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Update No: 072 - (27/11/07)

Foodstuff price hikes
In October the International Monetary Fund released its newest estimates of Afghan economic trends, putting this year's GDP at 13% growth and next year's at 8.4%. Inflation is forecast at 8.3% this year and at 7.6% next year. However, most Afghans live on a low income and are most concerned about the ongoing rise of basic goods like foodstuff. While overall inflation figures are kept rather low by the decline in the cost of renting luxury apartments and houses, the price of rice, cooking oil and flour is growing rapidly. During November the rise was accelerated by the decision of Pakistan to ban the export to Afghanistan of certain products. The price of fuel also remains higher than in the earlier part of the year, mainly due to the crackdown on smuggling in Iran. Afghanistan is now more dependent on imports from Central Asia, where prices are higher and growing. There are also reports of Pakistani border guards stopping trucks from entering Afghanistan following the declaration of the state of emergency by Musharraf, although this was likely a temporary measure.
Estimates recently released by the US Geological Survey show that Afghanistan has significant deposits of a whole range of minerals, including precious stones like emeralds, rubies, sapphires, garnets, lapis, kunzite, spinel, tourmaline and peridot, as well as gold, mercury, sulfur, chromite, talc-magnesite, potash, graphite - and sand and gravel. When added to available information about oil and gas potential and assuming that at least a substantial portion of these minerals could be extracted profitably, this suggests that Afghanistan might be finally able in the future to build a substantial tax base to support its own government. 

Khalilzad looks at Afghanistan again
Several important political developments occurred in Afghanistan in November. The first, which actually started in October, was the renewed involvement of Zalmay Khalilzad, the Afghan-American who was Ambassador of the United States in Kabul before being posted to Iraq and then the United Nations. Khalilzad is know to have been putting pressure on Karzai to reshuffle his cabinet and intensify the reform effort, presumably on behalf of the Bush Administration. Khalilzad's involvement is fuelling speculation that he might be considering a presidential bid in Kabul in 2009. In any case, his pressure seems to have sorted some effect, as Karzai in a public speech on 13 November lashed out at the cabinet, denouncing the high level of corruption. Some observers believe that this might prelude to a cabinet reshuffle. In Washington they seem particularly eager to get a new Minister of Interior, given that the police are considered a key player in the counter-insurgency effort and that the current minister, Zarar, is seen by many insiders as the epicentre of corruption. However, Zarar is also a key player in Karzai's newly founded party, the Republican Party, which might not survive a split between Zarar and Karzai. The latter, moreover, has already in the past occasionally criticised the corruption of his own government (although never before so harshly) but never followed up with serious measures. Several cabinet reshuffles in the past did not prevent the level of corruption from worsening, while the anti-corruption authority has achieved nothing in years of activity. For what it is worth, Transparency International's world corruption index now ranks Afghanistan 172nd out of 180, a marked worsening over the earlier years of the Karzai administration.

Crackdown on private security
Another important development in October-November was a crackdown on private security companies, many of which stand accused of illegalities and abuses. A few have already been closed, but the crackdown is expected to continue. Insiders believe the crackdown is the result of a confrontation within the cabinet, between two opposed factions which support private security companies and NGOs respectively. The pro-NGO lobby has for the moment being the upper hand, but the crackdown on private security companies might lead to a political backlash, as most of them are linked to the Tajik militias which occupied Kabul in 2001 and provided employment for thousands of former militiamen.

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