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Update No: 067 - (27/06/07)

Fiscal tightening
During the last several weeks the finance Ministry sent signals that tax evasion is no longer going to be condoned. The most dramatic manifestation of the new attitude was the closure on tax dodging charges of one of Kabul's best known foreign restaurants. However, in typical fashion Afghan authorities moved from excessive tolerance to heavy-handedness: the restaurant is now being asked to pay $500,000 in arrears. Several other businesses have been targeted over the last year, including some which have been closed. The tightening of fiscal controls is part of a wider effort to increase revenue by the Afghan government. Most of its cash still comes from the customs, whose output is increasing thanks to a modernisation and computerisation effort. Modernised offices have greater capability to contain fraud and corruption and have in some cases seen revenue increase by 50% in the year following the improvements. 
On the other hands, the government financial commitments also keep rising. The new budget was approved by the parliament only after the Finance Ministry agreed to increase the pay rises to state employees and the families of war victims and disabled. However the government managed to avoid major re-allocation of funds to the provinces, as initially requested by the lower house.

Returnees threaten to submerge Afghanistan
By June it became quite obvious that the Iranian government meant business when it threatened to deport illegal Afghan immigrants. The threat had been repeated many times, but never taken seriously by either the Afghan government or international organisations. When Iran actually started deporting immigrants earlier this year, no preparations to accommodate them had been done. Almost three months after the deportations started and with over 100,000 Afghans already sent home, it is clear that Iran this time is determined to proceed and deport an estimated 1 million illegal immigrants. According to Teheran's authorities, around 300,000 illegal immigrants are eligible for work Visas, but they will have to apply from Afghanistan. With Pakistan also planning to send home a couple of million of Afghans, the prospect for Afghanistan are pretty grim given the unemployment rate already well above 30%. Only the few skilled Afghans have relatively easy access to jobs abroad, with the result that a brain drain deprives Afghanistan of skilled workers and professionals at a time when unskilled workers are being returned en masse.
Pressure on the Afghan government from its neighbours takes other shapes too. In April the Pakistani government once again responded negatively to Afghanistan's request to grant direct access of Afghan importers to its ports.

The internal fronts
Karzai is under growing pressure on the internal front too, as old allies clamour to be given back a greater chare of power. Protests against a pro-Karzai governor in Jowzjan ended with a number of demonstrators killed, while one of the main jihadi leaders, Prof. Rabbani, is now openly asking for the re-appointment of jihadis in key positions. One of Karzai's deputies, Ahmad Zia Massoud, is also joining hands with the opposition, which the Iranians are trying to unify in a National United Front. Relations with the international partners are also straining on a number of issues, such as eradication. The debate on poppy eradication continues to make the headlines, with evidence emerging that even the latest eradication drive, claimed to have eliminated 21,000 hectares of illegal crops, has largely been compromised by corruption. As a result, the actual number of hectares actually eradicated is probably a fraction of those 21,000, who themselves are a modest percentage of the 176,000 hectares planted in 2006. At the same time, new lands have been planted with poppies. Another matter of controversy is the demand of the Karzai administration that a larger share of aid to Afghanistan be channelled through the government, as opposed to NGOs and foreign government departments, but donors maintain with reason that Kabul has limited capacity to spend.

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