Afghanistan - Agricultural and Rural Development Project

Document of FILE COPY The World Bank FOR OFFICIAL USE ONLY Report No. P-2565-AF REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE DEMOCRATIC REPUBLIC OF AFGHANISTAN FOR AN AGRICULTURAL AND RURAL DEVELOPMENT PROJECT May 22, 1979 This document has a restricted distribution and may be used by recipients only In the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Calendar 1978 February 22, 1979 Currency Unit: Afghani (Af.) US$1 : Afs. 40.24 Afs. 40.0 Af. 1 : US$0.02485 US$0.025 Note: An exchange rate of Afs. 40.0 US$1 has been used to calculate project costs. FISCAL YEAR March 21 to March 20 GLOSSARY OF ABBREVIATIONS ACCSI - Afghan Cartographic and Cadastral Survey Institute AFC - Afghan Fertilizer Company AGBANK - Agricultural Development Bank of Afghanistan CIDA - Canadian International Development Agency DCD - Department of Cooperative Development EHD - Environment Health Department FAO - Food and Agricultural Organization HLDC - Herat Livestock Development Corporation IFAD - International Fund for Agricultural Development MEU - Monitoring and Evaluation Unit PCCRD - Presidents' Council for Coordination of Rural Development PDPA - People's Democratic Party of Afghanistan PRDC - Provincial Rural Development Council RDD - Rural Development Department RPIU - Regional Planning and Implementation Unit UNDP - United Nations Development Program USAID - United States Agency for International Development WHO - World Health Organization  FOR OFFICIAL USE ONLY DEMOCRATIC REPUBLIC OF AFGHANISTAN GHAZNI-WARDAK AGRICULTURAL AND RURAL DEVELOPMENT PROJECT CREDIT AND PROJECT SUMMARY Borrower: Democratic Republic of Afghanistan. Beneficiaries: Ministry of Agriculture Rural Development Department Agricultural Development Bank of Afghanistan (Agbank) Amount: US$ 16.5 million equivalent Terms: Standard Relending Terms: The Government would onlend the equivalent of $4.5 mil- lion to Agbank for 15 years including 5 years of grace, at an interest rate of 4.5 percent per annum. The Government would bear the foreign exchange risk. Project Description: The project aims to raise the incomes and standards of living of the rural poor in an area of Afghanistan where some 60 percent of the people live in absolute poverty with per capita incomes below $85. The project includes (a) agricultural investments in minor irrigation rehab- ilitation, agricultural extension and applied research, credit, veterinary and cooperative services, range manage- ment, and cadastral survey; (b) investments in rural infrastructure including minor road improvements and village water supplies; (c) project planning, coordina- tion, and evaluation; and (d) related technical assis- tance, and feasibility studies. Some 62,000 farm families including about 3,000-4,000 nomad and transhumant families would benefit directly from the Project. In addition some 100,000 people would benefit indirectly. Although the limited experience and capacity of the executing agencies, and the substantial dependence on community participa- tion are recognized as risks, the careful emphasis on institution-building, and the expert assistance and train- ing to be provided should limit these risks. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Financing Plan/ Government, AgBank Cost and Bene- Estimated Cost Local Foreign Total IDA IFAD UNDP ficiaries Total and Financing Plan: -----US$ million----- ----------US$ million----------- Minor Irrigation Rehabilitation 2.0 3.0 5.0 3.2 2.6 - 0.9 6.7 Agricultural Credit 4.0 1.2 5.2 2.1 2.6 - 2.0 6.7 Veterinary and Range Management 1.8 0.9 2.7 0.6 0.5 - 2.4 3.5 Applied Research & Extension 2.1 0.5 2.6 1.5 1.2 - 0.8 3.5 Cooperatives 0.7 0.2 0.9 0.5 0.4 - 0.3 1.2 Cadastral Survey - 0.2 0.2 0.1 0.1 - - 0.2 Minor Road Improvements 2.7 3.0 5.7 3.6 2.9 - 1.1 7.6 Village Water Supplies 0.3 0.9 1.2 0.7 0.5 - 0.3 1.5 Project Unit 1.6 1.1 2.7 1.4 1.1 - 0.7 3.2 Technical Assistance 0.7 2.3 3.0 1.5 1.1 1.0 - 3.6 Feasibility Studies 0.1 0.9 1.0 1.3 - - - 1.3 Total Base Cost 16.0 14.2 30.2 16.5 13.0 1.0 8.5 39.0 Physical Contingencies 0.9 0.3 1.2 Price Contingencies 4.6 3.0 7.6 Total Project Cost 21.5 17.5 39.0 /1 Includes physical and price contingencies. Estimated Disbursements: IDA FY 1980 1981 1982 1983 1984 ----------US$ Millions---------- Annual 1.7 4.8 3.1 3.2 3.7 Cumulative 1.7 6.5 9.6 12.8 16.5 Rate of Return: 18 percent. Appraisal Report: Report No. 2297-AF dated May 8, 1979.  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE IDA TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE DEMOCRATIC REPUBLIC OF AFGHANISTAN FOR AN AGRICULTURAL AND RURAL DEVELOPMENT PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Democratic Republic of Afghanistan for the equiv- alent of $16.5 million on standard IDA terms to help finance an Agricultural and Rural Development Project. The International Fund for Agricultural Development (IFAD) would make a loan of $12.5 million for 50 years including 10 years of grace, with a 1 percent service charge per annum, and provide a $500,000 technical assistance grant. UNDP would provide US$1.0 million for technical aissistance, with IBRD as the Executing Agency. The equivalent of $4.5 million would be onlent to the Agricultural Development Bank; of Afghanistan (AgBank) for 15 years including 5 years of grace at an interest rate of 4.51 percent per annum. The Government would bear the foreign exchange risk. PART I - THE ECONOMY 1/ General 2. The Basic Economic Report distributed to the Executive Directors in April 1978 (Report No. 1777a-AF) - The Journey to Economic Development - provides an assessment of the economic situation, development achievements and prospects, and constraints for future economic and social development in Afghanistan. The findings of that report were summarized in my report to the Executive Directors, dated June 20, 1978 (Report No. P-2357-AF) in which I recommended a credit for a Kabul Water Supply and Sewerage Project. The broad issues discussed in these reports give perspective to a summary of the recent developments in the economy. Current Siltuation 3. The performance of the Afghan economy rests heavily on the agricul- tural sector. Yearly changes in agricultural production reflect primarily weather conditions. In the four years from 1972/73 - 1976/77 agricultural production grew steadily at an annual average rate of 2.6 percent peaking at a level of food self-sufficiency in 1976/77. In 1977/78 insufficient rainfall during the winter and spring followed by hot weather during the growing season resulted in a drop in crops of 10 percent and in heavy animal losses. The decline in food-grain production led to an important price increase during the second part of the year, partly because Government wheat imports were ordered too late. A substantial recovery of agricultural production occurred in 1978/79. Food grain production rose by 6 percent. It is possible that the 1/ This section is essentially unchanged from the corresponding Parts of the President's Reports for a Third Education Project (No. P-2491-AF dated March 19, 1979), and a Third Highways Project (No. P- 2564-AF dated May 22, 1979),  -2- level of output in 1979/80 will fall because of insufficient rain and snowfall during the winter. In addition, the land reform will, for reasons discussed below, certainly disrupt production temporarily to some degree. Accordingly - and given the large share of agriculture in GNP - economic growth is likely to be small in the next 18-24 months. 4. The overall budget deficit expanded sharply in 1976/77 to a level equal to one-third of total expenditure. Foreign aid fell short of expecta- tion, and the Government relied heavily on the banking system to finance the deficit. In 1977-1978 the budget deficit declined by 10 percent while revenue rose by only 6 percent after a period of continued growth. After a dramatic increase in 1976/77, development expenditures levelled off in 1977/78 partly as a result of delays in project preparation and implementa- tion. Due to abandonment of the Seven-Year Plan by the new Government (see para 14 below), some slackening of major new investment decisions before the new Plan targets are formulated in the fall of 1979 can be expected; only then will the domestic resource position come clearly into focus. 5. Although the trade deficit was large from 1974/75 to 1977/78, net receipts from services and capital flows exceeded the deficit. As a result, the surplus on the balance of payments doubled in 1975/76 and tripled in 1977/78 compared with the 1974/75 level. Cumulative balance of payment surpluses are reflected in the accumulation of official foreign exchange holdings, in the accumulation of reserves up to a level of almost 12 months of import requirements in 1978, and in the substantial appreciation of the Afghani. The Afghani has appreciated more or less continuously in the bazaar market since 1971, but since 1976, policy measures were introduced to restrain this appreciation. During 1978/79, the central bank successfully intervened in the market so that the exchange rate which for a period reached Afs. 32 to the dollar, fell to Afs. 40 to the dollar by the end of 1978. A large part of the recorded surplus originates in remittances of Afghan workers living in Iran. The official figures, however, do not fully reflect the actual flows, due to the importance of the informal financial sector. The level of these remittances, and hence the current payments surplus, must be considered uncertain as a consequence of events in Iran. Economic and Social Priorities of the New Government 6. On April 27, 1978 the People's Democratic Party of Afghanistan (PDPA) overthrew the regime of the former President Daoud; the new Government is headed by Noor Mohammad Taraki, President of the Revolutionary Council and Secretary General of the Central Committee of the PDPA. The Prime Minister is Hafizullah Amin. The PDPA has committed itself to an ambitious program of action, and particularly to the following goals: land reform, adult literacy, expansion of primary education, increased access to secondary and to higher education, provision of basic health services, equal rights for women, reduc- tion of unemployment, revision of the tax system, and strengthening of the public sector. In addition - and in fact as a pre-condition for significant progress on any of these issues - the new Government is in the process of instituting a major overhaul of the administrative system to make it more action-oriented and more effective in responding to economic, political and social conditions.  - 3 - 7. These goals and the initiatives taken to accomplish them correspond to a large degree with the recommendations contained in the Bank's recent basic economic report. The "basic needs" program recommended in the basic report as an integral part of the development strategy is also a key element of the program of the PDPA and the Government, under the corresponding label of "food, health and shelter" for all citizens. The basic report was dis- cussed with the new Government in February 1979. The mission found itself in broad agreement with the Government with respect to the diagnosis of the economic, social and institutional constraints to development. 8. With the new Government only one year in office, and in vi.ew of massive personnel changes in the upper and middle echelons in the adminis- tration, the Bank's assessment of the progress made so far is necessarily derived less from the analysis of firm economic data than from the accumula- tion of subjective impressions brought back by a large number of Bank missions which have been in Afghanistan during the past year and from the efiective- ness of various Government agencies in regard to requests for inforrmation or decisions made by these missions. All these missions have noted a new commit- ment to development, combined with an impressive seriousness of purpose. A very open and rewarding dialogue has been possible on effective approaches to achieve the various goals. However, the Government recognizes the far- reaching nature of the changes it seeks to bring about and the potential this offers for difficulties of a political, economic or social nature. Given reasonable stability, however, there is a confidence that considerable headway in tackling Afghanistan's formidable development problems is now within reach. Development Issues 9. Land reform and reform of the social structure of the rural sector are the Government's first priorities. Three recent decrees address themselves to these problems. Decree No. 6 cancels all debts owed by sharecroppers and agricultural laborers. Debts owed by farmers owning less than 2 hectares and secured by land or crops are written down, and their terms are reduced; Gov- ernment has indicated that institutional credits will not be affected. The Decree may however, have a serious impact on the supply of private credit and place a heavy burden on institutional credit. Decree No. 7 promulgated for "ensuring of equal rights of women" raises the legal age of marriage and places a limit on financial transfers at marriage, hitherto a major cause of indebtedness. Decree No. 8 deals with land reform (the previous land reform law of 1973 had not been enforced and led to insignificant transfer of owner- ship). The land reform decree limits the size of land holding to 6 hectares of Class I land (irrigated and suitable for double cropping) or its equivalent in lower grade land, and it provides for the distribution of expropriated land primarily to landless labor and sharecroppers, up to a limit of 1 hectare of Class I land or its equivalent per family. The decree also limits future fragmentation of redistributed land and requires equitable distribution of water on irrigated land. To implement the land reform, the Government has set up 100 expert teams which are carrying out the complex task associated with the redistribution, initially in 10 of the 26 provinces of the country, on a village-by-village basis. Land distribution began in early December 1978 and by the end of March, about 250,000 hectares were officially reported to have been distributed among over 100,000 families. The Government has announced that the land reform will be completed in all provinces within about a year and that about 675,000 families will benefit ultimately, probably more than one-third of all families in rural areas.  - 4 - I 10. One severe transitional problem to be faced in connection with the land reform is the provision of implements and inputs for the new farmers, who as tenant farmers relied on credit from money lenders and landowners. For obvious reasons - because of the sheer size of numbers and the absence of any bankable collateral of the great majority of farmers - an extension of conventional institutional lending cannot completely resolve the problem. The Government, therefore, is pinning its hopes on a rapid expansion of the cooperative movement. The number of cooperatives has already increased from 150 one year ago to 250, and is expected to reach several thousand upon conclusion of the land reform. Although Government spokesmen assert that membership would be voluntary, the cooperative movement is expected to ulti- mately comprise almost all farmers. Although a revised cooperative law has been issued and encouragement given to the creation of farmer's credit unions, it is recognized that the rapid expansion of cooperatives does not by itself resolve the credit supply problems, and that during the difficult transitional phase ahead severe shortages of qualified staff in the cooperatives, the lend- ing agencies (essentially the Agricultural Development Bank of Afghanistan) and in the Government extension service will most likely impede agricultural production temporarily. 11. Another high priority program of the new Government is the rapid expansion of elementary education. Primary schools are being set up with voluntary labor and teacher training is being stepped up as a part of the expansion of secondary and higher education. In addition, the PDPA has launched an ambitious adult literacy program, using volunteer teaching staff and make-shift facilities. One of the most severe tests ahead - stimulated by Decree No. 7 mentioned above - is the extension of both primary education and the adult literacy program to women, who in the rural areas were all but completely left out in the past. 12. For industrial development, following the nationalization measures of 1973, large-scale industry has been almost entirely in the public sector, where the record has been poor. The new Government is making efforts to correct some of the most severe deficiencies, such as virtual absence of enterprise accounting, and bureaucratic management practices with a minimum of independence and accountability. While the future industrialization policy will, for a number of reasons, continue to emphasize the expansion and pro- motion of large-scale public enterprises, the Government exhibits awareness that for purposes of employment generation, as well as for processing agri- cultural products, procurement of basic consumer goods and production inputs, the promotion of small- and medium-sized industry - by necessity largely in the private sector - cannot be disregarded. While the Government has not expressed a strong formal commitment to that end, there are indications that it is in the process of gearing up institutional arrangements for the promotion of small and medium-sized industries. 13. In the past, domestic resource availability was not a major con- straint for development since resources (both domestic and foreign) tended to exceed absorptive and implementation capacity. In the coming years, however, domestic resources are likely to emerge as a major new bottleneck of development. The programs of social and economic transformation are likely to be accompanied or followed by a rapid rise of development and current ex- penditures in these areas, even under the most generous assumptions about the  -5- impact of 3elf-help and voluntary services. In addition, sizeable debt service payments for public external debt will put additional new burdens on the budget.. In fact, the new Government is facing an almost insoluble dilemma, because of its commitment to social progress and the identification of these subsidized services with that goal. On the revenue side, the major tradi- tional sources of revenue - like import duties, income from public enterprises, export sales of natural gas, and corporate and individual income taxes - are unlikely to grow fast, and for some items (like progressive land tax and personal income tax) may even shrink. The Government is aware of this dual squeeze an(i is looking for remedial measures. These are being sought through measures a:Efecting foreign resources. First, the Government is seeking a debt moratorium from a number of previous lenders; and second, the Governmnent is seeking long-term commodity credits from abroad, which would provide counter- part funds for discretionary use by the Government. Meanwhile, in its first budget, the Government has followed the prudent course of its predetcessors and has budgetited for a 6 percent expenditure increase, of which about 30 percent would be foreign financed. In this situation, of a narrow tax base! and low domestic savings capacity Afghanistan requires special consideration from external lenders, including IDA, in financing the local costs of development projects. 14. Foreign resources did not generally constrain development: in the recent past; the country not only failed in the past to use all foreign assistance available, but for years has run a balance of payments surplus and correspondingly increased its reserves, beyond the level necessary for securing imnport requirements. As with domestic resources, the chief problem was limited absorptive and implementation capacity. The new Government is committed to increase it through administrative reforms and accelerated investment and growth. The Goverrment also expects a sustained flow of external assistance (including sizeable commodity aid), in particular from the USSR, other COMECON countries and IDA. How and at what level resource requirements and their availability will eventually balance is impossible to gauge at this juncture; this problem reportedly is one of the reasons the new Five-Year Plan will not be finalized until September 1979. 15. The most pervasive past constraint to development - arch;aic admin- istrative procedures and practices which choked decision-making, initiative and any sense of achievement - is recognized by the new Government. While the perceived need to deliver on the postulated goals of development has begun to reduce bureaucratic red tape and remove some delays within the existing institutional framework, the requirement to overhaul the framework itself is ac:knowledged. The problems associated with this less conspicuous revolution are truly formidable and will continue to stretch the patience of aid donors for some time to come. 16. In order to achieve its goal of development and to accomplish some progress on the issues sketched above, Afghanistan will continue to require external f'inancial and technical assistance. As indicated above, foreign financial assistance per se is not likely to become a development bottleneck in the neaLr future; more likely is a shortage of external resources for certain priority tasks which do not match the capacity or wishes of donor agencies. A second, but no less important problem is the continuing need to cover some  -6- of the domestic resource requirements, in particular those connected with project financing, by way of foreign aid. Negotiations are currently under way with a large number of countries and several international. organizations to establish an aid pipeline for the new Five-Year Plan, which started for- mally on March 21, 1979. Technical assistance, organized within a clearly defined and recognized framework, linking assistance to institutional changes and project preparation, remains a third matter of high priority. In this connection - through the institution-building consequences of its project work, usually incorporating a sizeable portion of technical assistance, directed at increasing absorptive capacity of the country and improving its efficiency - the Bank expects to continue to make a major contribution to Afghanistan's future development. PART II - BANK GROUP OPERATIONS IN AFGHANISTAN 1/ 17. The proposed credit would bring total IDA commitments to Afghanistan to $226.6 million (net of cancellations) for twenty credits in various sectors. Annex 11 contains a summary statement of IDA credits to Afghanistan as of March 31, 1979 and notes on the execution of ongoing projects. Starting in 1964 with a credit of $3.5 million, IDA lending to Afghanistan has grown steadily to reach an annual average of about $31 million for FY76-78, compared to an annual average of about $16 million for FY73-75. IDA has financed eight projects in the agricultural sector with credits totalling $109 million, four credits totalling 36.6 million for transportation, one of $2 million for an industrial development bank project, two for a total of $23.5 million for water supply, sewerage and sanitation, one of $10 million for a thermal power project, and two for a total of $27 million for education. A $0.3 million IFC investment in the Industrial Development Bank of Afghanistan (IDBA) was repaid to IFC following the nationalization of IDBA in 1975. 18. Initially, the Bank Group's lending to Afghanistan was attended by considerable difficulties. In addition to a limited knowledge of the economy, there were a number of serious practical difficulties related to relatively weak institutions and cumbersome bureaucratic procedures. Thus, the Bank Group's lending has tended to be directed at projects and institu- tions where the possibilities for effective lending were best. The analytical framework provided by the basic economic report and several sector studies (agriculture, horticulture, livestock, industry), the development orientation of the Government and a growing implementation capacity among Afghan institu- tions, provide the basis for the Bank Group's future lending activities in Afghanistan. While the emphasis will remain on the productive sectors, with a search for improved productive efficiency (especially in the agricultural sector), expanded foreign exchange earnings and domestic revenues, an increas- ing knowledge of the economy makes possible a well focussed response to the basic needs of the Afghan people. 1/ This section is essentially unchanged from the corresponding Parts of the President's Reports for a Third Education Project (No. P-2491-AF dated March 19, 1979), and a Third Highways Project (No. P 2564-AF dated May 22, 1979).  19. A number of further projects are under consideration. A wheat pro- duction project is currently being appraised, and a fourth education project is being prepared and will be appraised in June 1979. Preparation of a third irrigation project, a second industrial development bank project, a second power project and a fourth agricultural credit project is also in progress. Government has indicated that it intends to focus on regionalized rural development, and has requested IDA assistance in devising an appropriate organizational framework for it. 20. In addition to its lending activity, IDA is executing several UNDP-financed projects in Afghanistan which have been of great benefit in expanding the country's limited administrative capability. To help ease the managerial and administrative constraints, a long and difficult task, IDA has placed emphasis on institution-building and training for Afghans. IDA has helped establish several semi-autonomous agencies, (for example: the Agricultural and Industrial Banks, and the Herat Livestock Development Corporation), the aim being to provide the entities with the operational autonomy needed for a viable venture. The establishment of project: imple- mentation units in operating ministries is a further step in this direction. For example, the Project Implementation Unit in the Ministry of Education, established under the second education project, is to be commended for its work in preparing the Third Education Project. Similar units have been established for a Fruit and Vegetables Export Project which has recently become effective. 21. Project implementation, which has been variable in the past has shown improvement and in recent months prompt action on the part oE the Government: to remove project-specific bottlenecks suggests that this improve- ment will continue. On the other hand, we should not misunderstand the far- reaching nature of the changes which the Government is attempting to bring about in Afghanistan, for example land reform, and the potential this offers for difficulties of various kinds. Insecurity in the Herat area in recent weeks has hindered implementation of the two livestock projects. 'Close coordination between the authorities and Bank staff, facilitated by the Bank's resident mission office, will be essential to maintain the past improvements in the process of identifying, preparing and implementing projects. The overall picture of disbursements is now a satisfactory one. Disbursements under ear:Lier IDA credits were slow initially, but this situation has improved considerably since 1976, and disbursements are now at a satisfactory rate of about $20 million per annum. The IDA share of Afghanistan's total external debt outstanding and disbursed were about 6.0 percent and 4.0 percent, respectively, at March 20, 1978. For the future, the IDA share of total debt outstandinag and disbursed are estimated to reach about 6 percent and 6 per- cent, respectively in 1980/81. It is estimated that in 1980 debt service payments due to IDA will represent about 1.1 percent of service payments due on Afghanistan's external debt. Afghanistan's debt service ratio in 1977/78 was about 13 percent. PART III - THE AGRICULTURAL AND RURAL SECTOR 22. Eleven million, or more, of its approximately 14-15 million people live in rural Afghanistan. Of these, about 1.5 million are nomads, and over  - 8 - six million (about 40 percent) live in absolute poverty with per capita incomes of $85 or less. Agriculture, predominantly subsistence in character, continues to be the central point in this setting. It accounts for 57 percent of GNP (1975/76); 60 percent of export earnings, and 53 percent of the labor force estimated at 4.7 million. Food self-sufficiency is an important goal, but emphasis is also placed on cash crops. Wheat is dominant, occupying about 70 percent of total cereal crop land, and some 60 percent of the total cul- tivated area. Other crops include maize, barley, rice, a wide variety of fruits, and cash crops including cotton and sugar beets. Besides being an important source of export earnings, livestock provide the primary source of draft power and the major means of transport in rural areas. 23. Over the past decade, the performance of the agricultural sector has been disappointing, with production increase failing to match population growth. Agriculture's share of GNP has dropped from 65 percent in 1968/69 to 57 percent in 1975/76 due largely to sluggish growth in the sector. Con- straints to increasing agricultural production include the harsh continental climate, unreliable rainfall, inadequate irrigation water storage coupled with primitive irrigation systems and customary law on water rights, low literacy level, a shortage of trained and experienced technicians, weak agricultural extension and applied research programs, insufficient access to credit, and a low level of rural infrastructural development, particularly access and feeder roads. Quite substantial investments have been made in the agricultural sector over the last 25 years, but the returns have been limited by the con- straints summarized above. 24. Topography and climate limit land use in Afghanistan. Arable land is estimated at 8 million hectares; less than 15 percent of the total area. However, only about 4 million hectares are cultivated each year due to lack of water, and of this, only about 2.8 million hectares are irrigated. Water utilization is inefficient; by tradition, those at the head of irrigation canals are entitled to a water share usually much in excess of their needs, thus depriving farmers on lower reaches. Land distribution has been skewed until 1978, when Decree No. 8 was promulgated (see para 9). Available data suggest that about 40 percent of the cultivable land has been concentrated among 2 percent of the landowners; while about 80 percent of the landowners held small, often fragmented holdings of less than 4 hectares. Perhaps 30 to 40 percent of cultivated land has been farmed by landless sharecroppers who probably constitute a high proportion of rural poor. Landlord/tenant relationships were traditionally defined in the former's favor. 25. The absence of an efficient extension service and effective applied research programs is probably reducing the effectiveness, and hence the eco- nomic returns of major investments in credit and irrigation. While a basic extension service exists, its performance has been unsatisfactory. Contribut- ing factors include cumbersome, highly centralized administrative procedures, inadequate operating programs and training, weak research back-up, and poor staff facilities (housing, transport, equipment) in rural areas. A comprehen- sive review of the present national research and extension program is provided for under the Second Khanabad Irrigation Project (Credit 778-AF); a major research and extension effort is planned as part of a wheat production project currently being appraised; and preliminary discussions on a possible research and extension project are scheduled for May/June 1979.  -9- 26. Until recently informal credit markets have predominated, but the recent growth of institutional credit facilities and use through the Agricul- tural Development Bank of Afghanistan (AgBank) and commercial banks has been encouraging. Recently, loans to cooperatives have been a major growth area but AgBank is probably assisting no more than 8 percent of total farmers. Security requirements still favor registered landowners, although some pro- gress towards liberalization has been made recently. To compensate for any reductions in traditional money lending activities resulting from Decree No. 6 (see para 9), Government is establishing village 'farmer unions' which will mobilize savings for lending to villagers, mainly for consumer credit requirements. While lending through cooperatives will improve access to credit, emphasis on AgBank's part should be sound appraisal and good loan supervision with well-trained, competent staff rather than strict collateral. Institutional credit discipline among farmers is essential if AgBank is to survive as a viable financial institution and provide the required credit services. 27. While agricultural and rural development is constrained by a number of complex interrelated factors, perhaps the overriding constraint in the past has been thie previous Government's inability to establish a satisfactory policy framework and provide effective supporting services including research, extension, and veterinary. The operating framework including administration, financial and staff management has been inadequate to meet the needs of dynamic agricultural development programs. Administration has been over-centralized, staff morale and motivation low, and underutilization common. 28. The new Government's policies give priority to addressing some of the basic problems of rural society including rural indebtedness, access to institutional credit, support for cooperatives, and land ownership and tenure. It has recently requested IDA assistance (referred to in para. 25 above) to improve the efficiency and effectiveness of the national extension, research, and cooperative services on a priority basis. The measures describied in paras 9-11, and t:he sense of priorities they embody, are of potential significance to the rural economy. They indicate Government commitment to policies intended to benefit the rural poor, the absence of which has been a feature in the past. Rural development projects of the type proposed in this report fit in well with these newly emerging priorities. Organization and Services 29. Provinces are administered by appointed Governors who chair Provin- cial Rural Development Committees. These Committees include sub-governors, and representatives of central Government ministries. The latter are respon- sible administratively to the Governor and technically to their central ministries in Kabul. Provincial administration is highly centralized. 30. Coordination and management of agricultural activities is the primary responsibility of the Ministry of Agriculture. Exceptions include: major and minor irrigation works, for which the Ministry of Water and Power (WAPM) and the Rural Development Department (RDD) respectively, are respon- sible. The Ministry comprises headquarters departments representing the different subsectors and corresponding departments in the provinces. Having  - 10 - shed responsibility for supplying inputs to farmers to AgBank, the Afghan Fertilizer Corporation (AFC) and the Afghan Seed Company (ASC), the Ministry is in a position to concentrate on its major functions of policy-making and planning, agricultural extension, research and veterinary services. In the past, the Ministry's achievements in agricultural development have been limited, due inter alia, to overcentralized administration, limited budgetary allocations, and lack of well-trained and motivated staff. 31. The Rural Development Department (RDD) was established in 1972 as part of the Prime Minister's office to undertake rural social and economic development. RDD was responsible to the High Council of Rural Development, until its recent abolition. Coordination, planning and policy guidance for the project will now be provided by the Presidents' Council for Coordination of Rural Development (PCCRD) to be established under the proposed project (see para 57). RDD has two forms of provincial organization - either a provincial office headed by a Director, or in areas where Integrated Rural Development (IRD) projects have been proposed, a project committee with a Director-General as head. RDD currently receives technical assistance from UN, and the Indian Government, and both financial and technical assistance from USAID. Although operationally over-centralized, RDD has been quite effective in carrying out rural development programs scattered over almost all of the 26 provinces. Its 1978 summer program included the construction of over 50 irrigation structures, about 30 bridges, roads and other construction programs. 32. Following its reorganization in 1969, the Agricultural Development Bank of Afghanistan (AgBank) has, with UNDP/IDA/Government assistance, become an effective, functional organization. Its loan portfolio has tripled in four years to over Afs. 1.7 billion ($42.5 million) as of March 1978. AgBank makes short, medium and long-term loans for an expanding range of agricultural investments, including farm mechanization, on-farm development, production inputs, livestock, agro-business and marketing. AgBank's supply department imports tractors and water pumps and related farm machinery for sale on credit to farmers. It also provides after sales service, which is currently being reorganized and strengthened with UNDP/FAO technical assistance. Much of IDA's financial support to the agricultural sector has been successfully channelled through AgBank. 33. The Afghan Fertilizer Company (AFC) has expanded rapidly since its establishment in 1973, with substantial financial and technical USAID support. It is responsible for procurement, storage and distribution of fertilizer. More recently, its activities have included the purchase and distribution of improved seeds produced by the Afghan Seed Company (ASC), and monopoly pur- chase and sale of agro-chemicals, including veterinary medicines. Its satis- factory organization includes a wide distribution system with about 600 retailers. It has a regional office in Ghazni. 34. The responsibilities of the Environmental Health Department (EHD) in the Ministry of Public Health include a village health worker scheme. It is being assisted financially and technically by UNICEF and WHO. EHD has estab- lished five zonal centers to strengthen its administrative and limited imple- mentation capacity. Government recently transferred EHD's rural water supply responsibilities to the Ministry of Public Works.  - 11 - 35. The Afghan Cartographic and Cadastral Survey Institute (ACCSI) is headquartered in Kabul; its Ghazni branch serves the Project area. UNDP is currently lproviding technical assistance and equipment. Recently, modern cadastral survey methods have been introduced to replace earlier methods, which were slow and not entirely accurate. The Department of Cooperative Development (DCD), established within the Ministry of Agriculture in 1973, is responsible for promoting the establishment and registration of cooperatives, auditing accounts, drafting regulations, and providing assistance and advice on organization and management. It has 12 provincial field offices including one at Ghazni, and is currently implementing an intensified system of super- vision of cooperative agents and activities. In the past DCD has b3een only partially successful in promoting the establishment of viable cooperatives. With major financial and technical support for cooperative development now planned by Government, DCD is expected to emerge as a stronger, more effective organization. Previous IDA Assistance 36. IDA's assistance to agriculture, with credits totalling $109 mil- lion, has hitherto concentrated on (a) building up a system of institutional credit for farm inputs; (b) rehabilitation of irrigation systems to increase irrigation water supply; (c) increasing livestock and agricultural production for domestic use and to capitalize on Afghanistan's substantial export oppor- tunities in growing markets in neighboring countries; (d) upgrading and strengthening of support services and rural infrastructure; and (e) developing a network of project entities capable of undertaking the difficult task of agricultural development. 37. With the assistance of three IDA credits totalling $30 million, together with ongoing financial assistance from CIDA and USAID, and technical assistance from UNDP, AgBank has established itself firmly as a leading insti- tution for agricultural development. The Herat Livestock Corporation was established under the first of two Livestock Development Projects (IDA credits totalling $24 million) to develop a meat export industry, increaseb livestock production, and develop rural infrastructure in the Herat region. The proj- ects, which include assistance to nomadic groups, were seen as offering the opportunity to initiate "self-sustaining" rural development. Adm:inistrative weaknesses which caused initial delays, are being dealt with. IDA is assist- ing in the modernization of irrigation systems for some 30,000 hectares of land through two credits totalling $37 million. In addition, the IDA-financed Second Education Project is providing secondary agricultural schools for pre-service training. In-service training for extension staff, and farmer training is envisaged in the Fourth Education Project scheduled for appraisal in June 1979, and a $18 million credit for a Fruit and Vegetable Export Proj- ect to expand production of and export market access for raisins, vegetable seeds, and vegetables and fresh fruits has recently become effective. The Project Area 38. Ghazni and Wardak were selected from a group of provinces includ- ing Samangan, Bamiyan, Zabul, Uruzgan and Ghor. Selection criteria included (a) access from Kabul which permits utilization of existing infrastructure, (b) potential for agricultural and livestock production, and (c) a high  - 12 - percent of population living in absolute poverty. As a result of recent changes made by Government in Afghanistan's provincial structure, the Proj- ect area now includes the Ghazni province and parts of the Kabul and Paktika provinces (instead of Ghazni and Wardak); the actual area to be covered by the project is unchanged. 39. The total land area covered by the project is estimated at 4.3 mil- lion hectares of which 227,000 hectares (5 percent) are cultivated, 464,000 hectares (11 percent) are designated pasture, 29,000 hectares (0.7 percent) forest, and the balance of 3.5 million hectares (83 percent) mountains and desert. While the Project area accounts for about 10 percent of national population it includes only 6 percent of total land cultivated and 5 percent of national irrigable land. The climate is semi-arid with hot dry summers and long cold winters. About 92 percent of the precipitation occurs during winter, mostly as snow. The average-sized holding is about 1.6 hectares (compared to the national average of 3.5 hectares). Land ownership patterns and landlord/tenant relationships are traditional. About 53 percent of cultivated land in Ghazni is owner-operated and 37 percent share-cropped. Most holdings are highly fragmented. Irrigation water is the most scarce resource. Of the cultivated area, about 143,000 hectares are irrigated; 63 percent by river diversion, 16 percent from springs, 18 percent from 'karezes' (an ancient system of tunnels which tap groundwater in mountain fans), and about 3 percent from groundwater exploitation including wells. Frequent flooding, largely from snow melts, results in water and labor wastage due to destruction of diversion structures and canal intakes, and siltation. 40. An asphalt road links Kabul to the Project area, and unpaved roads link the two provincial capitals with major district centers and important villages. Apart from the main highway and a few important secondary roads, most project area roads are closed for up to five months each year due to floods, snow, and inadequate maintenance. As a result, many villages are isolated for much of the year. 41. The population of the Project area is about 1.4 million. Of this, the rural population totals about 1.2 million people, in 142,000 families and some 3,000 villages. A large number of transhumants and nomads live in the area during summer. Population density averages 33/km2 - 50 percent higher than the national average of 22. Population growth is probably the same as the national average, estimated at 2.2 percent. Ghazni's average per capita income is lower than the national 1976/77 rural figure of $120. About 800,000 people (60 percent of the population) probably live in or near a state of absolute poverty with per capita incomes of $85 or less. The highest concen- tration of these poor would be in the mountain regions and areas where irriga- tion water is insufficient. At least 80 percent of households use the same, usually heavily polluted water, for drinking, stock watering and irrigation. Rural areas do not have electricity; kerosene is used for lighting. The most common cooking and heating fuels are dried animal manure and brushwood. A critical shortage of domestic fuelwood exists. 42. Wheat is the predominant crop but production in the project area does not meet the requirements. Other cereals including maize and barley  - 13 - are relatively unimportant. Fruits, including apricots, almonds, apples and grapes; and vegetables, primarily potatoes, are important. Livestock produc- tion is also widespread; most village households own animals, and wbile the potential for improvement is substantial, productivity is low. PART IV - THE PROJECT 43. The preparation of the Agricultural and Rural Development Project began in October 1976 following a request by Government for IDA assistance aimed directly at the rural poor. The preliminary findings of an FAO/IBRD Cooperative Program Mission were submitted in January 1977. Continuing proj- ect preparation was reviewed by IDA missions in October 1977 and March 1978. Project appraisal began in June 1978, and was completed in February 1979. Negotiation,s were held in Washington from April 16 to May 1, 1979. The Afghan delegation consisted of Dr. Usman, Ministry of Planning, and Dr. Hekmatullah, Rural Development Department. The project's main features are summarized in the Credit and Project Summary. A Staff Appraisal Report entitled "Appraisal of an Agricultural and Rural Development Project"( No. 2297-AF) is being circulated separately to the Executive Directors. The Project 44. The proposed project would improve the economic and sociaL well- being of the rural poor in the provinces of Ghazni, Kabul and Paktikla. It would (a) raise rural incomes by increasing production in agriculture and livestock; (b) contribute to social welfare by providing clean drinlking water supplies; and (c) improve supporting infrastructure such as rural roads. The project would enhance community participation by mobilizing villagers to participate in project planning and implementation; directly involve line ministries in the development of agricultural and veterinary services; and strengthen concerned Government institutions, to enable them to undertake subsequent development. Further the project is expected to provide a replic- able design for rural development programs in other regions of Afghanistan. It would include the following components: - agricultural investments: minor irrigation rehabilitation, agricultural extension and applied research, cooperatives, range management and survey, credit, veterinary services, and cadastral survey; - rural infrastructure: minor road improvement, and village water supplies; - project planning, coordination and evaluation, related technical assistance, and feasibility studies. Project activities in the Kabul province would commence in project year three, following the establishment of effective implementation programs in Ghazni and Paktika.  - 14 - 45. The minor irrigation rehabilitation component would finance the construction of small and medium scale diversion weirs, crossings and intakes. Four adequately equipped units, including a small concrete-making facility and a pile driving unit would be established to carry out the works (Schedule 4, Para 1(i), Development Credit Agreement). Selection of rehabilitation works would be based on criteria (including a satisfactory cost benefit analysis) agreed upon between Government and IDA. Government has agreed that the first three appraisals would be sent to IDA for comment before actual work commenced (Schedule 4, para 1(ii), Development Credit Agreement). Government agrees with the principle that farmers should bear the investment costs of minor irrigation works; however, a plan of operations for implementation does not exist yet. Government has therefore agreed to submit for IDA comments by March 31, 1981, a study on how minor irrigation rehabilitation costs could be recovered in the Project area. If cost recovery is found feasible, recommenda- tions satisfactory to both Government and IDA would be implemented starting March 31, 1982 (Section 4.10, Development Credit Agreement). Meanwhile, rehabilitation costs would be met by the Project. Operation and maintenance costs would be met by beneficiaries (Section 4.11, Development Credit Agreement). At full development, these rehabilitation works would improve the reliability of irrigation water supply, reduce water and crop yield losses resulting from flood damage, and cut canal maintenance time and costs on an estimated 17,000 hectares. 46. The agricultural extension service in the project area would be reorganized, intensified and strengthened in order to rapidly extend existing and new technology to as large a number of farmers as possible. The number of extension agents would be increased, their training upgraded, and modest housing and transport provided. Extension workers would be provided with structured work programs to be prepared with expert assistance (see para 54). These would be based on a suitably adapted "training and visit" strategy successfully proven in other developing countries. The extension effort would be complemented by an applied agricultural research station on 20 hectares of Government land in Ghazni, to develop improved technology adapted to the project area (Schedule 4, para 3, Development Credit Agreement). At least some 150 multi-purpose service cooperatives, including nomads coopera- tives, would be established. Credit for cooperatives would be provided through AgBank. Cooperative agents would be trained with expert assistance (see para 54). Supervision of cooperatives and cooperative agents would be on a training and visit system similar to that outlined for agricultural extension (Schedule 4, para 4, Development Credit Agreement). 47. An experimental range improvement center (ERIC) would be established on 20 hectares of Government land in Ghazni by March 31, 1980 as part of the Forestry and Range Management Department (Schedule 4, para 5, Development Credit Agreement). It would be designed to increase knowledge of the project area rangelands; identify productive species suitable for propagation in the area; devise appropriate management systems aimed at increasing range produc- tivity, improving the living standards of rangeland users and reducing soil erosion; train and educate staff on the role of the rangeland pastoral system; and prepare a pilot range management-rural development project. Another major objective would be the establishment of service centers for nomads on a pilot basis; an implementation program for these would be prepared by October 31, 1981 (Section 4.12, Development Credit Agreement).  - 15 - 48. Through the Agricultural Development Bank of Afghanistan (Agbank) the project would improve access to and the use of agricultural credit among farmers and cooperatives and non-farm rural enterprises, for short-term pro- ductive inputs, medium and long-term on-farm development, farm machinery, water pumps and livestock (Schedule 4, para 6(i), Development Credit Agree- ment). Agbank's existing branch in Ghazni would be upgraded, and a new branch and about five new sub-branches opened in main project area centers. Similarly, the activities of Agbank's supply department in Ghazni would be expanded to ensure satisfactory repair and spare parts services to farmers (Schedule 4, paras 6(iv) and (v), Development Credit Agreement). Innovations under this component would include: (a) the development of new procedures for Agbank to accelerate loan application and processing; (b) the provision of training courses by AgBank's Supply Department during winter months for private village repair workshop owners; (c) credit to cooperatives for offices and storage facilities; and (d) the introduction of credit for non-farm rural entrepreneurs. Government has agreed to submit for IDA comments, proposals for loans under (c) and (d) by October 31, 1979 (Schedule 4, paras 6(ii), and (vii), Development Credit Agreement). 49. Efficient veterinary services would be extended to farmers, by establishing a village veterinary service and strengthening mobile vaccination teams. About 5 sub-clinics in larger district farm service -centers would support a fully equipped government veterinary clinic being built in Ghazni town (Schedule 4, para 7(i), Development Credit Agreement). Villages would be reached through a "barefoot veterinarian" approach. Disease control would reduce animal mortality, increase annual offtake and help improve animal pro- duction. Extension workers would advise farmers on nutrition and husbandry; and Village Veterinary Workers would educate them in the advantages of pre- ventive animal health control. The full cost of drugs and veterinary medicines would be paid by livestock owners (Section 4.09(a), Development Credit Agree- ment). Govlernment agrees with the principle of cost recovery for vaccines, which are currently provided free, but to allow time to devise an appropriate system of vaccine charges, Government has agreed to complete a study of this issue by March 31, 1980 for IDA comments, and implement recommendations mutually agreeable to Government and IDA by March 31, 1981 (Section 4.09(b), Development Credit Agreement). 50. The project would finance modern equipment and materials to permit reliable cadastral survey, and registration of titles on irrigated project area land. Government has agreed that ACCSI would be required to complete the cadastral survey in the project area by June 30, 1983 (Schedule 4, para 8, Development Credit Agreement). 51. Two road construction teams would be established to upgraide about 400 kilometers of minor roads to reasonable all-weather standards. Selection of roads would be based on criteria (including a satisfactory cost benefit analysis) agreed upon between Government and IDA; and Government has agreed that the first three appraisals would be sent for IDA comment before commence- ment of the work (Schedule 4, para 9(i), Development Credit Agreement). Emphasis would be placed on the need to: (a) reinforce roads providing the shortest connections between population and administrative centers, the main  - 16 - Kabul-Kandahar road, and provincial capitals; (b) improve access to cultivated areas to ensure that agricultural services can be extended to farmers; and (c) bring villages and remote poorer areas out of isolation. 52. The village water supplies program would supplement ongoing project area programs with an adequately equipped village water supply unit to under- take the survey, design, and installation of water supply systems for about 100 villages. Community participation and education, to make people aware of the importance of clean drinking water, would be an essential feature. Insti- tutions responsible for supervision and maintenance of water supply systems would be established at the village level. Villagers would be responsible for operation and maintenance costs (Section 4.11, Development Credit Agreement). Sites and systems would be selected on the basis of criteria agreed upon between Government and IDA, and the first three appraisals including designs would be sent for IDA comment before the work started (Schedule 4, para 10, Development Credit Agreement). 53. A Rural Development Department Regional Planning and Implementation Unit (RDD-RPIU) would be established in Ghazni (Schedule 4, para 11(i), Devel- opment Credit Agreement). It would inter-alia be responsible for project planning, coordination and evaluation (see paras. 58, 61 below). An important function would be to test new design and construction techniques, particularly for housing, adapted to local conditions and suitable for use by local artisans using local materials. Special features would include the establishment of a public relations unit to stimulate public interest and participation in the development process in general and in the project in particular; and a monitor- ing and evaluation unit. 54. About 27 manyears of foreign expert services, (at an average cost of $8000 per manmonth) for technical assistance with special emphasis on train- ing, and about 17 manyears of overseas fellowships for training would be provided. The bulk of the experts would be recruited through an experienced consulting firm, and would include a training coordinator. Specializations would include: a project leader, accounting-administration, engineering, farm management-extension, range management, livestock production, cooperatives, automotive engineering, monitoring and evaluation, and training. Overseas training would focus on 3-4 month fellowships, in developing countries, where the technology and conditions would be relevant. 55. Special attention would be paid to the Bande Seraj dam, situated about 40 km upstream of Ghazni town, to improve water storage management and effectively increase the irrigated area from 2000 hectares to the dam's 3000 hectare capacity. Government has agreed to provide the policies and procedures for operation of the dam for IDA comments, by January 31, 1980 (Schedule 4, para 1(i), Development Credit Agreement). Feasibility studies for expanding the storage capacity of the Bande Seraj dam, for a new moderate sized irrigation storage dam near it, and for a second rural development project in the country would be prepared with expert assistance. Experts for the first two studies would be hired by June 30, 1980, and for the third, by November 30, 1980 (Sections 4.02 (b) and (c), Development Credit Agreement).  - 17 - Project Implementation 56. The Ministry of Agriculture would be responsible for the implementa- tion, through its relevant provincial departments, of agricultural extension, research, veterinary, range management and survey, and cooperatives components. The Rural Development Department (RDD) would execute the minor irrigation works, the minor road improvement program and the village water supplies com- ponent. Agbank would handle all credit activities, and the Ministry of Water and Power, iin consultation with RDD-RPIU, would be responsible for tlhe dam feasibility studies. The ACCSI would implement the cadastral survey. 57. The project would follow the existing staff and organizational structure to the fullest extent possible. In addition, modifications would be introduced as necessary to strengthen administrative capabilities, partic- ularly at the provincial level, and to provide the mechanisms required for coordination. One such would be the establishment in Kabul of the Presidents' Council for Coordination of Rural Development (PCCRD), consisting of respec- tive Governors, representatives of Government departments and agencies, of the Ministry of Planning, under the chairmanship of the President of RDD. The PCCRD would oversee and coordinate regional agricultural and rural devel- opment activities, provide guidance to the relevant provincial organizations, and approve annual work programs and budgets before submission to Cabinet. Another innovation would be the upgrading of provincial administrations - Provincial Rural Development Committees - into formally constituted Provin- cial Rural Development Councils (PRDCs) with executive authority under the chairmanship of the President of RDD-RPIU, and responsible to the PCCRD. The establishment of the PCCRD, and the PRDC at Ghazni are conditions of credit effectiveness (Sections 7.01(e) and (g), Development Credit Agreement). PRDCs would be linked to districts through District Development Comrmittees, which in turn would be directly linked to villages through Village Develop- ment Councils. Provincial staff of central ministries would be technically responsible to their Ministries in Kabul, and administratively responsible to the PRDCs, thus the line functions of the central ministries would remain unchanged. 58. A third innovation would be the establishment within RDD of a Regional PLanning and Implementation Unit (RDD-RPIU) consisting of a President, two Vice-Presidents, three General Directors, and relevant technical staff, with both staff and line functions. RDD-RPIU's establishment (with adequate land for its offices and depot), and the appointment of its key staff, are conditions of credit effectiveness (Section 7.01(c) and (d), Development Credit Agreement) . The RDD-RPIU would provide the crucial liaison and coor- dination between the provincial departments of central ministries and between the PRDCs. Its staff functions would include planning, administrative and management support to the PRDCs. Its line functions would inter alia, include responsibility for the timely completion of project civil works; all procure- ment; maintenance of all project buildings, vehicles and equipment; maintenance of adequate stores, and establishment of satisfactory accounting procedures. The RDD-RPIU would be authorized to enter into civil works contracts with private contractors and to introduce necessary innovations in administrative and procurement procedures. The related technical assistance to be provided is detailed in para 54 above.  - 18 - 59. In order to expedite project preparation, an advance of $150,000 was made in June 1978 from the Project Preparation Facility, for the recruitment of key experts to coordinate the preparatory work and assist in organizing the administrative framework, and for initial offices, housing, vehicles and equipment. Key local staff have already been appointed, and an expatriate project leader is expected to be deployed shortly. Project Accounts, Monitoring and Evaluation 60. For administrative ease, funds to cover all investment costs, vehicle operating costs, and the portion of staff salaries being financed externally, would be administered by the President of RDD-RPIU through a Project Account that has been established, with provisions for quarterly replenishments (Section 5.01(a), Development Credit Agreement). RDD-RPIU would maintain accounts for project funds in accordance with appropriate accounting practices (Section 5.01(b), Development Credit Agreement). These would be audited annually by independent auditors and submitted for IDA comment within five months of the close of each financial year (Section 5.02, Development Credit Agreement). 61. A monitoring and evaluation unit (MEU) to be set up within the RDD- RPIU (Schedule 4, para ll(ii)(a), Development Credit Agreement), would, with expert assistance, monitor progress in implementing project components, assist in the solution of implementation problems, and evaluate project impact on agricultural productivity, and on the standard of living and well-being of the rural population. The MEU, estimated to cost about $150,000, would report quarterly to the Government and IDA (Section 4.06, Development Credit Agree- ment). As the project has important implications for future rural develop- ment programs in Afghanistan, and includes several innovative organization and management features, the Government and IDA would jointly review progress made and lessons learned, by not later than three years from credit signature and make any modifications necessary in the project design and composition (Section 4.07, Development Credit Agreement). A project completion report, analyzing project achievements in relation to targets and objectives, would be submitted to IDA within six months of project completion (Section 4.04(c), Development Credit Agreement). Project Costs and Financing 62. The total project cost, net of import duties and taxes (which are not levied on IDA-financed projects in Afghanistan), is estimated at $39.0 million, with a foreign exchange component of $17.5 million (45 percent). Details are provided in the Credit and Project Summary. The proposed IDA credit, which would finance 42 percent of total costs, would be supplemented with $1.0 million from UNDP for technical assistance (with IBRD as the Execut- ing Agency), and $13.0 million from IFAD. Foreign exchange costs would be met by IDA ($9.3 million), IFAD ($7.4 million), and UNDP ($0.8 million). IDA, IFAD and UNDP would also finance $7.2 million, $5.6 million, and $0.2 million respectively, of local costs. IDA financing for a portion of the local costs is justified for the reasons given in para 13. The appointment of IDA as Cooperating Institution to administer the IFAD loan and grant, the effective- ness of the IFAD Loan Agreement, and the execution of a UNDP Project Document  - 19 - are conditions of credit effectiveness (Sections 7.01(a) and (f), Develop- ment Credit Agreement). The Government is the borrower and bear the foreign exchange risk. The remaining local costs would be financed as follows: Gov- ernment, $5.8 million; AgBank, $1.1 million, and beneficiaries, $1.6 million. 63. Government would onlend $4.5 million to AgBank for 15 years includ- ing 5 years of grace at 4.5 percent interest per annum, representing about 66 percent of the cost of the credit component ($6.7 million). The terms of the Government's loan to AgBank, which are the same as for the Third Agricultural Credit Project, (Cr 721-AF) would be incorporated in a subsidiary loan agree- ment acceptable to IDA, signature of which would be a condition of credit effectiveness (Section 7.01(b), Development Credit Agreement). Interest rates for sub-borrowers would not be less than 8 percent per annum on medium and long-term loans, and 10 percent on short-term loans, with a 1 percent per annum rebate for borrowing cooperatives; the same as for the ongoing Agricul- tural Credit Project (721-AF). Inflation in 1976-78 averaged about 6-8 percent, and is unlikely to average more than 8 percent per annum from 1979 through 1981. Procurement and Disbursements 64. Contracts of $100,000 or more for equipment, vehicles and materials financed through the credit, would be awarded on the basis of International Competitive Bidding (ICB), in accordance with the Bank Group Guidelines. Domestic preferences of 15 percent or the applicable customs duty (whichever is lower) would be granted. Contracts of less than $100,000 for equipment, vehicles and materials purchased would be awarded after inviting quotations from at least three suppliers. The aggregate of these would not exceed $2.0 million. Local procurement procedures would be amended as follows: the President of. RDD-RPIU would be authorized to approve contracts of up to Afs 500,000 ($12,500) without any further approval, and to make purchases of up to Afs 20,000 ($500) without the use of a purchasing committee (Schedule 4, para ll(iii), Development Credit Agreement); local bids would be sealed and in writing; and contracts could not be readvertised after the completion of satisfactory bid evaluations. Most of the civil works would involve small, geographically scattered structures of varied design; not suitable for pro- curement under ICB. Therefore, as appropriate, these civil works would be completed by a combination of local competitive bidding, construction units of RDD-RPIU through force account, and village self-help. 65. Disbursements against the IDA credit and the IFAD loan, would be made pro-rata (with minor exceptions) as follows: (a) equipment, vehicles and materials: 100 percent of foreign expenditures on direct imports, 100 percent of ex-factory local costs, and 85 percent of locally purchased imports; (b) civil works, 100 percent; (c) AgBank subloans for wells, pumps, cooperative storage, village workshops, and on-farm development, 80 percent of disburse- ments; (d) AgBank subloans for fertilizer and seeds, 70 percent of disburse- ments in year one, and of annual incremental disbursements thereafter; (e) feasibility studies, 100 percent (IDA only); (f) technical assistance, 58 percent; (g) salaries of incremental local staff hired after March 21, 1979, vehicle ope!ration and maintenance costs, and RDD-RPIU operation and main- tenance costs (excluding vehicles), 60 percent. UNDP funds and the IFAD grant  - 20 - would be disbursed against 28 percent and 14 percent of the technical assis- tance respectively. Disbursements are expected to be completed by June 30, 1984; the closing date would be December 31, 1984. The Credit and Project Summary contains the estimated annual disbursement schedule. Benefits and Risks 66. The central aim of the project is to raise farm incomes and living standards. At full development, per capita incomes on farms are expected to increase by about 70 percent. The project would benefit some 62,000 poor farm families, including about 3,000-4,000 nomad and transhumant families. At least a further 100,000 people would benefit indirectly from the infrastruc- ture improvements. About 54 percent of quantifiable benefits would accrue to the target group. During its investment period, the project would generate a total of nearly 700 permanent jobs, and 200 manyears of temporary part-time employment. Moreover, over its life, the project would increase the demand for on-farm labor, thereby providing some 500,000 mandays of employment oppor- tunities annually for unskilled lower income families. Increased farmer incomes, together with the introduction of credit and training for some non-farm rural activities, would encourage further investment by small entre- preneurs in activities such as the supply of inputs and services to farmers, and goods and services to the local population. Thus, unskilled semi-urban and rural landless persons would benefit from opportunities to acquire skills and find employment in a variety of marketing, commercial and transport services. Clean drinking water supplies would improve the health of farm families, and efficient veterinary services would improve the health of their livestock. In addition, the project would contribute to general ecological stability in the area, protect water sheds, check soil erosion, and thus have a beneficial environmental impact. The project would make an important con- tribution by providing a replicable framework for future rural development programs in Afghanistan. 67. Through an integrated technological package, the project would increase the productivity and production of crops and livestock. At full development, annual incremental wheat production would be 17,400 tons, potato production 41,200 tons, rice 1,400 tons, apples, 3,200 tons, meat 770 tons, milk 6,220 tons, fodder crops 5,000 tons, straw 25,700 tons, fuelwood 8,100 tons. Agricultural, physical infrastructure, and other investments pertaining to crop production have been grouped together for purposes of computing the economic rate of return (ERR). The ERR of these investments, which account for 85 percent of total costs, is estimated at 17 percent. The ERR of vete- rinary and range management components, accounting for an additional 8 percent of total costs, is estimated at 24 percent. Investments in village water supplies are qualitatively significant, but the benefits unquantifiable. The costs of the feasibility studies have been excluded. The average ERR of investments accounting for 93 percent of costs is estimated at 18 percent. 68. The main project risk lies in the limited experience and capability of the Government's administrative machinery. The project would require close cooperation between participating Government ministries, departments, and agencies; where in the past cooperation has been limited. Substantial risks are associated with the implementation of Government's land reform and coop- erative programs. However, the implementation of the Project, with its integrated package of critical support services would effectively limit these  - 21 - risks in the Project area. Unless effective supporting services are provided promptly, agricultural production and rural incomes may suffer a set'back. Community participation is an integral part of the project; this might prove difficult, particularly initially. The proposed organizational and management structure, aimed at strengthening institutional capability to help ensure efficient implementation, and the expert assistance and training to be pro- vided should alleviate these risks. The key to alleviating poverty in rural Afghanistan lies in devising and successfully implementing integrated rural development programs; therefore, the risks being taken under the proposed project are justified. PART V - LEGAL INSTRUMENTS AND AUTHORITY 69. The draft Development Credit Agreement between the Democratic Republic of Afghanistan and the Association, the draft Project Agreement between the Association and AgBank, and the Recommendation of the Committee provided for in Article V, Section 1(d) of the Articles of Agreement of the Association are being distributed to the Executive Directors separately. 70. Special features of the project are listed in Section III of Annex III. 71. Special conditions of effectiveness of the IDA credit are as follows (Section 7.01, Development Credit Agreement): (a) the Subsidiary Loan Agreement between the Government and AgBank, and the UNDP Project Document have been executed; (b) the Loan Agreement between IFAD and the Government has become effective, and IFAD has appointed the Association as Cooperating Institution to administer the Fund Loan and the Fund Grant; and (c) the PCCRD, the PRDC at Ghazni, and RDD-RPIU have been established, and the President, two Vice-Presidents, and three Director Generals of RDD-RPIU have been appointed. 72. I am satisfied that the proposed IDA credit would comply with the Articles oiE Agreement of the Association. PART VI - RECOMMENDATION 73. I recommend that the Executive Directors approve the proposed devel- opment credit. Robert S. McNamara President Attachments May 22, 1979 Washington, D.C.  Annex 1 - 22- Paoe 1 of 5 Paqes TABLE 3A AFGHAGISTAN - SOCIAL INDICATORS DATA SHEET UREBENCE GROUPS (ADJUSTED AVERAGES LAND ARIA (TBHUSAMD SQ. Of.) APOAISTAN - MOST RECENT ESTIMATE) TOTAL 635.0 SAMt SAME NEXT HIGHER AGRICULTURAL 144.5 HMST RECENIT GEOGRAPIC INCOKE INCOME 1960 Lk 1970 /b ESTTS tb REGIONI c GROUP /d GROUP /e GNP PER CAPITA (US$) 90.0 110.0 190.0 167.4 182.9 432.3 ENERGY CONSUAPTION PER CAPITA (XILORAS OI COAL IEQUIVALENT) 15.0 33.0 43.0 65.7 88.9 251.7 POPUIATION AND VITAL STATISTICS TOTAL POPULATION, MED-TEAR (HILLIONS) 9.9 IL 12.3 /t 14-15 /f URBAN POPULATION (PERCEINT OF TOTAL) 8.0 10.7 14.3 12.8 15.0 24.2 POPULATION DENSITY PER SQ. EM. 16.0 19.0 23.0 85.2 46.8 42.7 PER SQ. KM. AGRICULTURAL LAND 71.0 87.0 99.0 322.6 254.1 95.0 POPUIATION AGE STRUCTURE (PERCENT) 0-14 YRS. 41.9 43.2 45.5 44.0 43.6 44.9 15-64 TRS. 54.8 54.2 51.3 52.9 53.3 52.8 65 YRS. AND ABOVE 3.3 2.6 3.2 2.9 2.9 3.0 POPULATION GROWTH RATE (PERCENT) TOTAL 2.2 / 2.2 ]A 2.2 2.2 2.4 2.7 URBAN 5.2 5.2 7.2 4b 4.2 4.0 8.8 CRtUDE BIRTH RATE (PER THOUSAND) 49.0 48.7 51.4 45.1 44.3 42.2 CRUDE DEATH RATE (PER THOUSAND) 34.1 27.6 30.7 17.3 19.7 12.4 GROSS REPRODUCTION RATE .. 3.4 3.4 3.2 2.9 3.2 FAMILY PLAJINIIG ACCEPTORS, ANNUAL (THOUSANDS) .. .. 15.3 USERS (PERCEIT OF MARRIED MEN) .. .. 1.0 13.7 14.6 14.2 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1970-100) 113.5 100.0 106.7 95.6 96.4 104.3 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUI2B NTS) 86.0 78.0 83.0 91.1 92.3 99.5 PROTEINS (GRJMS PER DAT) 65.2 58.0 61.5 49.6 50.0 56.8 OF WHICH ANIMAL AND PULSE .. 11.0 8.5 12.6 13.9 17.5 CHILD (AGES 1-4) MORTALITY RATE .. .. 24.1/n .. .. 7.5 HEALTH LiFE EXPECTANCY AT BIRTH (YEARS) 32.8 37.8 35.0 43.1 45.8 53.3 INFANT MORTALITY RATE (PER THOUSAD) .. .. 269.4 99.5 102.7 82.5 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TMTAL .. 3.0 9.0 30.0 26.4 31.1 URBAN .. 18.0 40.0 66.1 63.5 68.5 RURAL .. 1.0 5.0 17.2 14.1 18.2 ACCESS TO EXCRETA SISPOSAL (PERCENT OP POPULATION) TOTAL .. 21.0 21.0 15.7 16.1 37.5 URBAN *- 69.0 63.0 66.9 65.9 69.5 RURAL *- 16.0 15.0 2.5 3.4 25.4 POPULATION PER PHYSICIAN 22450.0 [1 14680.0 12930.0 8830.8 13432.7 9359.2 POPULATION PER NURSING PERSON 23210.0 ft 21080.0 11660.0 8479.3 6983.3 2762.5 POPULATION PER HOSPITAL BED TOTAL 5950.0 LI 5240.0 5210.0 1624.5 1157.6 786.5 URBN .. 1090.0 .. .. 183.3 278.4 RURAL *- 96 50.0 *- *- 1348.8 1358.4 ADMISSIONS PER HOSPITAL BED .. 9.6 .. .. 19.5 19.2 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAI .. .. .. .. 5.2 URBAN .. .. .. .. 4.8 RURAL .. .. .. .. 5.3 AVERAGE NUMBER OF PERSONS PER BOOM TOTAL .. .. .. URBAN .. .. .. .. 1.8 2.3 RURAL .. .. .. ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. .. .. ., 25.9 28.3 URBAN .. .. .. RURAL .. .. .. .. 8.7 10.3  - 23 - Annex 1 Paoe 2 of 5 oages TAELa 3A APGHIANISTAN - SOCIAL INDICATORS DATA SHEET REZERtNCE GROUPS (ADJUSTED AVERAGES AJGHAJllSTAN - MOST RECZNT ESTIMATE) SA5l SAIIZ NEXT HIGHER M1ST StCEIT GROGRAPRIC INCOME INCOME 1960 lb 1970 /b RTIATE Lk REGION Lc GROUP /d GMCP /e EDUCATION ADJUSTD E 0LUXENT RATIOS PRIMl;AR TOTAL 9.0/I 21.01k 29.0 k/ 59.1 62.9 75.8 PAULE 2.0 n 6.0n 5.0 kl 38.4 45.9 67.9 SECONUART: TOTAL 1.011k 6.0 Ik 8 aC ki 19.9 14.4 17.7 EALE 0. 3 k 1.0Ik 1.0 kk 9.9 8.8 12.4 VOCATIONAL (PERCUIT O SICOIDA1Y) 11.0 h 4.2 / q9 t ki 1.5 6.6 7.4 PUPIL-TEACHER RATIO PRIMARY 41.0 |k 37.0 k/ 38.2 38.5 34.3 SECONRY . 24.0 18.o tk/ 23.5 19.8 23.5 ADULT LITERACY RATE (PERCEIT) 8.0 10.0 11.0 i/ 35.6 36.7 63.7 CONSUMPTION PASSSEER CAIS PER THOUSAND POPULATION 0.5 3.0 3.0 /i 2.2 3.1 7.2 RDIO RECEIVIIRS PER TWOUSAND POPULATION 2.0 6.0 6.0 14.9 31.1 71.1 TV ECEIVERS PEI THOUSANID P0PULATION 2.8 14.1 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAnD POPULATXIO 5.0 6.0 27.0 6.4 6.0 16.3 CtINIA ANIUAL ATTUNDANCE PZR CAPITA 1.1 1.4 1.6 iDlPLOTI4ERT TOTAL LAUOR lORtCl (TWUSAIDS) 4700.0 L. PEKALE (PERfl:T) 16.9 17.9 18.3 21.3 24.2 2a.0 AGRICULTURE (PERCIMT. 52.9 62.8 60.7 54.1 IRNDSTRY (PCm) tt/ 19.7 PAItTICIPATION RATE (PENCRT) TOTAL* 36.0 35.1 34.2 35.8 39.8 37.8 MALE 59.1 56.4 54.7 52.4 53.3 50.3 FEIALE 12.4 12.8 12.8 15.6 19.6 20.9 ECONMIC DEPEIIDENCY RATIO 1.5 1.3 1.3 1.3 INCOME DISTRIBUTION PEiCINT O PRIVATE INCOME RECEtVED RY HIGHEST 5 PERCENT OF HOUSEHOLDS 18.6 20.3 19.5 -IGHEST 20 PERCENT OF HOUSEHOLDS 42.8 45.1 48.9 LOWST 20 PERCEKT OP HOUSPROLDS 7.3 5.7 5.9 LOWEST 40 PERCENT OF HOUSEHOLDS 19.3 16.8 15.7 POVERTY TARGET (.ltOUPS ESTDMATED ABSOLUTE POVERtTY INCOME LEVeL (US$ PER CAPITA) URBANI 86.0 80.2 88.5 155.9 RURAL 84.0 67.2 71.9 97.9 ESTDItATEDL RELATIVE POVERTY INCOME LEVEL (USS PE11 CAPITA) Wj.. 53.0 100.8 143.7 RURAL 53.0 39.8 42.0 87.3 STBDIATED POP1JLATION BELOW POVERTY ItCOYE LEVEL (PERCENT) UBAN 18.0 50.3 46.0 22.9 RURAL 36.0 44.6 48.0 36.7 Not available Not applicable. NOTES /a Th- adjusted group averages for each indicator are pop.lation-weight.d geometric _ans, excluding the extrame values of the indicator and the vmot populated country in each group. Coverage of countries smong the indicators depends on availabtlity of data and is not unifors. lb Unless otherwise noted, data for 1960 refer to any year betwven 1959 and 1961; for 1970, between 1969 and 1971; and for Most Rcent ttt b.tween 1973 and 1978. c South Asia; /d Low Income ($280 or lee per capita 1976); /e Lower Middle Income (281-550 per Capita, 1976); If Population (and also GNP per capita) date relate to fiscal year beginning March 21; L Dif- forence between UN rate of natural increase and World Ba ooulAtim growth rate due to different epou- lation estimate; Ih 1970-76; /i Rased on the latest appraisal eission estinate. /1 1962; It Public education only; /1 aged 8 years and over. /v. Industry including Handicrafts. !./1972 September, 1978  - 24 - Annex I DEFTNI_TIONS OF POCIAI. 5iCjATI)O P'ao I off 5 pages hiss: Tb. djused goup veraes fr eah In,1ir-0', a.r, p.pu1.tiuin-weegit,d peri ruc -:uding the extrem -a1ues of the indicator and the moat po pulatd ontry I -ah -r'p. C,i-,vea of -ontir an the -nIst.aoc.s:i.oaolability of data snd Is not unfos. Du to lack of data. ,roup asae for Capita. Surplus Uil Epr'cand lsd1,0tors otaces to wat.r and --aets disposal, housing. Income distribution and poverty ace simple popul4tion-waighL.d geometrJc means without the exclusion of extreme values. L.AND AREA (thousand sq. k.) Popul ti,, Ear ho.pital bad - total. urban. and rural - Population (totl.1 TYotal - Total surface area comprising land aea and inland .ater.. urban. and rural) divided by their respective number of hospital beds Agricultural - Most recent estimate of agricultara1 area used temporarily available In public and privete general and specialized hospital and re- or permanently for crops, pastures, market and kitchen gardens or to habilitation centers. Hospitals are establishments permanently staffed by lie fallow, at least one physician. Establishments providing principally custodial care are not included. Rural hospitals. however, include health and medi- GNP PER CAPITA (US) - GNP par capita estimates at current market price., ca1 centers not permanently staffed by a physician (but by a medical as- calculated by saine conversion method as World Bank Atls. (1975-77 basis); sistant, novae. sidwifa. etc.) which offer int-patient accoodation end 1960. 1970, and 1977 data, provide a limited range of medical facilities, Admlssions per hospital bed - Total number of admissions to or discharges ENERGY CON4SUMPTIONI PER CAPITA - Annual consumption of comercia1 energy from h.apitois divided by the somber of beds. (coal aed lignite, petroleum. natrals gas and hydro- ..nclear and geo- thermal electricity) in kilogrsme of coal equivalent per capita. HOUSiNG Average size of household (nersone per household) - total, urban, and rural1- POPUiLATION ANDl VITAL STATISTICS A house.hold consists of a group of individuals who share living quarters Total pgpulation. mid-year (millions)_ - As of July 1; if not -viliable. and their main meals. A boarder or lodger may or may nor be included in averag of . two end-year estimat.a; 1960, 1975,. ad 1977 data, the hbo...hold for stati.ticsl purposes. Statistical definitions of hue Urban population (percent of total) - Ratio of urban to total popuiu- hold vary. tion; different definitions of urban ereas may effect comparability Average number of persona per room - tot.l. urban. and rural - Average n. of data among countriea. her of persons per room in all, urban, end rural occupied con ventional Population density dwellings, respectively. Dwellings exclude mon-permanent structures and Per sq. ka. - Mid-year population per square kilom.. er (100 hectare sI un-co-pied Parts. of total area. Access to_electricity (nercent of dwellings) - total, urban. and coral - Per sq. km. agriculture land - Computed as above for agricultural land Conventional dwellings with electricity in living quartera as Percentage only. of total, urban, and rural dwellings re-pectivelp. Popul&tion agea sructure (perccnt) - Children (i-li yeare), working-age (15-64 years), and retired (65 years and over) as percentages of mid- EDUCATION year Population. Adjusted enrollment ratios Population arow h rate (percent) -_total, and urban - Compound annual Primary school - total, and female - Total and famale enrollment of all1 age, gro.th rates of total and urban mid-year populstions for 1950-hi, at the primary level as percentages of respective1ir primary school-age 1960-70, and 1970-75. populations; normally includes children aged 6-11 years but udjueted for Crude birth rats (per thousand) - Annual live births per thousand of different lengths of primary education; for countries with universal edo- mid-year populationi ten-yea arithmetic snrsseding in 1960 and cation enrolleent may exceed 100 percet since some pupils are below or 1970 and five-year average ending in 1975 far moast recent estimate, above the offi,iel school age. Crude death rate (pec thousand) - Annual deaths per thousand of mid- Secondary achcoi_ -_total, and female - Computed as above; necood.ry educa- year population; tan-year arithmnetic averages ending in 1960 and 1970 Eon requires at leaat four yearn of approved primary instruction; pro- and five-year average ending in 197) for most recent estimate. vides general voctional, or teacher training instructions for pupilsI Gross reproduction rate - Average number of daughters a woman will hear usually of 12 to 17 years of age; correspondence courses are generally in her normal reproductive period if she experiences pr.oent age- ..cludod. specific fertility rates; ausully five-year averages ending in 1960, Vocational enrollment (percent of secondary) - Vocational inatitutiona in- 1970, and 1975. clode technical, industrial, or other progras which operate independently Family planning - acceptors, annual (thousands) - Annual number of or So departments of secondary ins,titutions. acceptors of birth-control devicea under us-pices of national family Pupil-teacher_ratio - nrivarv. and secondary - Total students enrolled in planning program. primary end se ondary levele divided by numbers of teachers in the corr.- Family planning - users (percent of married women) - Percentage of sponding levels. married woman of child-bearing age (15-44 years) who use birth-control Adult literacy rats (percent) - Literate adults (able to read and write) as devices to all married women in same age group. a percenta.ge of total adult population aged 15 years and over. r0011 AND NUTRITION CONSUMP0TION Index of food pr'oduction per capita (1970-100)~ - Index number of per Pas ... er cars (per thousand population) - Passenger cars comprise motor cars capita annual production of all food comm,odities. seating less than eight persons; excludes ambulance., hearses and military Per capita supply of calories (percent of requirsments) - Computed from vehicles. nenrSy equivalent of net food supplies available in country per capita Rsdio receivers (per thoueand population) - All types of receivers for radio per day. Available supplies comprise domestic production, imports less broadcasts to general public per thousand of population; sxcludes unlicensed exports, and changes in stock. NtIe supplies exclude animal feed, seede, receivers in countries and in years when registrration of radio sets wee in quantities used in food processing , and losses In distribution. Re- effect; data for recent years may not be comparable since most countries quirements were estimated by FAO based on physiological needs for nor- abolished licenaing. mel activity and health considering enviroomental temperature, body TV roeIvers (per thousand population) - TV receive.. for broadcast to general weights, age end sex distributions of population. and allowing III per- public per thousand population; excludes unlicensed TV receivers In coun- cent for waste at household level. tries and In years whon registration of TV sets ues in effect. Per capit. supply of proteinp gram pr ay Protein content of per esapr_ir Laton_(per h~ou-und_populat_ion) - ihowa the average circula- capits net supply of fodpr dY, Ntie supply of food is defined asLion of "doily general Intercst newspaper", defined s periodical p.bli- above. Requirements for all countries established by USDA provide focar -ton devoted primarily to recording general news, It is considered to a minimum allowance of 6i grams of .toti proroin per day and 20 grams ho "daiiy" If it uyyoarc at leas.t four times a week. of animal and pulse prote.in, of which 10 Ur... should he animol protnir- Ciea oua ttednc cyt per year - Based on the number of ticknts These standard,, are lowe, than those of 75 irons of total protein and sold during the year. inclo.ding adwiosione to drive-in cinesa. and mobile 23 gtrass of animal proteir as ana-rago for tire ..eld, propose.d by uis PAO in the Third World P.,,,d Survey. Percapta rotin so lyroni snimol and pulac - i'rotrin supply oi food EMfiOXminT derived crm animals and yulaea In grams p-r day. Total labor forc- AkhLo_uuands - E-on-slcly active persons, including aroed Child (ages 1-4) mortality rete pethousa~nd) - Annu.i deoLhs per thous- force sod unem.ployed hut .xcluding houseives, students, etc. Defini- and in age group 1-i yearn. to childr- in this age group. tiono in -arioue countries ore nout comporable. eml(eret) - Female lebor force as percentage of total labor force. HEALTH Agriculture (percent) - iab.r force In f.aring, forestry, hunting and fishing Life -eupCLocY at birth_(era Average number of yearu of life an percentage of total labor force. remaining at birth; usually five-year averges ending in i960. 1970, Industr (pret - Lahor force in mining, construction, xanufactrurlg and and 1975. eloctricity,..wter snd gas as percentage of tot.l labor force. Infant -ot.lity rats (par thousan.d) - Annual deathu of irfontu under ircnsonae(pcn) ttl,mle, and female - Tota.1 nale, and one year of age Per thousand live birhts. Female lubor force on percentages of their respective populutions. A.cc.ss to eafe water (percent of population) -_to.tal,rb,ac__and rural I hea- .r. TL.11' adjusted particip.tise rstes reflecting ge-sec Number of people (total. urbsn. and rural) with reasonable access to trr-r,r,- Cr IIo. -oiirir. d ionc tine trend. safe water supply (includes trested surface waters or untrcated but Fcon...ic_deyend.nn_stloJ - Rutio of population .mder 15 end 65 and over to uncontaminated water auch a. thet from protected boreholes, springs, the labot force in age group of 15-hi years. and sanitary -ella) ao percentages of their resPective populations. In an urban area a public fountain or standpost iocsted not more INCOMI) DISTRIBUOTION than 200 aeters from a house may he considered as betng within rma- Perce- g fpiseicm (both in cash and kind) received by richest 5 sonable accees of that house. In rural areas reasonable access would percent, richest 20 percent. poorest 20 percent. and poorest 40 percent imply that the housewife or members of the house.hold do nor have to of households. apend a dip-op-rtionata part of the day In fetching the family's water needs. POVFRTY TARGET GROUPS Access to excreta disposal (Percent of population) - total, urban. and fstimated absolute poverty income level (US$ par -apita) - uchan and rural - rural - Number of people (total, urban. end rural) served hy exoreta Absolute poverty income level is that income, level below which a minimal disposal as percentages of their respective populations. Encreta nutritionally adequate dIet plus essential non-food requireaments is not disposal may Include the collection and disposal, with or without affordable. treatment, of humn secreta and waste-wter by water-borne systems Estimated relative poverty income level (U1S$ per, capita) - urban and rural - or the use of pit privies and similar installations. Relative poverty income level is that income level less than one-third P.pul.tion par physician - Population divided by numbec of practicing pec capita personal income of the country. physicians qualified from a medical school at university level. Estimated population below poverty income level (percent) - urban sod rural- Population per nrig<ro - Population dIvided by number of Percent of population (urban and rural) who are either "absolute Poor" or pr-trictng maleand female grodusts nurses. prectica1 nurses, and "relative poor" whichever is greater. ass istant nuraoa. Economicyand iScial Data Division Economi Inalysis and Projections Departsent  - 25 - Annex 1 Page 4 of 5 pages ECONOMIC INDICATORS ANNUAL RATE OF GROWlH-' (. constant Prices) GROSS NATIONAL PRODUCT IN 1975/76 (At 1975/76 constant prices) 1965/66- 1968/69 1976/ 1977/ US$ Mn. % 1968/69 1975/76 1977 1978 GNP at Market Prices I/ 1976 100.0 .. 3 Gross Domestic Investw nt - . - Gross National Saving- Current Account -alance 54 3 . 1 -70.0 +126.0 Export of Goods2/ 236 12 .. 19 24.8 6.1 Imports of Goods 278 14 .. 14 -1 21.1 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 197517w2 Value Added Labor Force V.A. per Worker US$ Mln. % Thousands % of total EL z Agriculture 977.65 55.4 2492.8 52.9 392.2 104.7 Handicrafts and Industry 241.10 13.7 929.0 19.7 259.5 69.3 Services 545.24 30.9 1073.5 22.8 507.9 135.6 Unallocated - - 87.2 1.9 Unemployed - - 127.5 2.7 Total/Average 1763.99 100.0 4710.0 100.0 374.5 100.0 GOVERNMENT FINANCE~' (General Government) (Afs. million) 1974/75 1975/76 1976177 1977(78 Current Receipts 10,250 12,025 14,011 14,849 Current Expenditures 6,300 9.020 11,067 10,432 Current Surplus (Deficit) 3,950 3,005 2,944 4,417 Capital Expenditures 5/ 4,648 6,065 10,550 11,215 External Assistance (gross) 2,958 4,644 4,453 7,251 MONEY. CREDIT AND PRICE6- 1971172 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 (Million Afs. outstanding end period) Money and Quasi Money 10262 12309 13901 15195 17822 23784 26500 Bank credit to Public Sector (net ) 7490 8940 10269 11118 11188 13680 12395 Bank credit to Private Sector 3485 4253 4259 5253 5585 6802 5730 Money and Quasi Money as : of GDP-/ 14 16.4 General Price Index(1968/69 - 100) 135 120 115.3 131.4 139.8 142 158.5 Annual percentage changes in: General Price Index 10.5 -11.1 -3.9 13.9 6.5 1.6 11.6 Bank credit to Public Sector (net) 19.4 14.9 8.3 .6 8.4 22.3 Bank credit to Private Sector 22.0 .1 23.3 6.3 21.3 -9.0 NOTES: 1/ IBRD estimates. The historical figures are based on crude approximations and assuch the growth rates reported are mere orders of magnitude. On the GNP breakdown, the available figures are very crude and therefore, the Gross Domestic Investment and Gross National Savings figures have not been reported. 2/ No figures are available for NFS separated into Exports and Imports; instead, net figures for "Other current account" are supplied under Balaffce of Payments. 3/ Settled population and nomads. 4/ Since figures on GDP at current prices are not available, it is not possible to provide estimates of Govermment Finance as a % of GDP. Moreover, no separate figures on Central Government finances are available. 5/ Portion of development expenditure financed by foreign aid. To find its US Dollar equivalent, an official exchange rate 45 Afghanis to 1 SDR and the respective annual average SDR, US$ ratio should be used on a number of Government transactions. 6/ Year ending Marclh 20. 7/ Estimates on GDP at current prices'are only available for 1972/73 and 1975/76.  - 26 - Annex i TRADE PAYMENTS AND CAPITAI. FL.Ol.S Page 5 of 5 pages BALANCE OF IAr.1ENTS (US$ Million) MlNKCIiANDIS F.XIORTS Pre I im . Per- Prelim. Per- 1976/77 1?77/78 1976/77 cenit 1977/78 cent Exports of Coods 282.5 322.0 flry Fruits and Nuts 68.2 23.0 82.9 26.5 Imports ui Goods 327.6 419.5 Fresb Fruits 23.0 7.7 22.9 7.3 Resource Gap (deficit - - ) -45.1 -97.K Sarakul 19.3 6.5 18.5 5.9 8/ Cotton 60.7 20.4 55.0 17.5 Interest Paym.nts -8.4 -12.9 Carpets and Rugs 23.4 7.9 38.5 12.3 Other Factor Vuymlenta (Net): Natural Gas 39.6 13.3 39.3 12.5 Travel (net) 29.4 37.1 All Other Commodities 62.9 21.2 56.4 18.0 Investment IicLsse frum Total 297.1 100.0 313.5 100.0 foreigni assets 2.7 7.2 Embassies cxpanditures (net) 3.0 2.8 Service Cotipoiient of1 Project Aid (net) -10.7 -22.1 EXTERNAL PUBLIC DEBT. March 20, 1978- Other current Ac