The Asian Development Bank (ADB) on Wednesday approved a $100 million grant to help the Government of Afghanistan respond to the coronavirus disease (COVID-19) pandemic, the statement said.
“ADB reaffirms its full commitment to supporting Afghanistan in its fight against COVID-19 and reducing the adverse impact of the pandemic on the lives of Afghans and the economy,” said ADB President Masatsugu Asakawa. “The assistance will help strengthen the health system, expand social protection for the poor and vulnerable population while ensuring gender mainstreaming, and support macroeconomic stabilization and job creation in Afghanistan.”
Afghanistan’s economic outlook has deteriorated during the COVID-19 pandemic because of business lockdowns, a sharp drop in household incomes, and a downturn in regional trade and remittances. ADB forecasts Afghanistan’s gross domestic product (GDP) to contract by 5.0% this year. Nearly 250,000 micro, small, and medium-sized enterprises (MSMEs), accounting for over 80% of nonagricultural employment, have been hit hard. The unemployment rate is projected to rise to 37.9% in 2020 from 23.9% in 2019. The budget deficit including grants has nearly tripled, reaching 3% of GDP in 2020, compared to 2019. Spikes in food prices due to disruptions in the food supply have increased the food insecurity risks.
According to the statement the national poverty rate is projected to reach up to 72% this year from 55% in 2017, with an additional 6 million people falling into poverty. A health emergency of such magnitude has aggravated the pressure on the country’s inadequate health care system, compounded by increasing transmission risks from internally displaced persons, returning migrants, and refugees.
To mitigate the adverse impacts of the pandemic, the government rolled out its comprehensive countercyclical pandemic response package of $633.9 million, comprising health, social protection, and macroeconomic stabilization measures. ADB’s COVID-19 Active Response and Expenditure Support (CARES) Program grant will support the delivery of the government’s response package, read the statement.
The program has several components. It will support the government in conducting a nationwide gender-sensitive public awareness campaign for COVID-19, scaling up the capacity of medical facilities, including gender-sensitive treatment facilities and the availability of medical supplies and equipment.
It will help the government extend its targeted social safety nets, including daily bread assistance to at least 310,000 poor households; water and electricity bill coverage for at least 350,000 households in Kabul, with priority given to women-headed households; coverage of over 130,000 old-age pensioners and their female heirs, including biometric registration; one-time cash transfers of 6,000 afghanis ($78) to at least 41,500 internally displaced persons and refugees; and remuneration packages for at least 32,570 disabled persons and the families of people killed in conflicts.
The program will also support the implementation of stabilization measures covering state-owned enterprises, job creation in the agriculture sector, and MSMEs. The MSME support will comprise tax exemptions, subsidized lending, vocational training, and market access.
The grant also features measures to promote good governance and anticorruption, including having a monitoring and evaluation specialist at the Ministry of Finance (MOF) to support program implementation and reporting, electronic tracking of fund flows at the MOF, and auditing of pandemic-related spending by the Supreme Audit Office, which are built into the assistance. ADB had earlier provided technical assistance to strengthen debt management and monitoring of fiscal risks, as well as project management capacity, procurement systems, and safeguards compliance.
The CARES Program is funded through the COVID-19 pandemic response option (CPRO) under ADB’s Countercyclical Support Facility. CPRO was established as part of ADB’s $20 billion expanded assistance for developing member countries’ COVID-19 response announced in April. Visit ADB’s website to learn more about its ongoing response.
This comes after in May, ADB approved a $40 million emergency assistance grant for Afghanistan. It supports the construction of 15 and rehabilitation of 5 hospitals and medical facilities, adding more than 1,100 new hospital beds; procurement of urgent medicines, medical supplies, and equipment; and training of at least 3,000 health workers, including 900 women, in COVID-19 surveillance, prevention, and treatment.
Cash-strapped government puts new projects on hold
Afghanistan’s Ministry of Finance (MoF) has informed all government departments they need to cut back on budget spend, including that on planned development projects.
In an official notice to all government institutions, MoF has ordered them to stop projects where contracts have recently been signed, and which employ contract workers.
All planned development projects have also been put on hold.
The MoF said that due to the increase in spend for the Afghan National Defense and Security Forces (ANDSF), the increase in health spend and a drop in government income, all government departments need to cut expenditure.
“After the assessment of the development and general budgets by the cabinet, changes have been brought to the ministries and all government budgets because of the increase in ANDSF and health spending. Contracts from the… budget should be halted or suspended,” read the notice.
The MoF said that the government has lost $33 million in customs revenue since the Taliban seized five border crossings in the past month, amid rising violence in the country.
“Sher Khan port in Kunduz, Spin Boldak in Kandahar, Islam Qala in Herat, Abu Nasr Farahi in Farah and Torghundi in Herat have been captured by Taliban in the past month,“said Rafi Tabi, spokesman for the MoF.
Analysts have said the government should consider other steps to cut back on budget spend.
“In this situation, we can’t blame government, but it (government) should consider other options to prevent confusing the public,” said Sayed Massoud, a university lecturer.
This comes after the projected revenue generation for Afghanistan was expected to be 216 billion AFN ($2.7 billion) for the current solar year.
The total 452.6 billion AFN budget for this year did however carry a 37 billion AFN deficit – which government was to provide 20 billion AFN from internal resources and 17 billion AFN was pledged by the International Monetary Fund (IMF) in order to make up the difference.
Afghan carpet industry facing major challenges: ACCI
Afghanistan’s Chamber of Commerce and Investment (ACCI) said on Sunday that the Afghan carpet industry is facing numerous challenges despite the foreign aid that has been injected into the industry.
The ACCI said that the lack of a dedicated industrial park and a suitable place to produce carpets are a key challenge that they face.
Carpet makers also said that the drop in exports of Afghan carpets is a major problem.
Abdul Jabar Safi, head of the craftsmen association said despite millions of dollars having been spent and funding from USAID being received no dedicated industrial parks have been established in Andkhoy and Jalalabad – both carpet making hubs.
The Ministry of Commerce and Industry meanwhile said efforts are being made to resume the traditional craft of carpet making in order to preserve the Afghan carpet industry’s uniqueness.
The ministry said that they have assisted carpet producers recently.
“It (new carpet industry) undermines the credibility of Afghan carpets. One good point of the Afghan carpet sector is that it provides 100,000 jobs for people especially for women,” said Fawad Ahmadi, spokesman for the ministry.
Analysts say that the carpet production industry will come to an end if government does not address the carpet producers’ challenges.
US, Afghanistan, Pakistan Uzbekistan form platform for regional cooperation
The United States, Afghanistan, Pakistan, and Uzbekistan have agreed in principle to form a new diplomatic platform focused on enhancing regional connectivity, the US State Department said on Friday.
“The parties consider long-term peace and stability in Afghanistan critical to regional connectivity and agree that peace and regional connectivity are mutually reinforcing,” the Department said in a statement.
“Recognizing the historic opportunity to open flourishing interregional trade routes, the parties intend to cooperate to expand trade, build transit links, and strengthen business-to-business ties,” the statement read.
The parties agreed to meet in the coming months to determine the modalities of this cooperation with mutual consensus, the US said.
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