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In-depth Business Intelligence
Books on Afghanistan
REPUBLICAN REFERENCE
Area (sq.km)
647,500
Population
26,813,057
Capital
Kabul
Currency
afghani (AFA)
President
Hamid Karzai
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Update No: 049 - (01/01/06)
A round of elections is over
Afghanistan completed its electoral season in December, with the election of
the upper house of Parliament (Meshrano Jirga) by the provincial councils. The
results give a hint of which groups will effectively play a leading role in the
future parliament, beyond the rhetoric of democratic elections and gender
equality. About half of the 68 members of the Meshrano Jirga are former jihadis,
while women account for just 2%, although president Karzai will appoint another
34 members, of which 17 have to be women. The lower house (Wolesi Jirga) still
has to elect a speaker, but the focus of attention is now moving towards NATO
deployment in the country, which according to the plan should allow the US to
reduce their commitment and withdraw a few thousand soldiers. The insurgency is
also shifting its focus towards NATO and it is trying to target non-US foreign
troops in corners of the country where it had not been previously active, like
Mazar-i Sharif in the north. The Arab terrorist groups financing the insurgency
are not happy about US disengagement and are trying to scare NATO countries from
committing themselves.
The economy: good macro, but political trouble for budget
In November the IMF released its review of the Afghan economy, pointing out
that inflation has been rebounding, but not as much as expected. Oil prices are
pushing it up, but that was offset by the decline of rents from the highs of the
last two years. In September, yearly inflation was estimated at 12.9%. While
government revenue grew faster than expected at +40%, that was entirely due to
customs, as tax revenue, already very low, declined even further. The foreign
currency reserves of the national bank now stand at a healthy US$1.5 billion, up
from US$1 billion in 2004, US$500 million in 2003 and US$300 million in 2002.
However, a recent decision of the Supreme Court, ruling that previous regime's
military pensions have to be paid, represents a blow for the sustainability of
budget reform, as it could add US$45 million worth of payments this year and
another US$22-23 million each future year. Foreign debt stands at US$2.5
billion, of which US$1.5 are owed to countries other than Russia and are
expected to be written off. Most of this debt dates back to the pre-2001 period,
as the new government is only liable for US$350 million.
Social problems
In terms of the impact of these good macroeconomic conditions on the
population, however, the problem is that unemployment remains very high. The
Ministry of Social Affairs estimates that the number of unemployed in
Afghanistan stands at 2.5 million, that is over 20% of the workforce. Social
problems are also beginning to start demanding the attention of the government.
For example, the number of estimated drug users in-country is rising fast.
According to a recently released joint UNODC/Ministry of Counter-narcotics
study, 920,000 Afghans are drug users. Of these, 150,000 are opium users, 50,000
heroin users, 520,000 hashish users and 180,000 consume non-prescribed
pharmaceuticals, such as anxiolytics, painkillers and hypno-sedatives.
Dynamic sectors
The most dynamic sector of the Afghan legal economy remains telecoms, which
has been growing 35% a year since the change of regime in 2001, as the expected
arrival of two more competitors in the mobile business is prompting market
leader Roshan to increase its investments to maintain its lead. It plans to
invest another US$100 million next year and by mid-2006 it should have expanded
its network to the whole country. The airline sector also appears set for major
developments, despite government hostility to allowing private companies to
operate internal flights. Ariana, the national air company, has finally
announced a plan to replace its ageing fleet. Four new Boeing 737-700 have been
ordered, while two 757-200 will be leased. Prospects for more foreign investment
improved at the beginning of December, as the foreign investment law was finally
passed, after a troubled history and long time spent being worked out.
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