x Abu Dhabi, UAEMonday 24 July 2017

Afghanistan boosts budget revenue

Afghanistan's state revenues still only account for less than a third of the budget in a country that remains dependent on western aid.

KABUL // Afghanistan's state revenues rose by 45 per cent last year, but still only account for less than a third of the budget in a country that remains dependent on western aid, the finance ministry said today. A series of reforms and anti-corruption measures brought Afghanistan's domestic revenues to $600 million (Dh2.2bn) in the fiscal year that ended this week, from $400m (Dh1.47bn) in 2008-09, the finance ministry spokesman Aziz Shams said.

Building the Afghan government's administrative capacity is the centrepiece of US President Barack Obama's strategy to begin withdrawing troops next year. Revenue remains barely $20 (Dh73) per person per year, hardly enough to provide services like schools, hospitals, courts, roads, an army and police. State revenue accounts for about 5 per cent of gross domestic product. The United Nations estimates Afghans spend more than four times as much on bribes.

Mr Shams said Afghanistan hopes to wean itself from international aid for ordinary budget expenses in three years. Afghanistan's ordinary budget for last year was more than $1.9bn (Dh6.98bn), 70 per cent of which was provided by donor nations, Mr Shams said. The international community also contributed $2.4bn (Dh8.8bn) for a separate development budget to improve the economy and build infrastructure.

This year's ordinary budget, sent to parliament for approval, is nearly $2.4bn (Dh8.8bn), with security forces being the focus of expenditure, Mr Shams told Reuters by telephone. The West, which has had tens of thousands of troops in Afghanistan since ousting the Taliban in 2001, has had to bankroll the budget for day-to-day government expenses, as well as pouring in billions for security and reconstruction.

Steps taken last year to improve revenue collection include making tax payments easier, reducing fines to encourage compliance, and expanding the collection of tax on income of state employees and on property rents, Mr Shams said. "The establishment of an anti-corruption department in the ministry has played a major role too. There have been 150 cases (of corruption) and there have been some arrests," he said.

"There have been reforms in the customs and unfit individuals are gone. The main government's anti-drive body has had some good proposals which have led to the collection of revenues." Plans to improve revenue will include imposing taxes on minerals, such as mines for precious stones and coal, as well as tightening ways of taxing flights using Afghan air space or airports. "This year we hope to be able to pay for 65 per cent of our ordinary budget, and we have predictions that in three years with the measures which I mentioned we will be able to pay all of it ourselves," Mr Shams said.

Exploitation of Afghanistan's mineral sector could enable the country to become self-sufficient economically in future years. A $4.4 billion (Dh16.16bn) project agreed with China to extract copper ore south of Kabul is by far the biggest commercial investment ever in Afghanistan. Work on the project has already begun, and in three or four years Jiangx Copper Co and Metallurgical Corp of Chian are expected to start production.

* Reuters