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IMF predicts Afghanistan to Overtake Pakistan’s Growth Rate in 2016

Thursday 14 May 2015

WASHINGTON (Pajhwok) – The International Monetary Fund (IMF) on Tuesday predicted a strong economic recovery of Afghanistan.

From a 1.5% growth in 2014, the IMF in its revised regional economic outlook for the Middle East, North Africa, Afghanistan and Pakistan, projected a growth rate of 3.5% in the current fiscal of 2015.

The country’s growth has been projected to increase to 4.9% in 2016, the IMF said in its latest report, according to which Pakistan’s growth rate in the same year has been projected to be 4.7%.

However, in his Outlook 2015, ADB projects the economy of Afghanistan to grow by 2.5% in 2015, up from 1.7% in 2014, if the political, security, and business environment is stable. With parliamentary elections due by June 2015, consumer and investor enthusiasm will remain subdued. As agriculture performed at full potential in 2014 and winter snowfall was meager, agricultural output is expected to decline in 2015. Growth in industry and services is projected to pick up in the second half of 2015 on greater political stability, but demand for services will suffer from the withdrawal of international security forces. Growth in 2016 is projected to edge up to 3.5% on progress with political and security issues.

Afghanistan faces a deteriorating fiscal position, unable to raise revenue even as public expenditures rise. These trends risk an ever-widening fiscal gap. In response to the revenue shortfall, the government adopted strict austerity in the second of half of 2014 that reduced overtime payments to civil servants, set aside some new discretionary development projects, and limited salary increases, bonuses, and other benefits. Despite these measures, a large financing gap fails to cover civilian wages, pensions, and other essential recurrent and development spending, requiring the government to draw down cash reserves.

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