A World Bank report to be released on January 23rd, Afghanistan: Managing Public Finances for Development, warns that fragmentation of foreign assistance may adversely affect the accountability and capacity of the Government of Afghanistan. Join the authors for a live online discussion about Afghanistan and the new report. Submit your question now!
Larry Hendricks:
I have been a consultant in Afghanistan for almost 12 months starting in late 2003. I realize that the World Bank and other multilaterals must contribute their funds to the government. What I don't understand is with all the corruption in the Afghan government the World Bank would suggest that all donors contribute through the government. Much of it will never get to projects and it will give the government a platform for avoiding the issue of corruption. Could you please explain your rationale since a government trying to balance a budget based on donor money makes no sense.
William Byrd:
The rationale for money going through the budget is multiple, and it includes the state building agenda of building up an Afghan state, and also delivering results that the government can take credit for and responsibility for. And the risk of corruption is very real, but let's not think that there is vulnerability to corruption only in projects that go through the Afghan government budget and not in other projects. So, the key to reducing the vulnerability to corruption is to further improve financial management and control mechanisms, as recommended in the report.
harriet myers:
how long will it take - do you believe that afghanistan will be in fact in a position to adequately manage any aid flowing to the country?
Stephane Guimbert:
The report recognizes that government's capacity constraints are very real. However, the report suggests that this lack of capacity might well become a self-fulfilling prophecy if the government is never given the chance to manage resources. The experience shows that capacity can be built over time by managing aid. A good example of the progress made in the capacity being developed over the last few years is the budget process, which started very rudimentary in 2002, and the report documents progress every year since 2002. Of course, this doesn't deny the fact that the budget process, like other processes, needs to further improve in the future.
marcus wesley:
Exactly what services would be government be better off handling itself...and which would be best if the government simply awarded contracts to other players?
William Byrd:
There is no simple answer. There can be a variety of arrangements, depending on the government's capacity and the characteristics of the service. In the case of Afghanistan, primary education is being delivered directly by the government in a centralized way. This has succeeded in a sharp expansion of an enrollment, including for boys and girls in recent years to unprecedented levels in Afghanistan's history. This kind of delivery mechanism can also support unified curriculums. However, there are concerns on the quality side of it. Health is an example where the government, on a competitive basis, contracted out delivery of basic health services to nongovernment providers.
So, I think there is room for a lot of variation, and one key point is commercializable types of services, like power, water supply, et cetera, should be delivered in a contracted way and not by the government itself.
Haleem:
Does the Afghan government really have the capacity to use the fund properly? Any real examples?
Stephane Guimbert:
The report documents a number of sectors where the Afghan government has shown some capacity in using funds properly. In a previous answer, we discussed the education sector. Two of the most successful programs in Afghanistan are the National Solidarity Program, and the basic package of health services. The National Solidarity Program gives grants to communities who plan and implement community-based projects. The basic package of health services has services to a majority of the population around the country. These two examples are interesting because in these two cases, the government has shown capacity to provide oversight of these programs, but these two cases also show that the government does not need to deliver all its services in these two cases, the services are delivered by nongovernmental organizations, NGOs, but with the oversight of the government.
steve renshaw:
What capacity does the government of afghanistan have at the moment to adequately deal with an influx of aid funds....after all this is a country still in the throes of conflict?
William Byrd:
Actually, one of the early efforts in the reconstruction program was to provide adequate capacity to the government to handle aid funds coming into the country. This one is very important, and it achieved some success, as is shown by the report's evaluation of the public finance management system, that funds risk capacity to handle budgetary funds appropriately. The key issue for the future is that much of this capacity has been brought in, contracted in through international firms and consultants, and the challenge for the future is to build up adequate and sustainable core government capacity in the government itself, so that it will no longer be so dependent on external capacity brought in.
harry greenburg:
Doesn;t the current security situation in Afghanistan undermine your argument...if the government can't at the moment bring that under control, how can you adequately expect it to maintain control over financing?
William Byrd:
Security is the number one challenge in Afghanistan's reconstruction program, and delivering services like education, health, building, infrastructure, et cetera is much harder and more costly to do in a situation of insecurity. So, the security situation has an adverse effect, particularly in parts of the country where conflict is ongoing. So, the response to the challenge involved building up Afghanistan's own security forces while relying in the short run on international security support. And as important as the national army, which is currently being staffed up, is improvements in the police and justice sector. The report provides a detailed analysis of the security sector from the public finance and development perspective recognizing the importance of dealing with security, and also instituting proper financial management practices in the security sector just like in the civilian sectors.
Manu Mago:
why the world community is not focussing on the reforms which are of immediate concern like poverty and complete self governance and not under the influence of any other nation. more or less let the identity of the nation be preserved . the world community should provide only help and not interferance with the will of the citizens of afghanistan
Stephane Guimbert:
The report indeed makes the case that external assistance should be delivered in a way that strengthens and underlines the legitimacy of the government vis-a-vis its own people. As we have already mentioned in other answers, this doesn't mean that the government needs to deliver all services, but it means that the government must be provided with the means to be accountable to its people for their result, and therefore the government must be able to provide adequate oversight to the services in the health sector and the education sector and the power sector; and this is becoming even more important with the recent election of the parliament which should become a major institution to strengthen accountability.
anne bradshaw:
Isn't this really just an attack on non government organisations?? after all I imagine that a lot of NGOs are the bodies using the funds which you say should be given to the government or rather go through the government instead?
William Byrd:
The report is not--the main point made by the report, or the theme, is that government leadership, and use of the government budget and financial processes for the delivery of public services and aid, and the report does not say how the delivery of aid should be or should not be through NGOs. As was mentioned in the answers to previous questions, there are examples of government programs implemented through the budget where NGOs are contracted to deliver services.
So, for resources, including assistance going through the national budget, there are examples where the government delivers the service itself, like primary education, where there is a company or utility that delivers the service, or they're NGOs or they're private contracted firms. Similarly, for the aid that goes outside the budget, much of it is delivered by private firms contracted by the donors directly or by NGOs contracted by the donors directly.
I think we need to make a very clear distinction that we are talking about government leadership and funding through the budget and that this doesn't mean non-NGO delivery. The choice of service delivery entities is distinct from the issue of going through the budget or not going through the budget.
Patrice Yapi N'CHO:
Le souhait de toutes les institutions intervenant dans le développement serait que l'aide arrive majoritairement aux bénéficiaires que sont les populations. Ce qui a suscité la floraison d'ONGS du Nord et du Sud dans l'éxécution de certains projets communautaires dans les PMA et d'autres PVD. Au finish, certains prêts provenant de la réalisation des projets exécutés par des ONGS doivent être remboursés par les Etats. Notre préoccupation est de pouvoir élaborer une plate-forme où les bailleurs de fonds, les Etats, les ONGS et les réels bénéficiaires (mairies, Conseils Généraux, Organisations Professionnelles Agricoles, Mutuelle de développement des localités ou des structures légalement constituées et reconnues dans la région par ces actions au profit de développement)se rencontrent régulièrement pour discuter des projets dès la conception jusqu'au stade de l'évaluation. Messieurs, avez-vous fait allusion à cet type de procédures lors de la conception de votre projet.
Translation by World Bank:
All development institutions wish that aid will mainly reach and benefit the populations in need. This explains the bloom of NGO of the North and the South implementing certain community projects in the PMA and PVD. At the end, certain loans resulting from the realization of the projects executed by the NGO must be paid off by States. Our concern is to be able to elaborate a platform where donors, States, NGOs and the benefiting population (cities, states, professional organizations etc
) meet often to discuss the project from the concept to the evaluation stages. Sirs, did you study/talk about this kind of process in your study?
Stephane Guimbert:
The report, indeed, as reviewed, the processes by which all the actors you mentioned, the donors, the states, the NGOs and the community, the processes by which they will get together and discuss all these issues, the report makes a very strong case that the central process for this dialogue is the budget process. The strategic level, this being Afghanistan National Development Strategy, NDS, which is a strategy document prepared by the government in consultation with all these stakeholders, NGOs, community, and this report is actually discussed today in London by the government and the international community. This is the first step of this strategy, and the government plans to develop a full strategy over the coming month in consultation with the people of Afghanistan.
And the second step of this process, the forum of discussion is the annual budget where the material strategy should be translated as documented in the report, the concluding step of the budget process, a vote in the parliament which again addresses this issue of dialogue between the government and its people through their representatives.
Ismail:
Are you saying the non government organisations are not well equipped to handle aid going to Afghanistan?
William Byrd:
The report doesn't say NGOs are equipped to handle aid going into Afghanistan. I think as was mentioned earlier, the key is government leadership and working for national programs and national objectives, and one thing that has been found to be very effective in the government programs that have involved NGO delivery is competitive procurement and cost control and monitoring and evaluation. With these kinds of arrangements, which are good practice in aid, NGOs certainly are one of the useful mechanisms for delivery of aid.
Patrice Yapi N'CHO:
Dans le cadre de la réalisation des objectifs du millénium, quels sont les objectifs qui ont été mis en relief dans le cadre de la réalisation de cette étude? Qu'est ce qui a été concretement fait dans le cadre de l'attribution des marchés publics? Quel est le poids du secteur privé dans le développement du pays?
Translation by World Bank:
Within the framework of the Millenium Development Goals, what objectives came in light in this study? What has been done regarding the allocation of procurement contracts? How important is the private sector in the development of the country?
Stephane Guimbert:
Let me first start with the MDGs. The government had adopted in 2005 the MDGs as its own objectives. One significant change that the government has made to these objectives is to have additional ones about security, and this reflects that security remains a major concern for many Afghans today.
Regarding other MDGs, as reviewed, some of the developments, some of them very encouraging, for instance, with a significant increase in enrollment, where there were only 1 million children in school in 2001, there are almost five million now, but changes to reach the MDGs are very significant in the health sector, notably for infant and maternal mortality, the challenge to reduce the disparities between boys and girls and between men and women also remains enormous.
Let me now turn to the second part of the question. The government has adopted a number of steps to improve the allocation of procurement contracts. Very earlier on, it had contracted an international firm to have them doing this procurement contracting and provide the professionalism and transparency that greatly enhanced the effectiveness of its programs. But it is true to note that the private sector remains very weak in the country, and so procurement rules have to make sure that they support the emergence of a dynamic private sector in Afghanistan.
caroline escobar:
Shouldn't your theory be applied to all governments in all countries - the only way then to really help them is to channel all aid funding through governments - rather than other bodies?
William Byrd:
Yes, the general principles and good practice of financial management that is outlined in the report is widely applicable. The reason why the situation and the recommendations and the warnings, if you want to call them, are so important for Afghanistan is that its situation as a post-conflict country with very little tax revenue is that it's dependent for the vast bulk of its resources on external aid. 92 percent of spending in Afghanistan, public spending in Afghanistan is aid-financed. In that kind of situation, the need to go through the budget and to follow good financial management procedures is very striking. In a more typical country, developing country where aid may be 10 to 20 percent of total spending, then the issue is less urgent because if 10 or 20 percent of government spending is going outside the budget and outside the government control, that's obviously much less of a problem than if 92 percent or 75 percent is going to be happening outside the government's control, particularly in Afghanistan where building the state and building government institutions is a central part of the reform effort.
So, the principles and analysis from international experience are applied, but they are specially severe in Afghanistan in the post-conflict environment because of the large proportion of aid that goes--that is externally financed and is going outside budget channels.
kevin wheeling:
Can you explain more about the Compact for Afghanistan...what's that meant to achieve
William Byrd:
The compact for Afghanistan, which is being discussed today and tomorrow at the high-level London conference on Afghanistan, is intended to be a five-year commitment by both the government and donors. The government commits to implementing the interim Afghan National Development Strategy produced last month not only to achieve results but to achieve modest growth in domestic revenue and management and effectiveness of utilization of funds. The donors on their side are committing to medium term continuing high levels of assistance to Afghanistan over the medium term, and also to further harmonize, improve, and hopefully put more of the assistance through the Afghan budget.
This compact is very important because it sets a medium-term framework and a mutual effort and reinforces the long-term commitment of both sides for reconstruction of Afghanistan. In many countries, a typical pattern of post-conflict situations is that around five, six, seven years after the end of conflict, the donor money dries up, attention goes to other hot spots in the world, just at the time when the government may be building capacity and ready to absorb aid more productively and to utilize it better. So, in Afghanistan, the compact and the commitment by both government and donors is intended to avoid this kind of problem, but to stay the course, to complete the reconstruction process.
Jalil Alkozai:
United States gives around $2 billion to Egypt and $3 billion to Israel each year. Only $600 million to Afghanista is what I and many others will call 'building a nation on cheap'. Why can't these so called superpowers learn from past mistakes?
Stephane Guimbert:
Afghanistan has benefited over the last three, four years from significant external assistance. For instance, in 2004, external assistance was 10 times higher than domestic revenues. But more that the amount, it's important to look at the modalities of how aid is delivered in the country. That's what will make aid effective or not.
The first modality is the predictability or lack of predictability of aid. The government needs some flexibility in the medium term but the resources that will be available to it. Without that, the government can't make decisions on what to finance and what not to finance.
Another modality is to make sure that there is a very clear accountability for what aid is supposed to deliver. As the report argues, the preferred option should be to make the government fully accountable for results, and for that it means that the government has some control over external assistance.
And the final point about the modalities is the timing of aid. As was discussed earlier in a previous answer, it takes time to build capacity for aid to be effective in Afghanistan. In the experience of other countries, it shows that it is possible that aid decreases just at the time where capacity is being built.
Vishal:
Although World Bank successful Organization since from Long time,then why Poverty is not Eliminated in developing countries like Afgahanistan ?
William Byrd:
The answer really is that poverty is a deep-rooted and multifaceted challenge, and aid from the World Bank or from other agencies can play a role in the elimination of poverty but certainly not by itself can eliminate poverty without other conditions in place. And we should also keep in mind, as a share of GDP of the developed countries or by other measures, the actual amount of aid is relatively small.
A key aspect for aid to succeed is that there be a level of security of institutions built up over time that allows the country itself to take over responsibility for reducing and eventually eliminating poverty, and I think in Afghanistan this is key in why building the state, government institutions on a sustainable basis, both financially sustainable and sustainable as institutions in terms of their human resources and organizations, that are so critical.
So aid can bring in some short term relief, if you will, alleviating the symptoms of poverty, but what's much more important is the impact of aid over the long term in helping countries to build their institutions and build their capabilities to reduce poverty themselves, and this is really what our report is about, how assistance and resources can be harnessed in a way that builds a state and improve poverty over the long term, rather than over the long run providing palliatives to ease problems.
Manuel Sarlin:
When a Capacity Building project is implemented by the government (or a management firm contracted by the government), how can Donors monitor the results and avoid nepotism ? Why are conditional Grants so rare ? It seems so obvious that any Grant without clear performance indicators and conditional release of funds is a nice open door to ineffectiveness. Will you personally give US$300 as pocket money to your children without any conditions ? I would prefer to give US$20 per week and wait for results before to continue, unless I don't really care about the future of my children's self-development (or my money !)
Stephane Guimbert:
This question raises the very important issue of monitoring and evaluating public expenditure and assistance provided to Afghanistan. The report reviews in some detail these issues, and in particular the report stresses the very strong achievements made by the government with regard to financial management and financial reporting. The government has indeed established a computerized system which enables it to provide regular financial reports on the use of public funds. However, as the report notes, the broader issue of monitoring and evaluation, the broader issue of statistical capacity remains very challenging in Afghanistan. The lack of data is, indeed, a major impediment to understanding whether the government's program are not achieving their purposes.
Specifically choosing the capacity-building project mentioned in the question, of course, the same issues of monitoring and evaluation apply to this kind of project, but here it is particularly important, if the project is serious about building capacity, to give government a chance to build capacity, and therefore not to seek to manage the project by completely bypassing the government.
Mohammad N Azizi:
Four years have passed since the fall of Taliban. There have been considerable achievements on several aspects in Afghanistan; however, the country is still far away from the right track of real development. For how many more years, Afghanistan will need the huge amounts of donor money, and if we say Afghanistan needs aid for another 7-10 years, What will Afghanistan of 7-10 years from today will be compared to its immediate neighbors and other countries of the region.
William Byrd:
The report actually analyzes and forecasts or projects what would be the track of Afghanistan's domestic revenue and its recurrent expenditure, the expenditures that are required to keep the government going. Because one of the key requirements is that the government mobilize enough domestic revenues that it can cover its core operating needs. Afghanistan is not there yet. Right now the domestic revenues of the government cover only about half of what is in the operating budget, the recurrent expenditures.
The report indicates that with good efforts to mobilize more domestic tax revenue and containing overall expenditures, it will be possible that within the next couple of years revenues will at least meet the civilian wage bill--i.e., the cost of the government employees--and that by 2011, 2012, the budget should be able to cover the recurrent expenditures.
However, this is not the whole story because there are also recurrent expenditures which are in the development budget itself, for example, health services and transfers, which are also in some sense part of the government recurrent expenditures, and those will take longer to recover.
So, Afghanistan is going to need external assistance for a long period of time and, like many other developing countries, is going to need external assistance for its development budget for the capital projects, whether it's dams, roads and the like. That will be required for some time to come, but the key effort in the coming years is to mobilize more revenue to cover the recurrent budget and reduce and phase out the external assistance needs for the recurrent budget, and the report outlines a set of actions and a strategic program to achieve that result, and the government is committed to doing this in the National Development Strategy which was recently put out.
Marcus Ridner:
Why do we help other countries,when many of them have wasted our money, and we have no ROI to show for it in 50 years. If we give $5Billion to a country we should control the money and only spend it on legimate purchases,with a reciept, so they cannot pocket it for themselves and the country can get better, with that kind of accountability. Too many liberal handouts leads to too many hangups. What have countries done with the money they have recieved? I see no improvements in many countries, and you know who they are, that is your forte to know. Forgiving a $40 billion debt to a country is stupid, you have to teach people the mindset of how to make money, not forgive money, It seems no Leader of a Foreign Nation that has borrowed money from the USA/or other nations, has the ability to make their country profitable, or have the forward thinking that a multi-billion dollar natural diasaster surplus account should be on hand,if and when a natural diasaster strikes, they could hold 10% of their national GDP for emergenices ,either no one is thinking/planning into the future for their country,or they just don't care, and what makes us responsible for others illresponsibilities?. Please explain it to me, and don't embarass yourself, if you cannot answer my questions. A true Leader of any kind, has the responsibility to create and bring solutions to improve the quality/profitability of all he or she is responsible for, people,economy etc. For some Leaders they think it is about their egos only, and that is pathetic. Solutions can be made and the people with backbone can get it done. Please email me, I look forward to seeing what your solutions are, you seem like a sharp bunch of people. Some of the world's richest legitimate business people can led a hand in advice and counsel of how to improve almost any foreign economy, and not havard economists,because I don't see where they are multimillionaires, they are just a professor making a salary working for someone else, who live of donations of $30-$40 million dollars to their university from the wealthy so they can have a salary, maybe you should ask people who have made over $100 million dollars conducting internationl business for advice, I would. Please remember this is not about me, it is about you and your colleague's looking for solution's. I thank you for taking the time to read,debate and put to action my questions,remember it is action that makes change,not intellectual racquetball. Thanks again
Stephane Guimbert:
First, the report documents the number of achievements made by governments and by Afghanistan over the last few years. We have already mentioned school enrollment. We have mentioned also the extension of growth. Economic growth has been significant, between 10 and 20 percent over the last couple of years. These are significant achievements, and part of these achievements are attributable to external assistance provided to the government.
Now, the challenges ahead remain enormous, and, indeed, it will take true leadership to bring solutions to these challenges. The Afghanistan national development strategy, the NDS, which is discussed today in London, is the process by which the government is to tackle all these challenges and propose a way forward.
Marcus Ridner:
Extended questions, could it be that foreign leaders fail to surround themselves with people who are much smarter, more capable, more successful and have more backbone than they do, and have actually built a business or know how to get the right counsel, and maybe some leaders do the above and have done so, good for them. If any foreign leader comes to the World Bank asking for a money loan, I believe very strict conditions of accountability should be placed upon them no matter how much they protest or puff up. If they ask for $10 million only give them $500,000 and when they pay that back give them another small increment. I hope my questions incite and provoke whomever may read them to cause solid and lasting change in leaders who hear them regarding foreign assistance of any kind. Thanks again I look forward to seeing powerful results.
William Byrd:
The point that is made about the need for strict accountability and results is very important, and, as the report argues, it's not only important for the donors who provide the assistance, or the World Bank as he gave in his example, but it's also very important that the people of the country itself that are receiving the money know that it's been properly utilized, so that's a very important point which we fully agree with.
I think a couple of points, there is a need to build up critical mass, so the amount of assistance has to be of adequate size to make a really good start, and breaking it down into very small parts may actually result in the assistance not being as well used or as effectively used as it should be. So, there does need to be a programmatic approach which is looking at a wider part of the country as a sector, whether it's education or health or any other sector, from a program that's a program level going for numerous, very small and fragmented projects, so that would certainly affect the size of assistance required.
And also the report documents that Afghanistan simply cannot afford to take too many loans at present, so most of the external assistance to Afghanistan has to be in grant forms because otherwise the country will not be able to repay the loans, and there is certainly no point in giving loans where the country is unable to repay them, even with the best efforts to mobilize more revenue and the best policies.
pankaj kumar:
In the processe of reconstruction of civil socity ,promotion of democrecy and the role of media in Afghanistan ?
Stephane Guimbert:
The civil society, the parliament, the recently elected provincial council, the media, all have a important role in the reconstruction process in Afghanistan. The reports focuses on public finance management and as such focuses on the role of civil society around the budget process. We can see two major roles for civil society around the budget process. First, there is a role of participation in the budget process by providing information to government on the people's priorities, people's needs; and second, there is a role in terms of oversight of budget execution that is after the budget has been approved civil society, the parliament in particular has the role in reviewing how government is implementing the budget, reviewing government's financial statements and reviewing the external auditors' reports.
The recently elected parliament will be critical in enhancing the role of civil society in the two dimensions, first as the approver of the budget, and second as the reviewer of budget execution.
Lydia Johnson:
How much is needed to rebuild Afghanistan? And why has progress been so slow? Is the Bank still an effective "rebuilder" of economies?
William Byrd:
In response to the first part of the question, the Afghanistan government with the support of international institutions, including the World Bank, the detailed estimate of how much was required for Afghanistan's reconstruction, and the total amount required is in the range of $4 billion per year over the next seven years or longer. This is certainly a large amount, but even in relation to the needs, even this amount is not that large because when you get to very large projects which will actually change the endowment of Afghanistan in terms of its ability to use its water resources or hydropower resources or mineral resources, the investments become very large.
Now, over time, many of these investments can be private sector investments, but right now it's very difficult to attract the private sector to invest in some of these very large activities.
In terms of the second question about why has progress been so slow, I think the answer is the multifaceted, but some of the main factors are security, as some of the other questions have posed them. The effort to do reconstruction while there is conflict actually going on, other forms of security, including the drug economy, certainly does slow down the progress of reconstruction.
Another big factor is that the capacity issue in the government is also in the Afghan private sector coming out of conflict, and this is why the reports emphasizes so strongly the need to develop capacity in all parts of the Afghan economy and the government. So, those are just two of the answers.
And the other answer is that in any post-conflict situation, there is a startup period which can last from the first one to three years, when results are hard to come by because the process is building up the basic institutions and capacity, and then it's really in the third to the seventh or the tenth year of reconstruction that the actual progress of achieving results on the ground which is what matters to the people, of course, takes off. And Afghanistan is no exception. In fact, given the fact that conflict went on for 25 years, and there has been so much destruction of human and physical and institutional capital, this process of getting--of the startup phase, if anything, is going to be longer than in other post-conflict countries.
With respect to the question about the Bank, I think the Bank can help finance development, but the rebuilding of economies is a full-scale national effort, and the Bank is only a minor partner in that effort and can help, but certainly it cannot make a big difference without the national cohesion and leadership to move forward.
