Development News from Afghanistan

By Michael Dwyer

March 9 (Bloomberg) — Afghanistan’s economic growth will accelerate over the next two years, according to the International Monetary Fund, with increased production of wheat and fruit helping reduce the economy’s opium dependence.

“Growth is expected to accelerate in 2006-07, with even stronger growth likely in 2007-08 owing to a rebound in the agricultural sector,” Murilo Portugal, IMF deputy managing director, said in a statement on the Washington-based lender’s Web site. The pace of expansion had previously been expected to slow to 12 percent this fiscal year from 14 percent in 2005-06.

Better wheat harvests and higher yields from Afghanistan’s orchards may help President Hamid Karzai wean the nation from its reliance on opium, which now accounts for about a third of the economy, compared with more than 60 percent five years ago. Still, Afghanistan’s production of the illicit drug, the base ingredient for heroin, jumped more than 50 percent last year.

“The drug economy is booming,” Barnett R. Rubin, a senior fellow at New York University’s Center on International Cooperation, wrote in the January-February edition of Foreign Affairs. “The weakness of the state and the lack of security for licit economic activity has encouraged this boom.”

Opium poppy production has skyrocketed since a U.S.-led invasion ousted the Taliban regime in 2001. Afghanistan produces about 90 percent of the world’s supply of the drug.

Afghanistan produced a record 5,644 metric tons of opium in 2006, from 4,475 metric tons in 2005, the U.S. State Department said in a report this month.

Poppy Cultivation

Areas under poppy cultivation increased 61 percent in 2006 to 172,000 hectares (424,840 acres) from 107,400 the previous year, according to the report. It estimates the country’s illicit opium was worth $3.1 billion last year.

“It’s a lot of money,” U.S. Assistant Secretary of State Richard Boucher told a House of Representatives foreign affairs sub-committee in Washington yesterday. “The overall Afghan economy last year was about $9 billion and the value of the drug trade was 35 percent.”

Afghanistan’s non-drug economy, which the IMF estimates has grown at an annual average pace of about 16 percent over the past five years, is benefiting from foreign aid even as Karzai’s government grapples with efforts to stamp out the opium trade.

“What we’ve seen in Afghanistan is the regular economy has been growing a lot faster than the economy of opium production,” Boucher said. “We’re trying to get Afghanistan to the point where it can develop an economy, it can develop a country without the corrosive and corrupting influence of the drug trade.”

Foreign Aid

Karzai’s government relies on foreign aid for more than half its budget. President George W. Bush last month asked Congress for an additional $698 million in 2007 to build roads, provide food aid and rebuild Afghanistan. The European Commission has offered 600 million euros ($790 million) over the next four years.

“We spent $2.5 billion to $3 billion a year over the last five years,” Boucher said, in reference to U.S. aid to Afghanistan. “We think this big push is needed to extend the effort more generally.”

Projects aimed at eradicating the drug trade can still sometimes be counter-productive, according to analysts, as they tend to encourage corruption.

“Efforts to combat opium production in Afghanistan have been marred by corruption and have inadvertently helped to consolidate the drugs trade in the hands of fewer, more powerful players,” the World Bank said in a November, 2006, report.

`Enormous Bribes’

Counter-narcotics campaigns like the ones conducted by Karzai’s government and international aid donors provide leverage for corrupt officials to extract “enormous bribes” from drug traffickers, Rubin said.

“Police chief posts in poppy-growing districts are sold to the highest bidder: As much as $100,000 is paid for a six-month appointment to a position with a monthly salary of $60,” said Rubin, author of the book, “The Fragmentation of Afghanistan.”

Afghan policymakers recognize the need “to address governance concerns and speed up the pace of reforms,” the IMF’s Portugal said.

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