Report on Progress Toward Security and Stability in - United States ...

sustainability for power includes capacity building and commercialization efforts to increase
DABS (Da Afghanistan Breshna Sherkat) revenue through increased sales, enabling DABS to
fully fund sustainment and capital improvements.
Currently, the ministries’ mechanisms and institutional capacity to appropriately budget for
O&M costs on a unit cost basis are limited and the approval and management of the budget at the
major heads of expenditure level is the domain of the MoF, with provincial level requirements
still often struggling to be recognized. The rigidity of this system, while necessary due to the
institutional environment, results in significant inefficiencies.
The ministries responsible for critical assets possess limited ability to adequately execute an
O&M plan on the scale required in Afghanistan, with the power and water sectors having the
most capability. The limitations in internal technical capacity, as well as contracting and
procurement to seek outside assistance exhibited by the ministries, would inhibit the
effectiveness of any increase in O&M budget disbursed through the Afghan Government.
Currently, the systems and internal controls needed to both determine appropriate O&M
spending levels and ensure that the amounts budgeted for O&M are deployed and disbursed for
the appropriate activities, are uniformly deficient throughout the ministries.
The Afghan Government must continue to develop internal capacity in order to sustain existing
infrastructure. Improvements in capacity will support both the budgeting process for O&M
costs, as well as the disbursement of the O&M budget throughout the year, thereby increasing
the likelihood of sustainability for assets and service delivery.
6.4: ECONOMIC GROWTH AND DEVELOPMENT
Afghanistan continues to experience steady economic growth, averaging 8.5 percent annually.
However, this growth is primarily driven by donor and ISAF spending and must transition to
investment-driven demand to lay the foundation for sustainable economic development. Such
development is critical to long-term stability, but remains a significant challenge due to current
fiscal gaps, the immaturity of most Afghan economic sectors, widespread corruption, and
underdeveloped infrastructure.
A recent World Bank study on transition economics, assuming near-term growth in the mining
sector, estimated that during the process of security transition, economic growth is expected to
slow to 6 percent annually and eventually level off at approximately 4 to 5 percent as transition
concludes post-2014. However, two factors can mitigate the possible effects of an economic
recession: assuring that the reduction in external spending is more gradual than precipitous; and
channeling donor funding through the MoF budget process that flows directly into the Afghan
economy.
Major challenges for achieving economic stabilization are fiscal sustainability and transitioning
from a statist, command economy to market-driven economic growth. The extent of progress
will depend on tangible outcomes in creating and implementing the legal and regulatory
framework necessary to stimulate private investment; completing major infrastructure projects in
power, roads, rail, and air; financial sector reform; and increasing credit availability, agriculture
and agribusiness value chains, extractive industries and Small to Medium Enterprise
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