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Afghanistans Development
Cooperation Report 2012-2014
Highlights
Table of Contents
Executive Summary .................................................................................................. 4
PART I....................................................................................................................... 5
Chapter 1: Effective Development Cooperation for Poverty Reduction and
Economic Growth ..................................................................................................... 5
ODA is the main source of financing for development and poverty reduction... ........... 5
But aid flows are declining. ........................................................................................... 6
Economic growth and domestic revenue are underperforming. .................................... 7
Overall poverty has declined, but some of the poor are worse off. ................................. 7
Key Recommendations ..................................................................................................... 8
Executive Summary
The third Afghanistan Development Cooperation Report is a comprehensive
overview of all reported official development assistance (ODA) provided to
Afghanistan between 2012- 2014.This report examines how well the international
community has fared in the years since the 2012 Tokyo Conference in fulfilling ODA
pledges and making progress towards achieving mutual commitments on aid
effectiveness.
ODA continues to be the main source of development finance to Afghanistan. In line
with their Tokyo pledges, international donors provided an average of USD 4.07
billion per year during 2012-14, though aid declined 37% in 2014. Still, at 17% of
GDP in 2014, Afghanistan remains highly dependent on foreign aid for financing
development and government operations. Despite the generous support provided
by the international community, there is no statistically significant change in
nationwide incidents of poverty between 2007-08 and 2011-12. Multidimensional
poverty assessments over the same period indicate, furthermore, that poor are
getting poorer in some provinces. In 2014, due to shocks from the electoral crisis
and the withdrawal of foreign troops, economic growth has plummeted to 2.1%
from a high of 10.9% in 2012 (Chapter 1).
While Afghanistan will need continued donor support to sustain the gains of the
past decade, make progress on poverty reduction and subvert negative impact of
transition on economic growth, parallel progress on aid effectiveness remains
critical. Bilateral donors remain the largest providers of ODA to the country
(86.7%), followed by multilateral agencies and development banks (11.6%). During
2012-14, aid remained project-focused (67%) and fragmented. A high degree of
inconsistency was noted between ODA allocation and development priorities in the
national budget: three of eight development sectors received 49% of total ODA.
Likewise, 10 of 34 provinces received 43% of the total ODA, some of which were not
necessarily the poorest in the country (Chapter 2).
Progress on bringing ODA on-budget, while significant (48%), fell short of the 50%
Tokyo target and did not add the required flexibility owing to constraints of donors
own legal systems and their risk appetite. Pooled funding remained the dominant
mechanism for on- budget assistance (70%). Lack of mutual understanding between
the donors and the government on alignment resulted in divergent views of
progress on alignment of aid with national priorities based on donors and ministry
self-assessments (Chapter 3).
Access to timely, comprehensive and forward looking data on aid allocation - one of
the main requirements for effective national planning and budgeting - remains
limited. Although donors reported 97% of aid delivered during 2012-14, the quality
and comprehensiveness of aid data was uneven. Only 51% of data reported based
on the Afghan fiscal year. Likewise, most donors provide only annual projections for
aid spending, limiting aid predictability. Accountability was primarily driven by the
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TMAF process and was focused on a limited number of selective reforms, shifting
the focus away from overall development results Analytical work remains largely
uncoordinated among the donors and between the donors and the government, and
financing agreements were signed for less than half of ODA (41%) disbursed outside
the national budget (Chapter 4).
In line with the governments strategy to achieve self-reliance, the time is opportune
to refocus the aid effectiveness agenda and adopt strategies and approaches that
will improve the quality of development cooperation in Afghanistan. The revised
NPPs, the revised Aid Management Policy (2015), and the national budget process
should serves as the guiding frameworks for allocating aid. Aid coordination
mechanisms need to be reinvigorated to make policy and planning Afghan-owned
and led. The share of aid provided through the national budget should increase the
50% target, with more flexibility through modalities of budget support and sector
support. All donor activities and their results must be jointly monitored and the
Government must participate and sign off on all evaluations (Chapter 5).
In tandem with improving its effectiveness, aid should also target revenuegenerating sectors and should leverage other sources of development finance.
Focusing on building state capacity to mobilize domestic resources, developing the
extractives sector, and supporting trade and regional connectivity can help the
government realize its vision for self-reliance. Aid can also leverage diverse sources
of development finance including from non-traditional donors, private finance, and
south-south and triangular cooperation.
PART I
Chapter 1: Effective Development Cooperation for Poverty
Reduction and Economic Growth
This chapter assesses Afghanistans performance on key economic, fiscal, and outlines
aid dependency patterns and projections. Using Multi-dimensional Poverty Index, a
poverty analysis approach that complements monetary measures of poverty by
quantifying overlapping deprivations in standards of living, education and health, a
more detailed picture of poverty experienced by Afghans across the 34 provinces of the
country is offered. The MPI is a powerful tool in helping identify effective allocation of
resources by making possible the targeting of those with the greatest intensity of
poverty in the country.
ODA is the main source of financing for development and poverty
reduction...
During 2012-14, ODA inflows accounted for 64% of all resources available for
development (including domestic revenue) and 90% of total financial inflows to
the country for the same period (Figure 1-1).
Remittances
9%
ODA
90%
Millions
42%
40%
3000
26%
2000
21%
24%
2012
2013
17%
1000
0
2009
2010
2011
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2014
ODA as % of GDP
Source: AMDs calculation based on Central Statistics Office (NRVA 2007/08 and 2011/12) data.
Figure 1-5 Share of each MPI poverty dimension for various groups, 2011-12
100%
90%
80%
70%
60%
50%
Health
40%
Education
30%
Standard of Living
20%
10%
0%
Urban
Rural
Kuchi
Afghanistan
Source: AMDs calculations based on CSO (NRVA 2007/08 and 2011/12) data.
Key Recommendations
Donors should aim to keep ODA at a minimum of 18% of GDP in the mediumterm.
Donors and the Government should aim for equitable geographic
disbursements of ODA and enhance pro-poor service delivery in provinces
where poverty intensity has worsened.
Chapter 2: Development Assistance Post-Tokyo Conference
Billions
$16.0
14
12
$8.8
10
$9.3
$7.2
8
6
4
2
Pledged
Committed
Disbursed
Pledge not
commited
US
35.3%
JPN
16.3%
GER
UK
ADB
10.7%
5.4%
4.7%
EU
3.9%
WB
3.7%
AUS
3.3%
NOR
2.9%
CAN
2.8%
Source: MoF (2015).
Although they provide the vast majority of ODA, bilateral donors implement only
56% of ODA themselves. About 25% is channeled through multilateral banks
(mainly through pooled funds) and 17.3% is channeled through the UN system.
Support to
Recurrent
Budget
17%
Development
Projects
67%
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Figure 2-4: Comparison of on and off-budget ODA disbursements by ANDS sector, 20122014
Off Budget
On Budget
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Security
Health
Social Protection
Economic Governance
Unclassified
Millions
13%
12%
Off-budget
1400
On-budget
10%
1200
8%
1000
8%
6%
800
5%
600
4%
3%
400
2%
200
DABS
IDLG
MoF
MoEW
MoPW
MoE
MoPH
MoI
MRRD
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Key Recommendations
Donors who have fallen behind on commitments should coordinate
with GoIRA to clear any obstacles to disbursement of the remainder of
their pledges.
The administrative and management cost of pooled funds should be
rationalized as the size of such funds continues to grow creating
economies of scale.
All pooled funding mechanisms, as interim arrangements need to
maintain credible exit strategies to gradually transfer the
responsibility for management of funds to the government.
Donors should consider reducing the proportion of small projects in
order to streamline coordination and reduce administration costs.
Involvement in a particular sector should be justified not only on the
basis of strategic interest but also on the grounds such as knowledge
of the sector and comparative advantage relative to other partners in
the field.
Improve ODA reporting at the subnational levelonly 68% of ODA reported
between 2012 and 2014 was specified by province, making it difficult for the
Government to accurately track geographic disbursements.
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ADB
CAN 100%
CZE
WB
IsDB
80%
FRA
IND
60%
SWE
SPN
40%
20%
NOR
IFAD
0%
Com
Dis
AUS
ITA
GER
Target
UK
FIN
NED
JPN
EU
DEN
US
ROK
These trust funds are: The Afghanistan Reconstruction Trust Fund (ARTF), the Afghanistan Infrastructure
Trust Fund (AITF), the Law and Order Trust Fund (LOTFA), and the Afghanistan Peace and Reconciliation
Trust Fund (APRP).
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2014
27%
2013
73%
36%
Bilateral
64%
Trust Funds
27%
2012
0%
73%
20%
40%
60%
80%
100%
Millions
2000
1500
1000
61%
67%
58%
500
0
2012
2013
Disbursment
2014
Expenditure
Source: AMDs calculation based on DAD data (2015).
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The 50% on-budget ODA target should be maintained. Donors who have
not yet reached the target should coordinate with the Government to
discuss options for bringing a higher share of ODA on-budget.
More flexibility should be provided to the Government to re-allocate onbudget aid from high-performing to low-performing projects within a
defined set of programs. This is likely to further increase budget execution
rates, enhance the Governments capacity to monitor projects, and will
allow the Government to respond more quickly to changing development
needs.
The Government will work with donors to review the NPPs to make them
more streamlined, time-bound, and focused on achieving specific and
measureable results. Donors should maintain a minimum target of 80%
ODA alignment with NPPs and jointly monitor progress with the
Government.
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2013. The DAD is the Governments main centralized source of information about
ODA and is publicly accessible online3.
However, data is often incomplete and/or submitted too late.
Specific areas for improvement include collecting better quality information on
geographic disbursements and ensuring that donors submit annual data early
enough to be incorporated into the Governments budget planning cycle.
For example, the Government issues ODA Request #1 to donors at the beginning
of each year to collect updated commitment and disbursement data for the midyear review of the national budget. In response to ODA Request #1 in 2015, only
51% of donors provided commitment and disbursement data based on the Afghan
fiscal year4; 42 % of donors provided disbursement data for FY 2014; and 46 % of
the donors provided commitment data for FY 2015. The lack of complete and
timely information undermines the quality of budgetary planning.
Figure 4-1: Donor Response Rate to ODA Request 1 (as a % of all donors), 2015
50%
45%
46%
42%
40%
35%
35%
30%
30%
30%
26%
28%
24%
25%
Total
On-budget
20%
16%
Off-budget
15%
10%
5%
0%
2014 Dis
2015 Com
2016 Proj
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GoIRA and global figures provided to the OECDfor instance, OECD aid
projections for Afghanistan in 2016 are 50% higher than the amount donors have
thus far reported to the GoIRA. Data submitted to the OECD suggests that multiyear forward spending projections are possible.
Additionally, only 41% of off-budget projects are governed by Financing
Agreements (FAs), which outline the scope, objectives, and details of each project
and help maintain Government oversight. By contrast, 100% of on-budget
projects have FAs in place. Donors have committed to sign FAs for all off-budget
projects.
Key Recommendations
Donors should work towards providing the Government with mediumterm ODA projections to improve predictability and provide at least sector
level data at the start of the budget process.
Project proposals should take into account any recurrent operating costs
that will need to be borne by the Government in the future. Clear and
realistic strategies for transferring projects to Government control should
also be included.
A greater proportion of on-budget ODA should be made more flexible,
allowing the Government greater scope to allocate aid where it is most
needed. This can be accomplished by introducing programmatic or sectorbased approaches to development assistance.
Pooled funds should be brought under greater administrative control of
the Government, with appropriate risk-mitigating strategies in place.
Small and medium-sized donors should reduce the number of sectors they
are involved in and make greater use of pooled funds such as ARTF to
deliver aid.
Donors should strive to ensure that off-budget projects are not duplicating
or contradicting an existing government activity. Furthermore, salaries
and benefits provided to Afghan personnel must adhere to governmentdefined salary scales.
All donor activities should be registered in the DAD. Government
counterparts should be provided with the results of any monitoring and
evaluation activities, and GoIRA maintains the right to request an
independent third party or joint donor- government review.
Donors should prioritize projects that focus on increasing the domestic
revenue base of Afghanistan as rapidly as possible, particularly with
regards to the responsible and sustainable development of Afghanistans
mineral and petroleum resources. Development aid can also play a helpful
role in facilitating regional trade and cooperation.
Donors should support GoIRA in accessing alternative sources of
development financing such as Global Funds for development and publicprivate partnerships.
PART II
Profiles of Top 10 Donors to Afghanistan 2012-14
This part highlights details on ODA provided by Afghanistans top 10 donors by
total disbursements in 2012-2014. Each profile provides an overview of
commitments and disbursements during this period and outlines the proportion
of aid channeled through the budget, a breakdown of which sectors and
provinces they supported, and information on their largest projects.
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