of investment capital it represents. 103. Questions regarding the inadequacy and need for revising the commercial code were raised in relation to the provisions of the Industrial Development Bank Bill. The implications are that the commercial code represents, in a number of important areas, a limiting factor for efficient operations of development banking and credlt, in the protection of the rights of lenders and borrowers, on mortgages, etc. VJhile it should be noted that at preset the Commercial Code seems more honored in the breach than the observance by most private enterprises operating in Afghanistan, the hoped-for expaasion in private sector activities would no doubt benefit from clearer and more relevant provisions in the code, an improvement in court procedures and the general legal environment. 104. The main source of credit for agriculture is the money lender or local merchant; at very high interest rates. In the livestock sector a sizeable quantum of credit is required for the purchase of winter feed, purchase of karakul pelts, curing and baling. For the latter alone, the volume of credit is estimated at Af 150 million to Af 200 mil- lion ($3-4 million). Institutional finance to individual agriculture and livestock producers is not always available and is difficult to administer. The logical intermediary between the banking sy.tem, including the Agricultural Development Bank, and individual producers is the cooperative. The need to encourage the formation of cooperatives and expand the credit base for their operation, particularly through the Agricultural Development Bank, has been recognized and a Cooperative Act is awaitina approval. - 31 - rnnt-.1 ii.i nfl -Il The fnrpanino discuqsion may throw some liwht on the dimension of the problems of development and the direction and intensity of the reqired G,avernment nation in the nrt. few va.r Rfforts to innrpasp domestic revenues have not succeeded due to Parliamentary inaction at a i4me when increa ing ef-ne an-nprinn+nnei onr r h v o hon xnted An Qt.t.pmnt. to change the past behavior of some of the major economic variables needs +V n +a 4W mnadn na he poafman Mn +ha ennnarr enffic-1-+ly +n allow an appreciable increase in living standards and to provide job uppurUU.L.U LV nEU &&_Uwu.L11g LVOV VU.. U.L rovLvU =UJ.PLIJVVU. ULVo UmLAU1.mC' L changes in the Government development machinery take place, its future HVUWU L.Ls WL. GUHULIIUW UU LUU1U.L.LULULC ".W0 tou gUWLoH. 1MJE LO JAU point in following a policy of deficit financing if the proceeds are used for unprouuctive purposes. ror tne implementation of tne0e UnLJ:ges a number of institutional constraints should be remedied to sustain the i r% . A 1V. Among the moA iMportant 15 te weaAneu of te development administration and planning machinery itself particularly with regard to project preparation. The lack of statistics, and the skimpiness 0f resources devoted to the preparation, analysis and follow up of public and private investment projects are seriously retarding the rate at which foreign assistance can be effectively utilized. A strengthening of the analytical staff of the planning organization, and the establish- ment of an industrial development institution to provide feasibility analyses and both direct loans and loan guarantees to the private sector are badly needed. Improvement of the legal environment, including the enactment of a banking law, the modernization of the commercial code, and the codification of the mortgage law, would improve the climate for private investment. Inventories of natural resources (and censuses of population, agriculture, and private industry) in forms useable to foreign and domestic private investors are also needed. Honesty and efficiency in the civil service are impeded by the very low level of government salaries. The shortage of accounting skills is a pervasive bottleneck which impedes efficiency in both public and private enterprises, and limits income tax and other Government revenue potential. The speed with which these constraints are tackled will provide a test of the genuineness of the will to develop in Afghanistan.  STATISTICAL APPENDIX Table No. 1. EXTERNAL DEBT, FOREIGN TRADE & BALANCE OF PAYMENTS 1.1 Estimated External Public Debt 1.2 Estimated Future Service Payments on External Debt 1.3 International Reserves I.h Net Balanres under BilateraI Accounts 1.6 Foreign Loans, Grants and rechnical Assistance 1-6 Valnii of Enorts hv Commdity 1.7 Export Projection 1_8 Vnlie of Tmnorts hv Cnmmodity 1.9 Balance of Payments 1._10 Tvh~nnge a1te in the Pre Markt 2. PUBLIC FINANCE & MONETARY POLICY 2.1 Actual and Projected Estimates of Government Revenue 2.2 Ac+ual WAd Dr4jec+ed E+tima of GovrnMen+ t AA4r J And4+nA o 2.3 Local Currency DevelopmentExpenditures 2:)+ qimm- wr -f'PN,bA--+ wr- P--4 +-; - A,i-4m +-- q----A -A Td P l a n9se 2.5 sources and Uses of Government Funds 1968/1969 2J4 MannMary 5bnwrav 2. Ch6nges in the Money Supply and its Causative Factors National and Commodit- P ce Indices , fnnofl invn r ntT ff, an m nl 5. itAJulU11VII DUvrLD .1 Volume of Agricultural Production 3.2 Agricultural Population and Landownership 3.3 Major industrial Production 3.4 Industries Established under Private Investment Law  Table1 ItY1UAtTA1 AT WC1TVTlA1MT LVrMWOTAT DrTMTTr1 TWl'P MTTrPAWnT1n AQ f'M rr1rPU'D i 10 A / Debt Ren.ayab1e inForei-gm. C11rreney (In thousands of U.S. dollars) Debt Outstanding December 11, 1969 Source Disbursed Including only undisbursed TOTAL EXTRNAL PUBLIC DEBT 2 492,691 649,33L Loans from international organizations - IDA 277 8,500 Loans from governments b92 374 640,83j Clhina (U-4inaland) uu a.\yitL..Lt2A.CL11U] U ) L k L Q U000 Germany (Fed. Rep. of) 47,153 56,518 ja-an 2 , 000 United Kingdom 2,530 United Statnn CA ,nc P0 oDn U.'SS.R. 366,71M !71,797 /1 Debt with an originl or extended maturity of over one year. /2 Excludes $1h,784,200 unallocated portion of frame agreements from U.S.S.R. Statistical Services Division Economics Department July 16, 1970  Table 1.2 AFGHANISTAN - ESTUL1ED FUTURE 3ERVICE FAYMNTS ON EXTERNAL PUBLIC DE-BT OU1STANDINC INCLUDING UNDISBURSED AS OF DECEMBER 31, 1969 Debt Repayable in Foreign Currency (In thousands of U.S. dollars) Page 1 DEBT OUTST (REGIN OF PERIOD) PAYSENTS DURING PERIOD INCLUDING AMORTIf yEAR UNDISSURSED ZATION INTEREST TOTAL TOTAL EXTERNAL PUBLIC DEBT 1970 648#998 11,670 80583 20p253 i97t 6379128 139R5 9e361 23,1346 1972 623,343 15#363 90569 24#932 4973 607>980 19,731 99889 1974 588249 23359 9531 32,891 195564taR9 26'305 8>947 35,252 1976 538 585 28>692 8s304 36s995 197509Q893 28mA830 7a7313656 1978 481 064 27>852 7,166 35s018 u979 45s1 25A14 6,73 3:8 1900 4270898 23>166 69123 29289 49044>3*486 >2!2*8 7 w & -*V-* f 10& 7 5 1 1982 3820866 210168 5156 26324 1984 340>622 21.276 4,254 25.530 toL: Includes service on nll debt listed in Table 1 prepared July 16, 1970 wi.th täh exception of the following, for which repnyment terms are not Pvailable: Loans from governments: Germgny (Fed. Rep. of) $137,000 United States 20)n,00n Š337,000 Tnble 1.2 AFGHANISTiN - ESTE4AT2D FUTURE SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBT OUTSTANDTm INCLUDING UfD) ISBURSED AS OF DECEMBER 31, 1969 (CONT.) Debt Repnyable in Foreign Currency (In thousands of U.S. dollors) Page 2 UEd UT ST (BEGIN OF PRIUUJ FATaENTe DUvNaO INCLUDING AmORTI* --~ . se m LWkh Thnv&iE YAR UNDI3BUR3kU LAIsAUR nmo LOANS FROM INTERNATIONAL ORGANIZATIONS IOA 1970 80500 ' 1971 8#500 25 25 1972 8#500 1973 8.500 p 1974 8s500 16 53 IV 1975 8s483 35 59 94 1976 8P448 35 03 go 1977 8P413 35 63 98 1978 8,378 35 63 To 1979 8*343 85 62 147 1980 80258 85 62 47 1901 8*173 85 61 146 1982 8,088 8 60 IM5 1983 8,003 65 60 145 1964 7,918 120 59 z79 LOANS FROM GOVERNMENTS 1970 640s498 11s670 8*576 200246 i9ri 62882e is*985 9336 23#321 1972 614#843 15363 9*528 24*892 1vr3 5vv.4so 19vs31 v.v41 29.672 1974 579,749 23s342 9.479 32.820 tvrs 556s407 26*2 0 6eav 35158 1976 530s137 28,657 80240 360897 1977 501s481 26P795 7*666 36063 1976 472P666 27*81T 7*104 34.920 1979 444869 25#229 *.610 31.639 1980 419.640 23.081 Go061 29.142 191 396s559 21*S81 5.560 27#341 1982 374s779 21#083 5096 26179 1983 353#695 209991 4#644 25.635 1984 332.705 21P156 4.194 250351 Table 1.2 AFGHANISTAN - ESTTMATED FUTURE SERVICE PAYNENT5 ON EXTERNAL PUBLIC DEBT OUTSTANDING INCLUrDING UNDISBURSED AS OF DECEMBER 31, 1969 (CONT.) DebL Repayable in Foreign Currency (In thousands of U.S. dollars) Page 3 OEUT OUTST INCLUDING AMOR7Ti WCAR O NTISR ZT?TmW TETro T wpTA b LOANS FROM GOVERNNENTS CHINA (MAINLAND) 1970 24>000 I9ra 24p 00 v^ v 1972 24#000 t973 24s000 1974 24>-000 * i 975 24j>000 1976 24,000 1977 24#000 1978 24.0000 Il ma 1979 24.000 '0 1980 241,000 * 1961 24p000 1982 24p000 * 983 24>000 1984 24>000 GERMANY (FED. REP. OF) 1970 56381 3,904 1tåD3 5a54? 1971 52>477 4#051 1p640 50691 1972 48>427 4>051 1,Sl6 5,544 1973 44>376 4226 1,386 5 612 1974 40,150 4,304 1>237 5_4 1975 35-846 49304 1,085 55389 1976 31>542 3,348 934 4282 19728194 3p348 826 4,174 1978 24847 2>885 723 3e608 i979 21,961 2,802 638 3>440 1980 19>159 2?0 559 2>629 1981 17,090 2070 497 2,567 1982 15020 2>070 435 2505 1983 12950 2070 373 2>443 #4Aml 2OåT l38 1blel.2 AFG'C1ANTSTAN - ESTIIA ,D TUIET l SERVIP PA YVNh'M nN EWfXT AT E ITCET UrTSÅ TNCLUDING UNCDISJRSED.AS OF DECEMBER 31, 1969 (CONT.) Debt RepnyAble in Foreign Currency (In Lhousqnds of U.S. dollArs) Pmge DEBT OUTST ,ara.ts nc Dwøynn% øåvuruJYz ^åjTmdWft Iffrøfln INCLUDING ANORTIm wcA åi>jnlrc[211 Nr 7AYTInmJ Wj.~ WTEARw% NISUSE &-AT10N 4NTEREST iTA#L LOANS FRON GOVERNMENTS JAPAN 1970 2>000 a 80 80 97200 80 80 1972 2*000 m 80 80 i973 2#000 av8 8 1974 2>000 • 80 80 1975 2>000 8 80 80 1976 2>000 133 79 212 19771,86 133 73 207 1978 1>733 133 68 201 1979 1s600 133 63 196 1980 1.467 133 57 191 1981 1333 133 52 185 1982 1200 133 47 180 1983 itel6 133 41 175 1984 933 133 36 169 LOANS FROM GOVERNMENTS UNITED KINGDOM 1970 2.530 207 193 400 1971 2,323 214 175 389 1972 2øt09 219 157 316 1973 1p891 223 139 363 1974 1>667 223 121 385 1975 1>444 223 103 327 1978 1å220 223 85 309 1977 997 223 67 291 1978 773 223 49 2?' 1979 550 223 31 255 1980 327 173 13 186 1981 154 31 * 31 1983 1 31 * 31 1983 90 31 31 Table 1.2 AFGHANISTAN - ESTIMATED FUTURE SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBT OUTSTANDING INCLIÄMNG INDISIURSEFI AS OF DECt-iMRR 31 1 9C6 ('CONT ) Debt RepAyabe in Freign Currency (In thousandsofU.S.dllrs) Pg" DEST GUTST <DE4-N OF PERi00) PAYNENTU DURING PER100 INCLUDING ANORTIF YEAR UNDISBURSED ZATION INTEREST TOTAL- 604NS FROM GOVERNMENTS UNITED STAIES 1970 83>990 2,522 12677 4,199 1971 819468 2s752 1-694 4p446 1972 78>716 2*872 1,647 49519 1973 75#844 3,042 1*595 49638 1974 72>801 3,217 1545 4762 1975 69p585 3*431 10437 40868 1976 66,153 3,758 1,324 5>082 1977 62>395 4-063 1,307 5.370 &1 553É 1979 54 088 1-488 1312 2>801, 4980 5260 28%032772>8 1981 51*072 1p549 10240 2,7891 198249,23 157112 2077,) 1983 47 953 1>592 1,164 2756 U.S.S.R. 1970 4710597 5,037 4p984 10p020 1971 466*560 6p968 5,747 12>715 1972 459,592 8#222 6*128 14,350 1973 451*370 12s239 6>740 186980 1974 439,130 15,598 6#496 22,093 1975 423>533 18#311 6,183 24.494 1976 405*222 21#194 5,818 27p012 1977 384,028 21,027 5#394 26#421 1978 363#000 20,331 4,973 25>3.03 1979 342>670 20.582 4,566 25.148 1980 -322,088 199177 4,155 23.332 1981 302p911 17>997 3,771 21,768 1982 284>913 179279 3#412 20#691 093 267>634 17*164. 30066 20*230 1984 250>470 17#308 - 2,722 20,0C31 Statistical Services Division Economics Departmnt July 16, 1970 Page 6 Tnc Atb1l.2JAiJuTAL -- ESTiNA'YeD FUTURE SERVICE PAYM4EINT 014 EXTERNAL TUBLIC DEBT OUTI:iDIG iiCLUDrIHG UNDISDU6ED AS OF DECEMBER 31, 1969 Debt Rppayable in Foreign Currency (In thousands of U.S. dollars) DEBT OUTST (BEGN O PEROD) PAYMENTS DURING PERIOD (BEGIN OF ERIOD) INCLUDING AMORTI- YEAR UNDISBURSED ZA TTON TNTERR T rnrraT. TOTAL ADDITIONAL EXTERNAL PUBLIC DEBT /1 1970 14,758 5,266 n.a. 5,266 1971 9-,92 A.AR 1. ,LAR 1972 5,02h 3,960 3,960 1973 1.06h 971 971 197h 93 93 93 197q - /1 Includes service on bilateral debts from U.S.S.R. which are outstanding on December 31, 1969 but are not included in the regular submission. The follouing debts are also outstanding but have been excluded from this table because repayment terms are not available: Debtor Amount Intercontinental Hotel $ 5,851,200 Balgh Textile Co. b.901.338 Afghan Cotton Industry 1,000,50h Total $11,753,0h2 Statistical Services Division Econonics Department July 22, 1970 Table 1.3 INTERNATIONAL RESERVES Milos ol' dolars) March 20 1. Da Afghanistan Barik 45.16 38.59 28.93 29.66 29.41 Gold 34.69 314.85 33.04 32.97 32.99 Foreign Exchange 17.19 . 13.80 6.05 14.06 7.62 (Convertible) (16,.52),- (13.62) (5.68) (13.57) (7.43) (Inconvertible)2/ (0.67) (0.18) (0.37) (0.49) (0.19) Special Drawing Rights --- - --- --- 4.97 Net IMF position -9.06 -11.26 -8.98 -17.55 -17.11 Net balances under bilateral agreements 2.34 1.20 -1.18 0.18 1.04 2. Foreign Exchane of Commercial Banks 1.63 2.47 2.26 30 3.76 (Convertible) (1.,31) (2.19) (1.67) (2.72) (2.25) (IInconvertibLe)./ (0.32) (0.28) (0.59) (0.98) (1.51) 3. Total (1 + 2) L'6-79 4:1.06 31.19 33.36 33.18 Addendlum Gold, convertible foreign exchange, SDR's, and net IMF position (43.46) (39.40) (01.41) (l.71) (30.53) 1/ In addition, Da Afghanistan I nk holds silver valued at US$10.5 million. 7/ Mainly Indian and Pakistan ru,pees. 3/ Adjusted for transactions with 1MF not recorded until ti followiIg fionJth. Source: Da Afghanistan Bank r Table 1.4 NET BALANCES UNDER BILATERAL ACCOUNTSY/ (Millions of dollars) March 20 1966 1967 1968 19869 1970 U.S.S.R. 1.88 1.33 -1.83 .18 .48 Czechoslovakia -- - 0.40 0.61 .43 .72 Poland 0.50 0.31 -0.02 - .31 - .43 Mainland China -0.05 -0.06 0.07 - .09 Yugoslavia 0.01 0.01 -- - .01 - .01 Bulgaria - .02 - .12 Total 2.34 1.20 -1.18 .18 1.04 1/ Dashes indicate that fieure is less than q.000 : totals may not add due to rounding. Source: Da Afghanistan Bank and IMF. Table 1.5 0RON " OR AND TECHNICAL ASSISTAICE 1/ or 111A) 1. Q._.R, Q. 49.514 30.702 3 50 (a) Ia (projecta) 54,810 14,720 24,602 28,507 (b) Granta (projeats) 250 - 680 400 (o) Tohpla Assist.ane (grant) 1,888 2,794 3,420 4,100 E (d) Twoaic Assitan2Ce (l ) 2,000 2,000 2,00 443 2. .,Å ä^gäLi (a) loa (?-jets) 5, 6.6- (-C) Gramm kprojec~/ 5,y- I,215,6jz,4 (se)stance (grant) ,806 5,27 5,63 5,500 E La an (projeats) 11,850 5,940 1,425 930 (b) Grant (projeate) 1,600 1,700 2,000 1,370 (o) Touleal Åuistane (grAni) 3,8&1 3,867 5,000 5,000 E 4. cna - 2.980 WM0 (a) m (projmate) - 2,980 5,740 5,559 (b) Grat - - - - 5. Franco .6 852 6_0 L--- r-) s Grant (projeeta) . - 192 70 ( Techi«al Åfivtanoo (grant) 453 506 560 560 E 6. United Nation* aj0 ååiL. 19 6L6 (a) laen (projects) • - - (b) Grantv (pajecto) 1,620 930 2,384 2,164 (c) Technical Asi~tan*e (grat) 3,010 2,614 1,047 2,561 (d) World Food Progran - 1,546 5,034 2,168 7. Colombo Plan §.2 (6 on(proleote)- (b) Granta (projCcte) - - - (c) Technical Asastanoo (grant) 385 334 420 472 E 8. Other countries (Poland, Czooho- slovakia, Bulgaria, 3wd4) 1M 1.000 l000 1.000 (a) Lm (projecta) - - - - (b) Ckrant (projecta) - - - - (c) Technical Asulutanoe (grant) 1.0001000 _a0 1.000 TOTAL 661,241 Grants 9,020 9,401 11,120 5,651 Teohical Assistanee i2 of which,teIa Oranta 15,406 16,542 17.081 19.193 World Pgod Programt - ,0 2.168 E - Etisated du. to non-ava1~ahtty et data. / Forlign loan9, grante =d tokhoal asitanos rcpremt the forign knumency onpuonnt of developent expenditures (for local ourrency expEnditurs see Table 2.3), and they are the actua11y dietured amount . No r roniiatio nm be ade bewen figuren in this table, and balance of payments data in Table 1.9. The Eman rascns are (i) commodity eld from individual countries is not included under Table 1.5, but is of cours* part of aid and oan financed imports. (ii) data in Tablå le in-id.i finannin or man-- -A .a. these amounte are excluded from the id and loan finaced ~ rtD Of goode in Table 1.9. 2/ Revised total figuren for years 1966/67, 1968/69 and 1969/70 on projeatg vre collectod by the recent IMF mission to Afghanistan; no country brakdown was w«avlable. The totale are equal to actual disburaments on forg lans and grante in the developsent accounte. 1966/67 1967/68 1968/69 1969/70 of whichi Lonne 71.9 59.7 38.0 34.5 Orantn 9.3 9.11 12.2 9.7 Sources Ministry of Planntng. Table 1.6 VATTE OF EYPnRTS RY MWOTTY (Millions of dollars) COMMODITY 1965/66 1966/67 1967/68 1968/69 1969/70 Fruits & nuts 24.0 22.5 26.0 26.9 27.7 Karakul 16.1 11.8 14.1 8.3 1/ 13.0 Raw cotton U.1 14.3 7.9 5.9 5.7 Raw wool 2.0 6.5 4.9 7.0 6.6 Carpets 8.9 8.2 5.2 4.5 6.3 Hides & skins 1.5 2.4 2.4 2.3 2.7 Casings 1.2 1.5 1.3 1.1 1.0 Oilseeds 4.5 1.0 0.9 2.8 3.3 Natural gas -- -- 2.9 9.0 12.0 All other 0.7 1.3 0.8 4.0 3.4 TOTAL 70.0 69.5 66.4 71.8 81.7 1/ The 8-1 million karakul rnOrts in 1968/69 renresent customs returns: on the basis of exchange receipts the export earnings amounted to $14.3 million. Sasea. ToA - 1oAR A n w+n n +-hi M4w%Ia+-v"r ^f Plown4irr. 1QQ on 1Q70 fv%n +ha Ministry of Commerce and the IMF. Table 1.7 EKPUI rHUJECTIUN (Millions of dollars) P R 0 J E C T I 0 N * Actual Preliminary 1970/71 1971/72 1972/73 I973/74 197t/7' 1968 - 69 1969 - 70 Traditional Exports: Fruits, uts 26.9 27.7 28.3 29.7 31.1 32.7 24.3 KarakulO 8.3 13.0 13.5 13.6 13.7 13.8 14.0 Raw cotton 5.9 5.7 9.0 6.7 9.5 11.5 13.5 Raw wool 7.0 6.6 7.0 7.2 7.3 7.4 7.5 Carpets 4.5 6.3 6.3 6.4 6.5 6.7 7.0 Hides, skins 2.3 2.7 2.8 2.9 3.0 3.1 3.2 Casings 1.1 1.0 1.0 1.0 1.0 1.0 1.0 Oilseeds 2.8 3.3 3.2 3.3 3.4 3.5 3.6 All other 4.0 3.4 3.6 3.8 4.0 4.4 4.8 Sub-total 62.8 69.7 74.7 74.6 79.5 84.1 68.9 Non-traditional: Natural gas 9.0 12.0 14.6 16.8 19.6 19.6 '9.6 Sub-total 71.8 81.7 89.3 91.4 99.1 104.2 108.5 Services: Tourism 2.4 3.8 4.2 4.7 5.2 5.8 6.4 GRAND TOTAL 74.2 85.5 93.5 96.1 104.3 110.0 114.9 1/ The $8.3 million karakul exDorts inl968/69 represent customs returns; on the basis of exchange receipts the export earnings amounted to $14.3 million. Mission estimate. Table 1.8 VALUE OF IMPORTS BY COMMODITY (illions or dollars) 1964/65 1965/66 1266/67 1967/68 1968/69 CONSUMER GOODS: 2.7 33.4 34.0 3L.9 of wnich: Food 10.4 6.8 14.2 14.9 15.0 Tea 4.2 2.9 6.1 4.8 9.5 Other foods 0.5 0.9 1.7 6.3 4.6 Textiles 11.8 9.7 9.7 9.6 10.4 Cotton fabrics 3.9 Fabrics excluding cotton 5.8 4.3 4.9 5.1 6.4 Used clothing 2.1 1.h 1.0 1.0 1.2 Other consumer goods 9.9 9.2 11.5 L 9.5 Tobacco 0.3 0.2 0.4 0.4 0.5 Footwear 1.8 1.6 1.4 1.5 1.7 Medical, pnarmaceuticai, other chemical 3.9 3.1 4.3 4.8 5.0 Motor veh1r'h 3 ..11 3.1 2.5 2.1 Bicycles 0.5 0.2 0.3 0.3 0.2 INTEIMEDIATE GOODS: 22.4 16.8 18.4 19.2 20.6 of which: - - Petroleum products 7.5 4.3 4.4 3.8 3.1 Rubber tires & tubes 1.1 2.1 3.0 3.8 2.8 I-t e 0 .. WAA aa.. Ji au tstAAWO c..C . ...) C. 9ov Plumbing, heating, lighting equipment 3.1 1.1 0.9 1.1 0.8 Other non-metallic mineral manufactures 4.4 3.5 4.1 4.7 6.14 Other miscellaneous -manufactures 4.1 3.9 3.5 3.5 4.9 CAPITAL GOODS: 4.3 3.7 & - 5.7 of which: 'achinery 3.3 2.7 3.8 3.5 L.0 onter trannnort adu4nt 1.0 1.0 1.2 .0 1 1.7 ALL OTHER COMMODITIES: 8.1 10.3 10.0 5.1 _..3 TOTAL COMMERCIAL IMPORTS 66. 56.5 66.7 63.8 65.5 &N FD IMORTS 74.5 74.4 864.1 75.4 58.9 of which: Non-project loans & grants 15.4 18.1 20.3 13.4 8.7 Project loans & grants 59.1 56.3 63.8 62.0 50.2 TOTAT TMDnrDPQC. _ .IA- ".Ti-Ll' 141.4 130.9 150.8 139.2 124. (Commercial and aid/loan financed) Source: Ministry of Commerce data and IMF. Table 1.9 RAT.AMPV nF PAVMrMPc (Millions of dollars) 1965/66 1966/67 1967/68 1968/69 1969/70 Exports, f.o.b. 70.0 1,69.5 66.4 71.8 81.7 of which: traditional 70.0 9.5 37 T.2 Z97 natural gas - - 2.9 9.0 12.0 Imports, c.i.f. 56.5 66.7 63.8 65.5 70.0 (commercial only) Trade balance 13.5 2.8 2.6 6.3 11.7 Adjustment between customs returns and exchange sur- render records 2.7 0.6 -0.5 6.5 -3.6 ADJUSTED TRADE BALANCE 16.9 34 2 .1 10 8 8 1 Interest Payments -1.6 -1.8 -3.4 -L.6 -7.8 DAT,T WDV RT r'TT'0nLTM A , n Y n , n- I n Z Amortization -3.5 -3.7 -7.3 -9.0 -13.2 Change in reserves -4.1 5.7 10.1 -2.2 0.2 SDR allocation . - - - ho9 Errors and omissions -5.5 -2.6 -1.5 2.0 BALANCE ON CAPITAL ACCOUNT --0.6 1. -9.2 -3.1 AD&LOAN FINANCED IMPORTS 74.4 84.1 75.4 58.9 52.6 1/ of which: project 56.3 63.8 62.0 50.2 34.5 yon-proeC+ A -ve) 1 2. 14)*.7 8 . 17 The breakdown of aid & loan fInancd imnnrtP fny 190/70 rencn+ the lateS+ -n -OM--4 collected.by a recent IMF mission to Agh anistan. The non-project aid item, mostly commodity aid, is very high in view of increasing general self-sufficiency, and the excellent wheat crops in 1968/69 and 1969/70. It is possible that USSR consumer good credits account for the big increase, but this is not certain. Also, the very high non- roJec. co,mpono ent l u impy una projieu impors have laidin by over u30 from the 196y/6 figure, which itself was substantially below the year 1967/68. Table 1.10 EXCHANGE RATE IN THE FREE MARKET (Afghanis per currency unit shomn) EAR ENDING March 21 U.S. Dollar Sterling Pound Indian Rupee Pakistani 1hn~e 1961/62 43.6 120.9 6.5 5.7 1962/63 53.0 148.1 7.5 6.7 1963/64 51.3 144.4 7.4 6.6 1964/65 63.6 177.1 7.8 7.2 1965/66 75.1 210.9 7.9 8.9 1966/67 76.4 213.2 6.9 8.9 1967/68 76.2 203.3 6.8 8.7 1968/69 74.3 179.3 8.1 8,4 1969/70 75.6 182.1 6.7 7.7 1969/70 April 20 74.7 181.0 6.8 7.9 May 21 75.5 180.5 6.8 7.9 June 21 74.6 179.6 6.9 7.9 July122 7.0 178.6 67 7.6 Agust 22 72.9 175.8 6.4 7.3 September 22 73.8 175.6 6.5 7.4 October 22 73.7 178.4 6.7 7.6 November 21 75.5 182.8 6.6 7.8 December 21 77.9 187.5 6.8 7.9 J«vna~ 20 76.9 156.6 6.5 7.7 March 20 79.0 19A.0 6.4 7.5 1970 April 20 80.5 192.0 6.3 7.4 May 20 81.3 193.4 6.3 7.4 1 Average buying rate for letter treneter. Soreer Da Afgbistan Bank. Table 2.1 age 1 Actual and Projected Estimates of Goverrinent Revenues durir;, the econd and the Tiird Plan (Mlillions of afý,hanis) Total Total S e c o - n d P 1 a n Second --7T h i r d P 1 an Third Plan ode Revenue Heads 1962/63 9 Plan 67: 196/67196970 ly/771a Actual Actuai Actual Actual Actual Actual Latua cta Budget fe/ 100. Direct Taxes 320 376 U68 575 601 2,322 L2 3 .£l 926 -10. individual Incame Tax 1'57 32i 39A ,223 iY7 M-4 l90 7 Itý9 120. CorporaEte Income Tax 77 79 81 81 123 ål 144 88.8 55 195 936 130. Land Tax b6 50 44 82 89 311 92 68.3 80 I50 1,966 l0. Livestock Tax 83 90 85 88 1 347 - 38 70 81 531 150. 'overnmet Enterprises Tax - - - - - - - - - - 190. Other Direct Taxes - - - - - - - 0.2 1.5 39 200. Indirct Taxes I 127 112 1 917 2 176 2 665 9 577 2 645 2 08h.21 2 6c8. 11,630 2,10. Import "uties S- 5 _1,i9 1,-r 3 , / 2 220. -xport Duties 75 77 80 139 167 538 159 162.l 185 ~ 180 930 230. Sales Tax on Consumer Goods 72 90 198 92 80 532 63 51.5 50 85 348 2i40. Taxes on Comnercial Transactions 89 593 530 80 93L 2,950 887 262 200 232 1,656 250. Monopoly Taxes 8 8 15 10 13 5b 15 20.8 30 46 132 260. Fixed Tax on Imports - - - - - - 153 200.9 220 250 932 270. Fixed Tax on Fxports - - - - - - 13 20.7 16 25 95 290. Other Indirect Taxes - - - - - - - 0.1 20 0- 300. incom from Sale of State P p 116 351 196 223 2h7 93 197 .68 8J .4 519 3TI. Land and Bui1digs ~5 ~ 102 122 40 ~ . 320. Natural Resources (Gas) - - - - - - 550 2/ 657 2,398 3:30. Rights to Exploit Natur-a Resources - - - - - - -10.5 - - 9 3a0. Mireral and Agricultural Products 35 hs å3 60 66 2L9 113 126.9 130 160 8.15 350. "sed Suipment by Auction - - - - - - 13 14.2 45 100 293 360. Printing Serv-ices and Products 3 3 3 7 1 17 2 3,9 4 4.4 13 370. Comunication Services 31 .i b3 L9 52 216 55 66.2 70 90 340 90. Reath Services 2 2 2 5 5 16 6 5. 6.5 10 32 3 0 Othr L,perty, goods and services - - - - - - 12.7 15 30 17 L J ncx,e fromr... 77 90 ill 11 133 525 127 1i41.6 142.6 ljo 8Li . ehicle License2 - -~ - --Ï L2. Identity Documer.ts 1 1 2 5 7 16 6 9.:2 10.5 7 35 L30. 1ort Charges 27 28 38 L5 52 190 51 51.1 52 52 230 LLO. Tax Fires and Penalties 3 3 2 L 3 15 4 4.3 4 20 L50. 1ustom ?ines and Fenalti,es 8 2L 11 10 13 66 10 11.9 12 13 56 L M Marriae and Divorce Papers 1 1 12 11 13 38 1 0.9 1 1 L'C. --nspcrt Toiission, Traffic Fines 35 36 38 L5 196 L3 43 h8 60 225 3 usiness Lic2nses and Pemrs.its - - - - - - 10 17.7 10 105 L Ler:ses, Fees ar.d Fines - - - - - - 2 3.4 5 3 7 ?a'lel2.l ( co:.tirued) Pg Total 0tal Se o n a 1 a n Secod T i r d P 1 a n i:it Plan Code RevenLe Heads 152/3 1963/6 196L/5 1955/66 1966/67 Plan 1967/6 1958/69 1/ 1969/70 ./ 1970/71 Official Actual Actual Actual Actual Actual Actual Actual Actual Budget / Pro jction - ~-- atimarte 500. Income from Use of State Pr rty 30 79 56 50 121 368 89 106.9 112. 69 755. Rental of Real Estate 7 7 71 12 18 ¯-2 1U 520. Rental of Movable Property ih 23 8 10 8 63 2 11.8 12 12 2û 530. Interest on Savings 2 - - - - 2 - 0.2 0.1 - 510. Interest on Loans - 1 - 3 - - - - - 550. Investpents 7 L8 59 25 96 235 35 h.h 54.6 52 50D 560. Road Tolls - - - - - - 34 33.2 36 50 220 590. Other - 1 - - - 1 - 0.2 0.2 - 1 600. Lncome f£rm Covernment Enterprisea 389 570 3h8 768 378 25 612 826.8 881.7 862 J 702 Mn. Monopoly f7 6 09 323 7, 9 97 SVr 7 ~ t3,7 620. Genmral Cooperative - - - 2 8 10 2 1.6 1.5 - E 630. Slaughter Houses - - - - - - - - - 6t.0. Governrent Factorles - - - - - - - 0.3 0.2 - 650. Public Institutions - 50 21 - - 71 - - - 660. Prisons - - - 1 1 2 - - - 670. Grain Supplies and Silos - - - - - - - 20 - - tio 690. Other 21 126 170 156 87 520 lt 150.8 180 721 700. Miscelaneous Income 93 75 65 68 70 371 76 162.8 70 0 4c 710. Colection oFBnkRevenues 0 rö s0 I" rö 21 3 W E I 720. Domstic contributtons 7 4 6 5 5 27 b -- 7 790. Other L6 31 9 18 25 129 14 14.7 25 20 69 800. Non-Revenue Income 20 56 58 151 55 350 19 54.5 5 im MTd. lefunds o? -erpayments 7 7 7 7 37 3 ~9 820. Repaymerits of Employees Loans 3 > 2 41 3 53 2 5.9 6 7 20 830. Cash Repaymrts of Advances 19 35 h 91 39 228 15 4l.4 37.5 33 1L2 890. Other - 8 6 13 6 33 - 2. 5.5 1 3 Subtotal 2,181 3,129 3,229 LXL24 4,254 16_,897 ,8bå 6LO12 -A Less:ommodity Assistance included above 61 432 168 161 - 822 - - - - - Total - Domestic Revenue 2,120 2,677 3,061 3 963 4,25 16,2U 4,$ 15i ,8.2 6,0i8.4 28,049 1/ jmnistry of P:Laningj based on 11 mntha actual reepts. Cumtom Departa~t of Ministry of Finance estimate is aboi t Af 1,650 -111m. 2/ Eleven zonths actual wa only Afs 193.6 ådLllim. h/ nastry af Planning and Kiniztry of Finan. Source: Ministry of Finance for 1967/68, 1968/69 and 1969/70; mlr.itry of Planning for all other years. (hlions of qfghnis) Total S e c o n d P l a n Second T h i r d P l a n 62/63 1936 196/65 196566 196 7 Plan 1967/68 196/69 1 70 197-71 Actual Actual Actual Actual Actual Actual Actual Actual o Budget 4.sumiate Administration and Security Fields 1 009.8 106.6 1,323.1 1,70.L 1 7247.1 6657.0 1819.8 183 2O09.3 2,092.6 Royal Court 20.9 2.0 27.0 31. 3h.5 137.9 32.8 39.3 38.5 37.5 National Assembly l1.0 1U.4 8.8 17.9 224.6 79.7 25.2 24.7 26.0 30.6 Senate 0.6 0.5 1.2 4.2 7.9 1L.4 7.1 7.1 7.2 1w.8 Supreme Court - - - - - - 37.9 45.6 61.7 71.9 Prime Ministry 19.5 23.L 24.0 26.3 25.0 118.2 32.6 33.5 30.1 32.1 National Defense 593.6 646.0 778.0 886.1 1,099.5 4,003.2 1,189.9 1,227.1 1,347.9 1,260.0 Foreign Affair s 8.6 66.0 70.2 77.1 74.9 372.8 74.6 '69.3 73.1 70.1 Interior (Civil) 31.0 37.0 50.1 55.h 55.5 229.0 42.9 56.7 56.9 73.9 Interior (Police) 99.5 112.8 116.5 157.3 185.5 701.6 189.2 209.0 210.0 320.4 Finance / 102.2 117.5 131.2 117.1 130.3 598.3 116.3 77.6 83.9 81.0 Planning 10.0 20.2 22.0 22.5 25.4 100.1 27.0 32.4 15.9 34.3 Justice 13.1 20.0 37.8 68.3 52.4 171.6 20.9 20.7 24.5 36.9 Tribal Affairs 20.8 2L.8 26.3 26.7 31.6 130.2 23.4 30.7 33.6 31.1 Social and Cultural Fields 313.8 L29.8 522.1 569.8 60,.9 24o.4 715.6 824.1 889.8 1 101.9 Education 2_/ 16.1 227.9 T3ÒÕ¯ 35,7 T31~7 1,U29.5 1u7 .9 ¯l El 67. Kabul University 3/ 28.A 69.6 78.7 71.3 62.0 330.0 121.4 138.9 141.9 186.5 Health 72.5 89.9 106.6 116.4 122.9 5c.3 109.3 117.1 120.9 175.1 Information and Culture 23.7 39.7 33.4 28.0 32.2 157.0 33.9 63.6 60.1 79.6 Olympics 2.1 2.7 2.9 1.8 6.1 15.6 3.1 4.1 2.1 3.7 Economic Fields 310.7 291.2 31L.2 367.7 327.0 1 610.8 365.8 5 hh.6 451.6 Communications 33. l7 ~ 2 212.9 ~6 154.3 - 77 50.3 Commerce and Gereral Transport 12.7 28.1 18.4 21.2 22.4 102.8 19.9 21.1 20.8 22.6 Public Woris 53.1 58.0 75.6 123.3 107.0 217.0 106.4 117.9 120.9 135.0 Agriculture LL.6 49.3 52.4 27.5 47.0 240.8 U4.5 52.7 52.0 55.8 Mines and Industries 27.8 56.0 51.8 62.2 L3.2 261.0 72.3 150.7 100.0 95.7 Civil Aviation 16.0 2.1 33.2 35.5 35.5 1U.3 L9.3 61.6 62.0 53.2 Helmand Valley Authority 103.4 34.1 35-1 29.9 29.5 232.0 26.6 26.5 26.7 27.0 Subsidies and Contingency Reserve 5/ 24.6 38.1 20.0 207.7 198.1 488.5 67.3 2:37.4 437.0 920.0 SubtotaT- Cur,-nt Expenditures 1«65939 1,-77 51-. 2,61.6 2,877.1 11,196.7 2, T . 3,5!~7 3,578. Foreign Debt Service Payments 126.0 59.8 378.9 286.9 277.0 1,918.6 475.0 6:12.0 910.5 1,087.0 Total - Ordinary Expenditures 2 .9 215.5 2583 2,902.5 3,154.1 3114.3 342 3.5 4 469.2 5,655.1 / Excludes subsidies and debt serice payments. Lncludes exoenditures of Health institutes 2/ Includes exoenditures of PolYtechnic in 1966/67 Ž/ A reserve for contingencies is included from 196/69 or I includes expend'iurcs of Facu:lt: of Med4rine f All -,gures are final except those of Interior (Folice), Pina.:e, -gri ::re, Industies and '::b=idy. They are estiiated by the MIinistry of Pinning Cn me basl of 10 Monns actual. Defen:e exoenditures are from budget estiiates. Source: linist,* of inance  jr r { 11R l J s nZn î ø 8 Koo o 0- fos ~0c kl-- C) IH I i .A N~I- a- y n Lo- kle Table 2.4 Furreif Budgeta Position dugnthe Second and Third Plans C ilioni of Afgsanis) Total Second Plan Second T hird Plan Pro-ect A s i s n70 AcTu-a- AcFual- Actual Actual ATual Actual Actual Acta B-iX iif I0FR-A Developmmte Expendtures Dorestic Revenue 2,120 2,677 3,061 3,963 4,25h4 16,075 4,l89 4,4s21 4,817 6,018 5,300 Current E pend)tures 1,659 1,866 2,179 2,616 2,877 11,197 2,969 3,450 3,781 4,5M 4,600 Foreign Debt Sarv-ice 426 550 379 287 .277 1L5119 1475 612. 911 L.087 1.0 Ordinary Expenditures 2,065 2,1416 2,558 2,903 3,154 13,3a6 3,4US u4,062 4,692 5,655 5,60 Currant Surplus 35 261 50 3 1,060 1,100 2,959 7145 359 125 363 (300) Commodity Assistance 112 615 411 727 889 2,754 '705 880 600 1,100 500 Resources available for Development 104 1376 91h4 1,787 1,989 5,713 1,450 1,239, 725 1,1463 6000 DeveSoe nPnt ExpeST itures in ocl urrnc j( 1,1416 1,830 162 1,720 1,728 8,31 45 106 1,911. 2,026 232 22l CIverall Sur-plus (Deficit) (1,299) (954) (708) 67 261 (2,632) (258) (672) (1,301) (869) 1,6oo 2A3d)l9 Pan :7 1 0/ ProEsect Atiiatane (S; million) 51.6 51.5 5R.1 56,3 63.8 282.3 62.0 50.2 ...) 60.0 37.5 Deel ym2t Expenditures: 3,783 4,163 4,299 4,270 4,618 21,133 4,517 6,185 3,80 5,050 3,300 (in Locia Currency) (1,446) (1,830) (1,622) (1,720) (1,728) (8,3146) (1,98) (1,91) (2,026 (2,332) 2,2W (I-rjct Assstainmi) (2,337) (2,1633) 2,677) (2,550) (2,890) (12,787) (2,119) (2,2) (,892)*) (2,718) 1,00 I/ Thne Goverrument's budgetary practice has been to show development expenditures in local currency only and show correspondiog foreign pioject,s a-&SiBt- ance separately in U.S. dollars equivalent. This practice may be explained by the fact that foreign project assistance is in t1he forn of goods ad services and does not require ary acccuntin.g transactions in local currency. This is why foreign project assistance is shown aoove in- ar. Addendum. Total development experditures, are neverth,,eless shown in the Addendum. )Etimted as the difference between total aid ad len-fianced imports (8526 million) and prceds of coaodity asitane as :corded in the Boget (!60mli) Details breakow-of aZ- wwe1 61prtg are n 1t available8 .7 600 Sour1e. See 63 ble6 2.1, 2.2 and 2.3. Table 2.5 BuURUES AN-D UsES U GUVKNmeNT FuNDs 1o8/-yo' Sources Af million % Uses Af million % I. Revenues from I. Government Con- TnrH1rA-.t 'yp. riY-rant. expndn- iture 2,831 314.2 Imoort duties 1.366 16.5 Transfers 619 7.5 Export duties 162 2.0 Sub-Total 3,450 41.7 Fixed tax on imports 201 2.4 Fixed tax on exports 21 0.3 Exchange profits 262 3.2 Sub- Total 2.012 2 II. Revenues from II. Debt Service Domestic Economy - ..Interest .0-. Other indirect taxes 770 9.3 Amortization 4_U Direct Taxes 520 o6.3 u otL U1 2 L*. M .1 rn 0 TTT -- .. Iransfers.L. U A.L.L Dreopen Expenditure property _65 11.6 In local currency 1,950 23.5 Sub-'otal 2.408 29.0 In foreign currency 2,274 27.4 III. Loans Grants Sub-Total 4,224 50.9 Commodity assistance 890 10.7 Grand Total 8 100.0 Project aid 2,274 27.4 Type of Use of Funda Domestic Personnel services 2,063 24.9 Borrowing 702 Other services 418 5.0 SublTotal j6 46.6 Material supplies & equipment ),u7u (. Xroperty & rent 676 u.2 Q'LO4.LU O PL 4A1uO oJL.7 I * Debt service A19 7 Grand Total 8,286 100.0 QrAd Toa 81286 100.00 Source: Governmerit Budget, MinisLry of Pinance. Table 2.6 MONETARY SURVEY (Millions of afghanis) Period endia&Mlrch 2O 1964 1965 1966 -1967--- -1-968- 1969 1970 ASSETS Toreign Assetsal 2,1962/ 2,196 2,437 2,292 1,1309 2,227 2,2013/ Claims on National Government 5,286 5,020-' 5,286 5,020 5,122 7,196 8,773 Claims on Official Entities 473 1142-/ 117 204 256 414 295 Claims cc Private Sector 1,707 1,955 2,198 2,3149 2,349 2,624 2,863 LIUBILITIES Money Supply 4,886 5,900 6,h-19 6,291 6,288 6,788 7,892 Currency in eirCulation (3,884) (4,722) (4,644) (4,624) (4.BO) (5,238) (6,l146) Demand Deposits ( 651) ( 578) ( 694) ( 570) ( 725) ( 693) ( 868) Time and Foreign Currency Deposits ( 348) ( 600) (1,081) (1,097) ( 759) ( 857) ( 881) National Government Deposits 662 370 439 838 640 1,126 1,305 Official Entities Deposits 7614 783 737 889 781 1,522 1,9224 Counterpart Funds 242 102 43 6 94 74 29 Foreign Liabilities 235 1478 5147 731 525 827 814 Other items (net)A/ 2,87.31/ 1,68Q/ 1,215 1,298 1,699 1,751 2,169 1/ Comprises gold and foreign exchange assets of Da Afghanistan Bank and private banks, converted at the official rate of Af 20 per US$1 through March 1963, and thereafter at the official rate of Af 45 per US$1. The data do not measure the true monetary impact of foreign transactions because such transactions arn also carried out at rates other than the official rate. 2/ The large increase in foreign assets and in other items (net) in March 1964 is due to the devalua- tion of the Afghani. in April 1963. The profits on the revaluation of foreign assets of Da Afghan- istan Bank (AS 1,278 million) were transferred to public sector accounts in March 1965. 3/ Includes Af. 219 million of Special Drawing Rights. / Net unclassified liabilities; the balance sheet of the Da Afghanistan Bank includes a sizeable amount of other liabilities, mostly representing the float between the head-office and the branches in the provinces. Source: Da Afghanistan Bank and the IMF. Table 2.7 CHANGES IN THE MONEY SUPPLY AND ITS CAUSATIVE FACTORS Changes in: 1963/64 1964/65 1 1 L947LE 198/69 1969/70 MONEY SUPPLIt 962 1.0 128 - 3 500 1 014 Currency in circulation 7 -M -1 -72 75i Demand densiat 12h - 76 116 - 121 1_ -19 17< Time & For. Cy. Deposital/ 112 252 h81 L6 - 338 98 2A CAUSATIVE FACTORS: 962 1 128 -OO 1,01 1. Forelgn assets (net)* ±,uy" - "5 172 - 9- f - 11 2. Public Sector Credit (net) 883 - 324 53 - 316 703 514 877 of which: National Government (net)** (892) (- 26) (32) (-251) (543) (1,096) (1,38) Government Entities(net)** (- 9) (-350) (21) (- 65) (160) (.583) ( -5 1) 3. Private Sector Credit (net) 41 248 243 91 60 275 239 4. Counterpart funds -161 1h0 59 37 - 88 20 45 5. Other items (net) - 895/2 1,193/ - 8 389 - 401 -426 -16 * Foreign Assets 1,096 ---- 11 - .5 - 183 h19 - 2h Foe T i hities - 2 -213 -69 -184 l Deposita -22 292 - 69 - 399 198 -486 - 179 *e7overnment entities - Credits 1 - 331 - 25 87 52 158 - 119 Deposits -28 - 19 46 - 152 108 -7h1 - h02 1/ Tn view of the fact that transactions are quite commonly effected in foreign currencies (Hundi system), foreign currency deposits are included. 2/ Reflects revaluation of gold and foreign exchange assets of Do Afghanistan Bank (AfW. 1.195 million) in Aprl 1963 and transfer of profits to government accounts in March 1965. 3/ Includes Afe. 219 million of Special Drawina Riahts. .ouorces Ha Afghnnistan Bank and the IMP. Tabie 2.8 XATIONAL AND COMMDITY PRICE INDCES (1961/62-100) Year Other Non- A21 anth Cereals Meats Fruits Vegetables Foods Foods Items 1962/63 95.7 97.9 100.5 103.6 107.4 101.6 96.1 1963/64 143.5 110.4 138.3 127.9 106.9 98.6 132.2 1964/65 173.4 145.o t47.0 138.7 129.9 99.1 156.1 96o/oo 16o.> 1-Ma. DO.U !44.6 1"1.U U3.4 lU.5 QA/726-7 917-0 188.0 197-h 141.4 111.1 21h-1 1967/68 336.0 212.3 177.4 155.8 151.7 110.9 266.2 2968/69 233.7 191.6 199.2 173.1 146.1 105.5 208.3 1969/70 1 217.5 214.2 209.9 179.3 146.7 114.9 19.6 Monthly Figures for 1969/70 §10 £s?* 6)I.*V &&1e 2Ee 1s .e A A)112 I. Fe May 229.7 230.9 213.1 269.0 1144.7 115.1 211-9 June 223.7 211.8 194.8 257.1 143.8 112.3 203.9 July 224.2 220.4 207.1 175.5 142.5 121.5 20.8 August 224.3 210.2 189.1 119.3 140.2 109.0 16.8 September 226.1 10.83 180.2 1o4.7 60.0 113.2 W7.7 October 209-4 1RJh W-RA 1 1 R 9 111 arl 7 November 209.8 204.0 213.0 156.4 16.6 121.4 190.0 December 205.5 211.4 235.7 151.7 150.0 120.6 ]1S.9 January 226.4 219.6 220.0 169.6 147.7 113.5 2g.7 February 207.3 227.1 227.6 169.9 148.4 109.4 IZ.0 1/ On the basia of eleven manths. Sourcet Ministry of Flaning Table 3.1 VOLUME OF AGRICUITRUAL PRODUCTION 1962/63 - 1969/70 (In '000 Zt) New Series 1962/63 1963/64 1964/65 1965/66 1966/67 1967/68 1968/69 .969/70 -Al A---n-l- -iAn -1 l U+.11 tA+, V0.+Nl (A-+,il, .1 A-II1 FRMtMate Wheat 2279 1947 2250 2282 2033 2241 2354 2450 Corn 700 713 720 720 720 765 773 775 Barley 378 378 380 380 375 357 361 365 Rice 319 319 325 325 337 396 402 410 Foodwrnin 3676 3357 3675 3707 3465 3759 3890 4000 Cotton (Unginned) 78 110 79 75 59 691/ 71-1/ 90 Sugar beet 61 56 31 56 56 62 62 65 Sugarcane 45 45 48 51 51 57 57 60 Oilseeds 50 50 50 52 55 35 36 ho Fruits n.a. n.a. n.a. n.a. n.a. 826 834 840 Vegetables 500 530 560 580 590 636 65h 660 1/ Includes about 12.000 tons not reported in statistics for previous years. Note: 1962/63 - 1966/67 are from the Ministry Planning. 1967/68 - 1968/69 are from the Ministry of Agriculture with revised basis; 1969/70 are mission estimates based on information from the Ministrr of Planning in line wi -i revised statistical basis. Table 3.2 AGRICULTURAL POPUlATICN & LAND OWNERSHIP Agricultural Area Land/man Irrigated Number of Average Size Region & Province Population CUltivated Ratior Total Cultivated Landowners of Holding (hectares) (hectares) (hectares) North: 2,805,790 2,036,3,46 .73 0. 46 312,620 6.51 Badahshan 398,720 112,768 .28 0.36 52,080 2.16 Takhar 332,380 348,895 1.05 0.17 20,300 17.19 Kundus 354,430 286,072 .81 0.70 32,050 8.93 Baghilan 466,980 222,646 .48 0.34 32,540 6.84 Samangan 222,150 184,316 .83 0.23 47,010 3.92 Balkh 325,270 301,1661 .93 0.71 39,850 7.56 Jawzjam 290,560 275,458 .95 0.614 41,850 6.58 Faryab 415,450 304,730 .73 0.38 46,940 6.49 Central: 2,986,700 512,838 .17 0.71 324,250 1.58 Kapisa 460,810 39,192. 09 0.98 49,780 .79 Parvan 493,720 47,073 .10 0.72 73,700 .64 KabuJl 639,800 65,528 .10 0.85 35,430 1.85 Iogar 237,390 62,017 .26 0.72 24,840 2.50 Wardak 382,740 26,559 .07 0.93 29,420 .90 Bamar 285,040 22,3141 .08 0.79 27,1OG .82 Oruzgan 369,920 124,957 .34 0.96 44,950 2.78 Ghor 117,280 125,171 1.07 0.25 39,030 3.21 East: 2,009,380 378,104 .19 0.67 294,690 1.28 Konar 261,670 25,602 .10 0.88 25,700 1.00 Laghaan 161,910 24,298 '.15 0.94 36,000 .67 Nangarhar 6140,900 59,785 .09 0.70 87,760 .68 Pakt:La 704,690 84, 967 .12 0.64 79,400 1.07 Ohazni 2140,210 183,o52 .76 0.62 65,830 2.79 West: 1,270,510 605,082 .48 0.53 130,390 4.64 Badgnis 295,260 :134,918 .46 0.23 38,310 Herat 685,000 326,471 .47 0.551 68,150 3 -7 Farah 290,250 143,693 .49 0.811 23,930 6.oo South: 1,222,340 615,263 .50 0.6:3 106,160 '.91 Zabul 267,250 66,739 .25 0.90 19,700 3.39 Kandahar 580,000 152,549 .26 0.714 L48,1'30 l1 Helmand 255,990 157,852 .62 0.99 27,450 5.75 Nimroz 119,100 238,123 2.00 0.24 8,580 2 7.75 TOTAL: 10,294,820 4,1117,633 .40 0.514 1,186,110 3.50 SoLrce: Preliminary Agricultural Census of Afghanistan, 1969; Departmerit of Planning, Ministry of Agriculture and Irrigation. Table 3.3 MAJOR INDUSTRIAL PRODUCTION 196 165 1966 1967 196e 1-69 1970 Fuel Coal Briquettes ('000 tons) 26.6 27.2 37.0 29.4 35.5 27.2 30.01 Construction material Marble ('000 cu.m) 8.1 6.0 5.4 4.7 3.2 4.7 6.1 Marble Traso 191000 cu 27-8 213 11 1 99.9 10.9 91L Cement ('000 tons) 103.3 142.2 172.2 174.0 123.6 86.3 105.0 Eood Industry Wheat flour ('000 tons) 47.9 43.7 54.4 55.3 67.5 58.4 4o.o Bakprv ('000 tons) 13.8 1.0 Tj].3 qq 16.A i-9 I q. Sugar ('000 tons) 7.0 3.9 7.4 7.1 7.5 5.3 7.0 Vegetable oil liquid ('000 tons) 0.8 1.3 1.4 1.8 1.4 1.6 2.1 Vegetable oil solid (1000 tons) 1.6 1.2 2.1 1.6 1.4 1.4 1.4 Light Indusqtry Soap (million cakes) 0.19 0.18 0.28 0.14 0.15 0.55 0.27 Shoes ('000 pairs) 57.0 52.9 74.8 107.6 119.4 142.8 122.0 Ginned cotton ('000 tons) 23.6 31.4 30.1 24.0 18.5 13.9 35.0 Cotton yarn ('000 bundles) 208.6 177.8 239.4 245.2 192.2 80.3 72.0!/ Cotton textiles (million m) 36.9 17.0 55.2 66.0 6h.0 L80 Qh.0 Woollen textiles ('000 m) 200.0 213.0 305.0 463.0 1443.0 445.8 1,000.0 Rayon ('000 m) 300.0 700.0 1,000.0 1,304.0 1,311.0 1,500.0 1,600.0 Miscellaneous Ice ('000 tons) 2.0 3.9 1.5 4.2 4.2 4.6 5.h Mine Production \ US-u LunI; ~.L.f 3y. 0 )u.1 .. Jo.9 40.0 JO.( Coal ('000 tons) 99.2 13.2.7 144.0 161.6 151.0 124.8 136.5 Lapis Lazuli ('000 kg) 10.8 5.0 8.6 10.3 5.5 5.0 4.5 Gas (million cu.m) - - - - 342.0 1,600.0 2,206.0 Electric nower National capacity (kw) 61,330 62,152 59,919 219,228 225,778 229,696 2133,0001 National production (kwh) 181,636 203,616 236,248 302,298 298,278 317,409 341,000L' I/ Installed capacity in uabul alone Is 12K bw and produotion 294 million kuh. National capacity in the ublic sector is 193 my and in the private secobr about 90 my. au co.manI.u aum F -A - 0 n2n u - .unu eat. Source: From data supplied by Ministries of Plaming and Mines and Industry to the mission. Also from Survey of Progress 1968-69 dated September 1969- Whr thee were u s o rve to by most sources were used. ** UAWpAno:es 3n r1gures, the ones agreed Table 3.4 INDUSTRIES UNDER PRIVATE IMVETMEU4T I. IIhmber 2/ cif Captal Value of Fiöd Capital Fixed Capital SuÅ..ec.o A ication! tied Work .Total Grass Oatput !uployffút . -utpt .. qpe Af Million Af Million Akf lliof Af Million conetruction 6 18.8 15.3 34.1 33.5 255 1.12 0.07 vood Procensing Raiin 13 78.5 145.4 223.9 653.0 737 0.22 0.11 Other food 10 73.4 39.3 112.7 233.8 434 ö.6 0.17 FruLIt 2 3.4 1.2 4.6 5.3 1.03 1.28 0.03 Kanufactuen Lcather goods 11 128.5 305.5 434.0 1373.8 6290 0.18 0.02 Metal products 5 l.1.3 53.3 94.6 231.0 239 0.36 0.17 hazicale 2 53.0 47.1 100.1 76.2 88 1.35 0.60 Other including plantics 13 99.2 117.8 217.0 797,0 907 0.25 0.11 services 10 36.1 11.2 47.3 40.2 228 1.79 0.16 Textlcs aPn :28 2797.0 6862.0 9659.Co 2245.0 8332 2.5 0.34 CottoM 3 425.4 145.8 571.2 149.7 703 5.0 0.61 Knittes goodå __1 23.4 __)l , _ý8 61 .Uk Aggregate 108 . 7.3 j ý 1600 ig; 0.2 1/ All figures are taken from infomation in individual applications provided by Thomas Mirer Asociates, Kabul; the totala are diLfferent from M±iner' a totala. 2/ At 50 percent potential. ! 씻 \ ―蕣 1 몃떼． & :9 l ｀짐솖 J 冷 - __ 憮닙 琉』汰〉，콜， 1& 42』 懲．仇 - l 。 - 4 夔 [ ：커蕣｀:/ - 」 ，빼·．聊C ．芯覲 즈 輸터 - 1 亡7\ k, _&_ 二 & - - 긋！·”’·毅醱ㅏ‘추 塔―솥 訂슨겡 霙 : 1：」 11 1 1 오蝦）瘢큉꽈ㅏㅏ．긔F 瑤 & ；葬／,i떼 ; ; - ! 殼｀큰訂三麟＊ 돈， 「“&:: 『 퓌 1 「．．垢．$...．輸섭ㅏ걜濾 쟈변， &0 ! l 『· - 1 楓 꿉慨） 규 & 「 - 1 》·1&&h·＊ㅑ·｀/-.s..．■→·■·‘:，汪！膨 하，걍：&[J&._. . - 】 Z／久l& ’蟾‘［긴―·쬐’．논！슨ㅏㅏㅏ．．긴，녹―｀신섰겯盧’ ,.-& ,&7졌 - - ,rZ,;&.&f&‘·■：.．··｀··슉떼』ㅏㅏㅏ샀 l鏃 컫―·큉ㅏ；！蠟 o · , *\: - -r .!\.（쉼毅ㅏp■es헵‘!＝鸞‘빼쎄― ．ㅏ萃긷／잿꽈l「’섯2．ㅑ，.,.&.．…”.,.．…〉 - ．「 ：』 ，맡， ＼쵯熄ㅏ．j．갸ㅏ― ：긴· 노癬g&&‘·’’』∼”&&&&&& 쉬 1 111 긺了．/[，차：&’·！ ■＝ㅏ·ㅏ효ㅏ＝ㅏ섰 &．喜꽈ㅏ―蠅 컫읫 온，＾∼ 니 ! 캐 꽝썅擄．샅팖硏 ·꽈．&; J.．딩 · ( ..*&Y- J I- , ,\.．竇裟 &&&；ㅏ．ㅏ薑；―ㅏ！·ㅏ’！ㅏ！·！‘奎 콥【楸r] &&“··：쵱卜：, 씽·…‘-－닌긔 》 걔 ，식蠟U^／긱《’’·／ 난「떼‘&‘차 , \ 뒤 - 。l)&&-X닉’l 謬． 1겯첫，：놀坪， ：「 .｀驀‘. , & ·Z 기 - 。，··，…‘,..YZ&,1 ，긱1& . 식鮮’,，치‘·。시 - l ，차i&& …－ㅎ， 1&，·，- ＊떼넌 ＼·＼.../r겨l L. -- -/ -- -- - ,&，·7 ，·∼／《 -&-&, ,/ 隱  ANNEX (to economic report "Current Economic Position and Prospects of Afghanistan") A System of National Accounts for Afghanistan 1. Short- and long-term analysis of the economic performance of Afghanistan, and a critical appraisal of the country's achievements during the Third Plan requires some form of an economic accounting system depicting the level of national resources and their uses, the revenue and expenditure pattern of the public and private sectors, the interrelationships between fiscal and monetary policies and the balance of payments. Moreover, evaluation of the Government approaches in the preparation of the Fourth Five-Year Plan requires, as a first step, analysis of the resources expected to to avAilable to the nation as a whole and the anticipated demands on these resources. 2. Framing a Rnational economic budget" for that purpose undoubtedly makes considerable claims on available statistical data. At present there are some basic data available in Afghanistan which could be consolidated and Juataositioned so as to produce a meaningful macroprofile of the economy. These include balance of payments and foreign trade statistics, Government accounts. prices. estimates of arricultural and indunstrial outnut. household expenditure surveys, and investments, The problem is therefore to fornulate an analytically useful swstem that would adAnt and make use of the kindi of data that is in fact available. Hitherto economic analysis and reporting on Afthanistan have been asantially of i partial natursi whAra AArh seOment of available information is treated in relative isolation from other segments. Snnh analvns have boan undoubtedly nnft1 nd v4alAnti nimhws nf vala-vaint analytical datum for policy decisions on various issues. While contined effn74.a are necennaey n iefine thaa Aaa and to neAav-Ekn pe4n to fill the large number of statistical gaps, it seems important to indicate the nnninn4+Jtag for mnwa i*AAnan1 A& a4-n-mal-4,nr waul+4ve P.m +, O"4% a global view of the economy by connecting the various segments of information. Tha hanaf4+.n frn snnh ownarMnank mv,&* (i1 to _Ir olc makeze realize thUK erl consequences of their decisions; (ii) to link the Government budget with the other major macro- and thereby improve our understanding of the economy; (iii) to check the consistency and accuracy of the data as a by- V o s.iuwaa W.L .ore.Ls.'&J. . J %PCL44&CU LJLUVU various sources. AMWWV Page 2 3. A system of national accounts for Afghanistan serving these purposes and a provisional set of national accounts tables for 1yo1 a= 1707 as oU-Ow below; and later used as a basis for projecting 1972 accounts, are the result of a first attempt to compile the national income of Afghanistan from the production side and from the expenditure side simultaneously in order to check the valdity of the various estimates frequently used in economic reporting on Afghanistan and to ensure this consistency. In this way, evaluation of Afghanistan's economic performance and future growth is based on a consistent and interdependent set of information. 4. Given the varying degree of accuracy of, and hence confidence in, the estimates of major economic variables, a double entry form of national accounts has been devised to check the balancing of economic identities and equations. The national accounting system is based on the following inter- dependent equationst National Income and Expenditure Account n Y * Vi (1) i=l GNP = Y + k + T_ - -- 1 GlNP = n + C + K + R W.M M -h "g ~ - ' r.nP = y + i - M- fl.' Government Appropriation and Capital Accounts Y = P D i+ Td + Ti + Fhg (5) Q g ri d iNh gg gh I B =S + A + K + N - D (7) gf r A B"TBTV "AI1 rA Page 3 Private Sector Appropriation and Di'spsable income Accounts Th = Ch +hg T d h Y, = Y - Pf + Frl (9) Yd C h + S h (10) Yj Y - P - Fu_ - TA + F (11) Consolidated Capital Account K =K + K (12) g a K =k + S + S + F - D (13) g h+FwnDr Rest of the World Account E + F M + M +D (1h) wn f r 5. Variables and Sources of Information V Value added in sector i. Date obtained from "A Preliminary Estimate nf (Irnon nd%mAq+t- P-rndmt nf Afahanimt.nn 1OA7-107211 at. nnnqtAnt 1967 prices(henceforth referred to as GDP), Table B in this Annex. Y National 4"e.-aM Ah+.ninakd fnm amriAn (1 rp Indirect- ta-ies. natafo~ 4" M ry o%f PlanwAineps la oas4fict+ ^n of Government Revenue, codes 200, 610 and 470. C Household private consumption. Value obtained from solution of equa- h +4-" (1) ani ^hanlkmA w14th gkni+A1n (1) * vkS wal-e of +hew able is close to the estimated value based on a sample survey of house- I-IA e Ax-A4+,- 4. +ha T.-I- f.. ..4 4-' 1l4O Pha .++..4 A&%J.U%A W% C n . ... WSL5 %AS A %PS.WSS "A L7W7* A t- erVL gives an estimate of Af 60,334 compared to the solution value of A, AnO A c,q Q -J.71m i"-fl+1 UA..L A nnexlUPJ. 0 awmman anumb4mTAwban 0M1Glvement- Batzgt -; Toal ordaX4ymm g expenditures less debt service, subsidies and transfers. Source: O~urve~y 01P Progress~ L7UV L7U7. AUIRTWY page KnGroas Investments. Volu.e ob+--A fr-om eUPAA (1)./s J.4'pJ WO .J. rp 4MM CL VI.LeI a LJ.1 u t J .1WUI I.LL O%.1 L-. I .L AU""LL116 tLU IMF in US dollars, converted to Af at the prevailing exchange ate ilsA 117M 17 Af 74 &1 V __ 4.U - V __ --6- --A HA er &- AU-- I U II.7 J LA. I%J - L .LL41 0 . LL -M CVV, 4MIZ LL . _)VJ - L Vz1 the bilateral rate. Given the changing pattern of direction of IL-LAUe U1i1 VVWL_L_L e..Lr-a"' vu 1CLL0 00 L.Le U MAYULpLD I -L7Ut ulu -7LP7 are Af 65.9and Af 71.6respectively; for 1972 a rate of At 68 wao Usnd, V. e. oJ_L"U4LJ Lower ULvw UL W7 JV r.LLV k;k U1= groVWJLL[wirg xI- ports of natural gas to USSR (bilateral rate). M Imports of goods and services. Data from Ministry of Planning and Xz jju uD uOswb UoUver UUu o al at JLn Z aove. ine overa L effective rates for imports in 1967 and 1969 are At 66.7 and AL ().7 reopec1v"Jy; Lor 17tfc a rate 01 al ( was usea. Dollar value of imports of project aid and commodity assistance were con- verted at the official rate 01 o z Af . Nf Net factor income payments. Data rrom im- convertea at Ar 45>.J. rgh Government transfer payments to household. Source: Government Budget. The figure is contaminated with a few items of a subsidy nature. SV Gross 0overment savings, i.e. before debt repayment, Obtained from eq. (6). P Government income from property and entrepreneurship. Data from ?inistry of Planning classification of Government Revenue, codes 300, 500 and 600 excluding 610. TA Direct taxes. As above; codes 100 and 700. Fl Household transfer payments to Government. As above; codes 800 and 600 excluding 470. D Interest on public debt: Government Budget. Y Current income of Government. Obtained from equation (5). g Dr Public debt repayment. Government Budget. A Commodity assistance. Data from Ministry of Planning and IMF. N Domestic borrowing (defieit financing). Obtained from equation (7). B Total Development Budget. Source: Government Budget for local currency anoronriations. Commodity assistance and vroiect aid from IMF. S. Private savinfs. Obtained from enation (8): value consistent with equation (10). ANNEX Page 5 K * Government gross investment: Government Development Budget. In- cludes maintenance expenditure plus project aid converted at official exchange rate. The classification of Government investments for 1967 and 1969 based on "Current Economic Po- sition and Prospects of Afghanistan" (SA-6a) dated May 27, 1969, after adjusting 1969 for 1967 prices. For 1972 original plan distribution pattern is used. K Project aid. Ministry of Planning and IMF. Kh Private gross investments. Investments in agriculture and industry estimated by Ministry of Planning. Investment in housing cal- culated as the increase in net output of housing (rents), from table 3. "Current Economic Position and Prospects of Afghani- stan" (SA-6a) dated May 27, 1969, for relevant years multiplied by a capital output ratio of 10:1 with one year time lag. k, Maintenance expenditure by private sector is estimated at total £1 depreciation funds (GDP table op.cit.) 'Ass estimated depreciation _n the inn,and electricity sector- swl s afo h depreciation in the mAnufacturing sector and one third of the !cnst+ucti+n scra.n' F Gros canital transfers from the rest of the world. Obtained from wn equation (14). The value need not equal the dollar equi- valenit of net capital transfers connverted to A? at. the official rate, as both exports and imports have been con- verted at Ilfet- ae" see above E and M. A equation (9). Y Disposable private income. Obtained from equation (11). Value d consistent with equation (10). ANNEX Page 6 Table A ¶3 1AL ACoW~T8 07 åAMiæa 197. 49m.7 .fam", anatant rices- 7)- 1967 1969 1972 1967 1969 1972 1. Natiana Iname & meadaeAe V.lu. add, Agricult:r. 29,91U 33,0k9 3h,295 Pr£Vte Go ime 55,288 60,658 64,608 MInIng 270 437 775 Gersz at 80 U an 2,558 2,876 4.537 Handirafte 5.821 6.162 7.015 aa i-timant. 8.043 7.186 8 19 Møaf.o~ring 97h 817 1,177 pato gooda a .erv e 4,802 5,678 6,53 Electrioity 266 287 382 1es. iere f gted. & .ervice. 8,323 7,611 8,199 Co.tru.to 92h 938 1,080 Le- ~.t fanter inm p~ta 100 213 121 Trade & Transport 11,451 12,516 13,417 Uanoorded ~e ta (pgar mre) 10 10 10 Service. 4,991 6,354 8,066 Ls.s ueo.rded aports (pour ..) 10 10 o Depria.ti-o 1,179 1,286 1,h69 Indir-ct tAXeM 3,0O3 2859 3.15 Gro.a Nati-1 Product 62,268 68,77, 75.252 62,268 68.77L 75,252 2. Goff ~ t Agrr ~e Aao.et Gora t oanaption 2,558 2,876 4,537 Imama tepre-tranranerp 196 1,670 Tr-asers to houshld 371 7 lea deproottlOn -> -21( o unt dtICK)3 Dlre% ~wn 673 53380 1,111 637 -132 I,rat t~0 3,013 2,859 3,159 Trasfers fraf bmehold U 3 157 150 current Expenditure of 00veat 4,10 1,362 5,577 orrent m= of GaO mnt 4,10 b,362 5,577 3. 0ove~ t apital afefot Dpreci.ation 145 152 210 Debt rep.~t 37h 399 680 8aving 1,111 637 -132 D-ll~ budgt (lue-I c4~.,-y) 1.728 22." Pi,~.....RA. Del dget fae ln 0 r y 3,669 2,27 2 ttn3,i 2,274 2,746 Detlo borr~win - 43 702 1,d39 Total 5,771 ,7 5,,72 T5,771 4,677 5,572 4. Private igesable Ip N" domestlc produ-t 58,176 64,842 71,oh5 FrIat ao on 55,26 60,658 64,608 .eea: Net Govt. io from Private gaing~ 2,132 3,317 b,770 property & ent~p W~n-ehip -311 -813 -1,460 Tr-f.-r to n r..,t -11 -157 .150 Direot ta -673 -533 -808 Plus Tranaf.rø to houaehold 371 636 751 Dispca-blc lnam* 5,12- 63,97, 69,37. Dispo" al I 57,,20 63,975 69,378 5, OuoseMaad omite4 Aet Groes Govenmet instusnt Deprecl.tion funde 1,179 1,286 1,h69 Ainistration & def"e 25 314 221 Govrnment asvinge 1,111 637 -132 SocIal M.rheade 157 211 216 Private aving. 2,132 3,317 4,770 Pronomi overh-ad. 410 398 4k8 Gros caaital transfer. 3.995 2.5C 2 ,76 Agri..& Iad evalopnt 530 748 1,002 las. debt ropayment -374 -399 -680 Miig & industry 586 337 256 Project aId t abore 3,669 2,274 2,7z Sub-total 1,3971 4,27. ,A92 Oroa privat. ine.vetinte Agriculture & indutry 382 674 741 Housian 1,230 1,300 1,300 Maint~oca 1,03 1,13A 1,259 Sub-total 2,6~6 3.108 3.300 Qr.o IVe tna 8,a,3 7,386 8,192 Ime.tnt Funda 8,A3 7,386 8,192 6. Rest at the warld AaO~nnt EportO of gofd & services 1,802 5.678 6,535 I~rtø af goodo a service 8,323 7,611 8,199 Grosa capital transfora 3,995 2,545 2,765 net feat= tam a . 100 213 121 Døbt røp~mat 8,77? 8,223 9,300 ,e ,22 1 9,300 7. Private ata Apr orai n Aa~ant Private cnu tion 55,288 60,658 6k,608 net doestic product 58,176 61.82 71.05 Tranefers to Ooernt 143 157 350 Lenø *et Govt.ancome from DIr~ct tane 673 533 808 prpery & «m «r~narhip -311 -813 -1,160 Private savirgs 2,132 3,317 ,770 Pla GoAvt.trffsfer. to hoamhold 371 636 751 Total Private ~ apt* 58,236 64,665 70,336 Total P.vate Inæm 59,23£ 61,665 70,336 ANNEX Page 7 Gross Domestic Product 6- Table B in this Annex reDresents an attempt at consolidating production data of Afghanistan for 1967 and 1969. Data for 1972 were npnAnted on the basis of the Third Five-Year Plan endinv in 1972- ad- justed, however, to actual performance up to 1969. The results should be ConAidAred of a preliminary nature to be imnrnved upon by the vri-us Government departments and in subsequent economic missions. The orders of maan4+xdA of Afghaniqt.an' arnnn dmeAtIn nndAnt do not Annrt dramattnlV from previously published figures. However, the sectoral origins of GDP na v,n+. inot-Asnwriy %iml1nT1' Thek mai.n sournes of data. atre t.he Mini;tir f' Plnnnina ndr the1 published material and files of the Robert Nathan Associates and the V oan +nrn sin hcA +-n +hA M- ia ww. na_v +xia ow 14 1 M A A.4-1 IfU1TV - A WT+4-mT T---- --P A-P-1-nk45,+ Nov. 1o69 .os zvy uvv Nov. 1969. 441 1 "CATI M a 1rD _-'_-4on -4d T.kn, - As 4 w n A k m4 %-L.L rLdj U0.3_ . X, r±4C6.1L1L. ULl A TUIGLU 11VLL1-1L1 _LJ 11 .rL&LL 0 1UU. Nov. 1969. Progress 1968-69", Sept. 1969, p. S-20. 1iv) W.. DlactKnan ana M.D. RIusmi "P for AfghaniBan 133(". (v) Robert Nathan Associates, "An Attempt at Estimating National Proauct of ALghniVan 1337 '- arCn - o74. (vi) Robert Nathan Associates, "Production, Consumption and In- vestments 1341u-5u", 19oo. (vii) FAO-IBRD, 'Report of Livestock Identification Mission to Afghanistan", Apri y70. (viii) Russian draft version of the Third Five-Year Plan, Vol. III. (ix) F.R. Mohmand, "Agricultural Products Marketing in Afghanistan", paper presented to the Colombo Plan-sponsored conference on "Agriculture Credit and Cooperatives", Newcastle, England, 1967. 8, in addition to these sources the following estimates have been made in the light of similar coefficients in other development countries: (a) Gross output of construction estimated at 50 percent of total investment expenditure. (b) Trade and transport margin estimated at 30 percent of total material output. (c) Gross output of other services estimated at 5 percent of gross material output inclusive of trade and transport margin. (d) Net output of housing estimated at 6 percent of national income. Page tI ke] Depreciation rates Ior various sectors easimatea ata Agri- culture (1%), Mining and Quarrying (5%), Handicrafts (5%), Manufacturing (10%), Electricity (C), Construction (10), Trade and Transport (1%), Services (1%), Housing (5%) of net output respectively. Total depreciation represents 2 percent of National Income. (f) Projection of output for 1971/72 based on the Third Five- Tear Plan Estimates, adjusted by Ministry of Planning in light of actual performance up to 1969, and mission estimates for the industrial sector. ANNEX pa 9 grms OISIC PDU 00Af06A63TA6 1967 - 1?72 1967 (Millico. o afghanle) Prod. tion Unit PrIo. Q a,tit of Otot , .La roes Outpwt t 0 ceasedity /1Sector y#4 (AJM) r ¯¯ i2 int at SE. 17 WiI A26 .22 '0 ton 6.08h.5 2.50h 2,779 2,781 15,23Y 16,909 16,940 9,267 11,29? 1.358 7.12 Wheat str. . 700.0 1,657 2,233 1.956 1,160 1,563 1,369 1.04 1,707 1,232 1.13 Corn 3,25h.5 720 772 50 2,343 2,515 2,766 1,757 1,887 2,075 1.1. Corn etalk. - 566.0 2..61 2,b65 2,500 1,399 1,395 1.,15 1,253 1,256 1.277 1.15 0ar8.r " 3,130.0 375 361 430 1,171, 1,130 1,36 850 816 98 . n,7 0 297 oRs 11 202 203 272 183 183 218 1.17 Rio 5,660.0 337 402 385 1,874 2,235 2,170 1,327 1,616 1,479 1.19 Rie straw " 560.0 925 1.103 1,056 5111 618 592 767 557 533 1.09 anthr w,,111 u.500 .0 4N ~ -1~ ~ ,4 260 260 260 1. her gran Su-Tnotal" ,0. 1.20 CASH MROPS 1.21 Cotton 6,086.5 59 71 85 359 7,32 $11 197 235 284 1.22 Cotton sed " 2,100.0 39 b7 56 81' 99 118 82 99 118 1.23 Sugar bnst " 550.0 56 62 65 3-. 3 36 25 28 3 1.27 Sug-r ons 400.0 51 57 0 2is 23 2 1.25 Oil eeds 6,500.0 30 36 37 191, 233 239 136 163 167 1.26 Tobano 6,800.0 16 16 18 10< 109 119 90 99 101 1.27 M,di.nl herb. " 20,000.0 26 26 26 520' 520 520 7.2 472 I 2 1.28 Fruit5 4.955.0 825 837 940 6088 4,132 1,162 3,270 3,306 3,330 1.9 V.getabls. S 1,698.0 1 6 f B 1.20 lui-Tota "I8 ,02 70 ,7 1.30 OTER AGRICULTUAL PRODUCTS 807 800 800 a00 800 800 1.r32 lrt. and p18tation 1,8«; 1,800 1.800 1.700 1,700 1,700 1 Other poduotso tal 1.30 Sob-STO ol 1.1 '000 ton. 186 193 208 7,215 ,425 4,780 1.02 Woo 25 26 29 312 327 362 1.43 Kakul pelte 000 nilte 1,800 1,600 2,000 378 336 420 ].W7, I ktn .00 7,700 7,9 215 229 5,704 5,755 6,50 1.45 Caeinge læ00 pounds 0,5,500 f, 7,500 o) * 1.46 Ditry prodonts & egg. '000 Ron 820 910 890 4,39 4,500 4.715 1.77 Net nreae inpopolotion '0 hood. - 500 450 - 22 140 1.78 other lineetonk produote - - - 13 1 1.40 Sbt-Total w, 3 1.00 TOTAL AGRICUTURS uk1 kÉm931 7.9.20 29.911, 33.0 9 34.295 2.00 PINI3 & q0ARRlO 210 '000 ton. 626.R 162 125 150 101 79 94 63 78 59 2.20 Mtural gas illosno.. .306 - 1,600 3,000 - 49 924 - 250 50 2.30 lt '000 tos 67.0 39 1 41 25 27 27 22 27 24 2.1 Ipi. Iall. 000 kg 15 ailli. 10 5 7 150 75 105 120 60 84 2.50 arbi' 1o.o 36 27 30 7i 68 86 57 51 67. 2.60 L,, tn:'0 tone 0.0 no i26 63 80 17T 797 _ _. 2.00 TOTAL MINI A6g1 22 liý i.l 3.00 RANDICRAFTS & S1.0LL INDnTRn t.oo Poon, neneraee 6 tcoo s,vu' ,.;~ t.o o- 3.20 Carp~t" & leath-r p-d,.t 3,781 3,985 4,690 2,161 2,298 2,88 3.30 Wod & papr prodot 1,010 1,025 1,00 555 562 570 3.70 lo-tallin einn.el 1,110 1,200 1,300 690 735 800 3.50 =;tal pod-t 1,.UO 1,.80 1,580 680 700 245 3.60 Other podunt _ O » 45 f.u 60 .-3U. 3.00 TOTAL HANDICRAFTS W -6_ 13 1227 12.540 L.821 6.162 L0 4.00 AJACTURmo 4.10 FOD ~EYGE s & 10BAC00 4.13 *nest io- ton 3000 55.300 58,400 59,000 166 175 177 55 58 59 4.12 ~okery produts" 5000 15,500 16,200 16,500 78 81 83 26 27 2 4.13 Sugor 0 6000 7,100 1,300 7,400 8& 64 8 29 22 32 1 g tbe 2ee ne o00 l 78 109 32 28 3t 4.15 l1e 900 4,200 4,600 64o 5 3 4.16 Other i,nutrte 4.20 T S.-T . l 4.21 Cotton g&LZnning 'læ0 Ron 60.8 59 71 85 36 3 52 18 22 26 4.22 Cotton yb- 'æ Rundles 245 80 72 1W: 48 43 77 24 22 4.23 Cotton tentiles '000 11.6 66,000 78,000 70,000 76 556 812 383 278 1.0( 4.24 1nolen textil,e '000 700 163 446 1,100 18< 180 4.0 93 90 22 4.24 Raynn læe 25 1,30 1,500 1,940 D 3 49 1 4.26 -oes 'læ paR.I 150 108 143 130 16 20 B 11 4.30 030 & WOOD t CT7 3519 4.4W PAPE & PAPCIR OWCT o or u 4.50 CKMC1 OA PTDEM sin. 4.51 d iuefjotteii 'læ0«on 2000 29 27 32 58 54 66 2 13 4.52 s.p '000 aks 5 140 550 350 1 3 2 2 1 4.53 Other-C 52 10 4.50 Subrotol 49 4 4.60 p1Ul4 MTERAS 4.61 dement 'nlæ tan f 051 7n 96 11 191 95 121 76 38 48 4.62 Oth., products 71 i 18 78.60 oSb-Tot.l 2U - 4.70 OTHER INDUStRIbS 36 52 70 13 21 28 4.00 TOTAL MNAC9T80RINO 2,L96 999 266 Q m 1.177 5.00 ELECTT .illin inh 3.1 302 317 413 2 1.220 266 _e 2 7.00 TOTAL MATERIAL QOTPM (, 0 38.169 41.720 44.724 8.00 7RAD 90TANP7 1&,751 12016 13.417 7.00 SERYT3fS251 2.9 9.810 nn .2,516 3,69 4,911 9.20 Othtr IsroRon. 9.00 TOTAL SEm4CS 10.00 HUMNo 4,31 11.00? RATIONAL IN'ME (o LO tg _0__) 59,076 64,629 01262! 122 ER061f 12.01 Agroutue 300 330 343 12.02 Mining Quarryng 1u 22 39 12.3 1-ndtnrft. 291 308 350 12.05 KL.M,1iLy4 5 57 76 12.06 1nooriation 92 94 170 12.09 Trde & Traport 109 125 134 12.09 Seorvioes.5 63 0 1.2.00 TorA8 l &A0ATIO N 0 13.00 U2T k0u98 I800M PAI2(NTS 2 73 14.002 at fator -ot (11.00 * 12.00 s 13.00) u...N 77"1, " A .4% 9.75 A- a. 6t . 5< 3.89 ANNEX Pagel Private Consumption 9. In 1969, two major household expenditure surveys were undertaken by the Ministries or Planning ana Agriculture in three regions: (i) Urban areas of Bost municipality in Lashkar Gah; (ii) Rural areas of Helmand Valley in Lashkar Gah; (iii) Greater Kabul area. The final results of the first two, and preliminary results of the third are now available and have been used as a basis for estimating total private consumption in Afghanistan at Af 60,334 million for 1969 as shown in the following table C. The estimate is fairly close to that obtained as a residual from the national accounting system described. The latter is used in the analysis. 10. The sources of information are: (i) Columns 1 - 6: Ministry of Planning, Department of Statistics "surveyof Progress 1968-69n, table 1, p. 59 (Rural areas), table 2, p. 61 (Urban areas). (ii) Column 7: With the exception of the first three brackets of expenditure groups, the average monthly expenditure for the national estimates is taken as 0.95 of the sample rural area. The latter is within the Helmand Valley region where sizeable USA capital development program is in progress. Average monthly expenditure by Nomad population estimated at 0.85 of the average expenditure in rural areas. (iii) Column 8: Rural Areas: Ministry of Agriculture and Irrigation. Department of Planning, "Preliminary Results of Agricultural Census in Afghanistan 1347". The sample's population distri- bution pattern by expenditure groups is used for the national estimates in rural areas. Urban Areas: V. Chapir, USSR Adviser on Manpower, Wagea and Salaries to the Ministry of Planning_ "Ponplation and Manpower Resources in Afghanistan 1966-72", table 4, n R usa l3hC (1967) r- / of uban popu-aton as 12 percent of total population is used to estimate total urban popu- tnfA. The nam te n n+4~ A@4ne -f24. ^in vma++e in o-P ex- penditure groups is used for the national estimates in urban Nomads: K.H. Hendrikeon German Economic Advisory Gro-p M-maA Dh1 me 4" A mb%."e+a" .A Q .-4-- -a- their Solution", 1967. ANME Table C Page 1I PRELIMINARY ESTIMATES CF PRIVATE CONSUMPTION IN AFGNISTAN 1969 SAMPLE SuRvEy Fæ LASHKAR GAH 1969_ NATIONAL ESTIMATE 1269 Monthly Average Pgrcent of Cuilative Percent of Cverage Annual Expendi ture Monthly Population percent of Expenditure percent of MbnthLy 1969 Consumption per capita Expenditure population Expenditure Expenditure Population ExpendIture Af Af Af ('=) (Af million) TT (2) (3) (4) (5) (6) (7) (C) (9) R u r a 1 A r e a 9 R u r a 1 r e a 9 o - 100 58 0.2 0.2 0.2 o.2 58 21 15 101 - 200 159 25.0 25.2 n.3 11.5 159 2574 h,9n 201 - 300 268 28.9 54.1 22.0 33.5 268 2975 9,568 301 - 500 379 29.6 83.7 :32.0 65.5 360 3047 13,163 501 - 700 585 1o.5 94.2 :17.4 82.9 555 1081 7,200 701 - UOO 808 3.3 97.5 7.6 90.5 767 340 3,129 Uol - 1500 1324 2.11 99.5 9.0 99.5 1258 247 3,725 1501 - hooo 1615 0.1 100.0 0.5 100.0 1534 10 184 Sub-Total: RURAL 100.0 100.0 1,0,295 41,895 U r b a n A r e a r b a n A r e a a 101 - 200 185 9.3 9.3 3.4 3.4 185 156 346 201 - 300 270 24.24 33.7 13.2 16.6 270 10 1,328 301 - 500 hoo 31.2 64.9 25.0 141.6 hoæ 524 2,515 501 - 700 600 18.5 83.IL 22.3 63.9 6oD 311 2,239 701 - 1100 890 10.3 93.7 18.41 82.3 890 17.3 1,848 1101 - 1500 1310 4.6 98.3 11.9 94.2 1310 77 1,:210 1501 - 4000 1802 1.7 .100.0 5 100.0 1802 29 627 Sub-ToIal: URBA 1i.0 100-.0 1.680 10,113 N c m a d s Sub-Total: NOMADS 2,O0 6,740 GRAND TOTAL (at current prices - 1969) 13,972 58 78 (at constant 1967 prices) 3 3 4 ANNEX Import Projection 11l For the purpose of projecting imports for 1972, the following reo nsps were us P ic' i n n-c "as A ,a /A 1% 1N1 riC JZ L4 IJL) n f3 f v 1 IL +,CA -A IL.LLU A P J 1J '71.t -e U--..."J LA ~ - JL C 14 W &T.L JLLJA-L A.] 75 MLa W1 .n - qAe -AA u -- --- 7- m- - I Wn"re M i. owtal Imports of goods and servIces; me imporTs of consumers goods; Mi imports of intermediate goods; Mc imports of consumers goods through co- uiy aid kUI; P proceeds of commoudity UasaTance as maret praces; O net output of wheat, Mk imports of capital goods through project aid and M. imports or services. 12. For 19007 an 19-09, on the Dasis of ata obtaiDe from tabies A and B above as well as tables 1.8 and 1.9 in the Statistical Appendix, the following relaTionships and 1972 projections are obtained: Eq*..2) Mc = Il ku " ;) IMP 33.4 - f1 (55,200 - 09) fl = 0.00061 1969: 34.9 - f1 (60,658 - 912) fl - 0.00056 1972: f = 0.00060 1 . me - 0.0060 (64,608 - 909) = $38.2 million = Af 2,865 (at the effective rate of 75, see sources to Table A) Al TIXT I?V a.NE Page 13 Eq. (3) L, Ma =f ( Ls 0w f2 = * MOW 0 1967-69 f2 8.7 - 20.3 11,292 - 9,267 - 0.00572 1997 aI = - 0.00572 (11,358 - 11,292) = - 0.h = 8.7 - 0.4 = $8.3 million = Af 376 million (it the official rate) Eq.(h) MI = - (Y) 1967 23.>4 = f, (58,076) f3 = 0.00040 1969 26.3 = f3 (64,629) f3 = 0.00040 1972 M = 0.00040 (70,624) = $28.2 million = Af 2.115 illion (at the effeetive rate of 75) Eq.(M) m = m- + I. + ma + m, + M- C .L G; 11 Zi _Q92 14 = 38.2 + 28.2 + 8.3 + 60.0 + 1.3 = i136.0 millions = 2,865 + 2,115 + 376 + 2,71t6 + 97 = AF 8,199 millions