Afghanistan:
The ConTinuitis- Economic Slide (u)
KeyAfghan economy, already depressed befofc [he Soviet invasion in
as been further disrupted by continuing hostilitiessubsequent exodus ofercent of the population. Therecognizes ihe country's serious economic problems,disarray at top levels ofvernmcnt prevenis thecoherent economic polkies. and Laiermiltent purges of ihe
Subsistence farming and industrial activities continue in the face ol labor and raw material shortages, frequent power^blackouu.-andTuelralioning, -but economic dcvetopmcnl plans and recommendations by Westernhave fallen by the wayside. Activity in the commercial agricultural sector has been miicd..with modest gains in thtjwoduction of fruits andbut wilh severe declines in cotlon and sugartwo letding commercial crops.esult of the fighting, shortages and
unemployment
family groups that take care of their own indigent members. Largely cut ofr from its traditional Western sopplicn. Kabul has become increasingly dependent on Moscow for supplies of food and petroleum products. (u|
The military situation in Afghanistan rnakes an improvement in the economy unlikely any time soon. The government lacks boih the popular support and the military force it needs to win effective control of much of rural Afghanistan, Insurgent attacks on road convoys have becomeeffective, causing severe disruption to the iransponation system. Even if its miliiary problems disappeared, however, the government would still have difficulty coping wilh its ccooomic problems|
Afghanistan:
Tbe Continuing Economic Slide (V)
PrcUm in 1W0
Tbe Babrak ro*ertimeai has failedll ffontsdomestic soppon andove ibemotSerniration. It has also been unableIhe pervasive perception that it is aeoveramcnl.laim (hat his isgove'rnmeat io SO year* to allow religioushas notopulation thai viewsintent as aniircbgious and equates MarxismUSSR wuh atheism. The unpopularity ofgovernment and the Soviet occapatiotsdriving forces behind the exodus of Afghanscountry last year. Tbe flight greatlyMitch and September, and by yeareodmillion Afghan refugees were living in India.and Iran, accordingN estimates, (u)
Insurgent aetiiilies forced the Babrak govemmenl to back away from tbe agrarianrogram the Taraki and Amin regimes had pushed8 and
part. Babrak did not want to furtherthe handful of large landownersemain in (he country. Besides cullingof comrnercia! crops such as coiton.to (he program also reduced the supply ofleading stapleps. As aof some food iietra worsened last year,has alwaysuralwidespread. Rationing was tot rod teedand induced such baskascooking oil. (u)
In response tpgrowing fuel shortages, tbe Babrak government also began rationing oil products in mid-'
gasoline for private auiomobUcsfor cooking and borne healing.for industry were determined co abasis. Ahbougb the supply of kerosenesince Ihe endajor urbanStill ciperitajcjng shortages of motor oil andjet fuel.
Atsoihei major problem for (he government has been demons!rations by bazaar shopkeepers in Kabul, who have economic as well as political reasons for their protesia. They have been hurt by the general decline in cconuctic activity, and government price conlrols have cut into their profit margins. Their emergence as an opposition forceerious blowbebecause althoughajor political force, the baxaari could provide strong finaanal supportcU-organiied opposilioo movement?
Political infighting within ihe Babrak1 has disrupted tbe economy. The ge*eenrneot installed by the Soviets is an unstable alliance of rival factions Babrak's Parcbam (Banner) and the Khalq (People's) of former Presidents Amin andby Moscow in hopes (bat supporters ofactions in the military and the bureaucracy would work together. The major difference between the two group* is in the base of support the Pareharartu tend to attract meavben oY'the wealthy urban families, whereas the Kbalqjsu eoocentraie on recruiting toiel-ligcnL poor, yours people of both cily and rural origins^.
Soviet attempts to make the two groups work together have not succeeded. Infighting has grown moreand Parchamisl senior government officials fireKhalqi subordinates at every opportmrtity To
irse. the two faction* have earnedf each other's lop officials.esult, ihe bureaucracy at lower level* remains ineffective. Thearther complicajcd>xauscng at top levels of key government departments, such as Ihe Ministries of Planning and finance, prevents Ihe formulation of coherent economic pcJietes^
Most ecoeomxcevclopmt.il programs have groundalt since ibe Soviet invasion. Although the Soviets claim Hlitfactory prtxgreu was made0 on several of their projects, the suspension of bilateral lid from Western donor* and loan* from multilateral institutions has severely cutlalled the pace ofSit projects of tbe United Nation* Develop-
meal Program and the Fncd and Agrteuliure Organi. ui'Kin have been suspended:ew technician* emain in Kabulandle admin ill rat ivc details. Meet Western aid technician* and officials have been pulled out of ihe country and even the Soviet*oncerned about aliening theirto travel, particularly in certain areas of scuih-era and western Afghanistan, (u)
ornjiete cessation of economicthe Soviets reportedly have ashed the countries of the Council for Mutual Economic Assistance (CEMA) lo increaseo Afghanistan. In0 the Sennets assigned CreebosJovj-kia the job of coordinating aid from the CEMA countries for development of Afghanistan's education and administrative system* and foron development. Information is not available to indicate what levels of assistance, if any, CEMA countries are providing or rogrcPrague has madeis program
Agriculture
The agriculturalha* suffered greatly sinceA record number of landowners havecounlry. taking with Ihem valuablefinancial and personalewthe land redistributionhadrelied on credit from large landholdersfinding it difficult to getihe government. In any event, many farmer*to accept govtrnosesu credits, fearingbe forced to fight against the insurgentsfor the loans. The Soviet-backedcollcciiviu agriculture has all but failed,rice and wheat production ami as ofsta
Since fighting has sharply limited lis access ioeven ihe Babrak government probably doesreliable crop data. Government data onproduction has always been suspect,propensity of farmers to falsify croplo avoid I* let; bartering and smuggling:antagonism toward ihe centralSince (he Soviet invasion. Kabul's effortseconomic deterioration has made inc.of reliable data even more
>
inai years, grain OiSpTsuch as "wTteal."Ttce. barley,male up nearlyerceni of totalwith wheat accounting for ihe largestihere appeared to havehift.talierns lasi year, wilh
of wheal and rice into other
Nevertheless Deputy Pnme Minister Solian All Keshisnand,peech to Ihe nation last April, announced highly satisfactory results for agriculturen general last year and for grain production inparticular. He estimated tola! foodgrsin outputillion tons comparedillion9 At Ibismay be ihflalt 1 " output would have come close toiIIion-ion target Kabul set ia0 development plan but would be lowenhanillion tons harvestedjonoally. (u)
Commercial crops, which normally account for 10
perceni ofrable land, appear to haveixed record. Production of rVuit* and vegetables increased moderately, bui there were severe declines in cotton and sugar beettwo leading commercial crops. Many farmers growing coiion and sugar beets fled, and irrigation facilities, on which these crop* depend heavily, were destroyed or badly damaged in the fighting/
... it The decline in grain output was serious, and, ai Kabul's behest, Moscow increased wheal shipmcnia ai ihe end of the year. Even wilh the increase, Knbul continued to make frequent rcQuesistoadditional wheat, to no avail. Last May. however. Moscow finally agreed toons of wheatjrioriiv basiseet food requirements
Industry
The govern me ni announced increased production in ihe tcttile. prinimi. and mining sectors but overall industrial production declined last year for the second consecutive year. The small industrial sector is plagu-ed by abysmal laborack of competent technical and iT-anagerial personnel, and iitcreasingly by shortages ofuteriab and spare parts.alio faced frcqocni power blackouts and fuel rationing. Because industry contributeshe gross domesiK product, the industrial sector's performaace wasajor factor in the ovetall performance of ihe econ. omy. (ul
Trad*
The Soviet invasion has ledharp drop in the volume ot* commercial imports. The volume ofrom Ihe Wesi throughas monthly before the in.as.on-has been cui almost in half. Both tbe Karachi-Peshawar-Kabul road route and the Karachi-Ouetla-Qandahar route, which arc used lo carry Imported Western goods via Pakistan, are frequentlyor days and havu become eittemel) dangerous/
Some coumries are also caprriendng difficulties In sfcipr-tng goods to Afghanistan via Soviet ports at Nakhodka and Votiochayy. Altogether there ha* been closepercent decline in commercial imports from non-Communist countries,J-perceni drop in imports from the Furoocan Community alone during Ihe first nine month*U)
olitical gesture io suppori Afghanistan's falici-lag economy, ihe USSRew tradewith Afghanistan0 thai calledpercent increase in irade between tbe two countries Although no pressure was put on Afghan businessmen and farmers to increase trade with the USSR, trans-portal km difficulties and ihe teas of markets iahy India and Pakisian forced Afghan traders to increase their commercial lies wilh the Soviets.esult, trade with the USSR now accounts forerceni of Afghanistan's total eiposis. comparedercent in prtor years.
Tradilionally. Afghanistan hudarge foreign trade deficit *ilh the USSR. The reverse was trueperceni increase in exportresulting largely from sales of dried and fresh fruits, carpels, and naturalthan offsetimports. By yearend. Afghanistan's foreign trade balance with the USSR reportedly amounted to an est.matedutton credit surplus, and the bilateral surgju* may have reached SJOO million By
frossouNcTles
Bilateral economic relation* bet-een Kabul andhaveihef ihe Soviet invasion,'
-
onsisted ol clothing and shoes,nd food for -poverty stricken" Afghans. In addition,ons of wheatg ha no tan. and increased the price they paidaser thousand cubic feel,
When tbe Afgfcaiu approached the Soviets early ihn year for mored. they -ere tuld that aid bad already been (really increased. Kabul was told thaiercenl increase In gas prices9 would be counted in Moscow's economic lid package. The mailer of repaying economic aid hat been worked out using natural gas imports from Afghanistan.ew rive-year trade agreement (WI-SSl. ihe Sc-ieu apparently have agreed toigher level of gas deliveries from Afghanistan in partial rcpaymenl of Kabul's bilateral debt. In addition, the Soviets agreed toer thousand cubic feel for naturalimports during the U'e of ihe contract.
AcoM*nfii. Sonetr dtu. Affkiuo* kxli II*-till ikf. The Sonar
is:
ud HhJUlrlouhH. -Ik
utc USSR"so Tmuwuncoe unu i
of i rf i:
Natural |il il Afgharusians Urges! single ernoet Item and account* forhird of tool export earnings.c-og-su estimateroved and probable gas reiervej atrillion cubit feet. The gas ckposit* are coiKeniraled in northern Afghanistan, aboutilometeri from the Soviet border. Until I'SO. the only production came from the Kha-aja Gogerdak field, de-eloped by the Scwieu aad0venged aboutB-aa cubic feetlimbedeakiBiou cubic feetut fell toillion cubic feetu)
Natural gas biles are expected loirjer role in bilateral trade in, given the onset ofin0ewi Jaroaduq in northern Afghanistan. Production from this field, which was discovered in thend-lib Soviet technicalanceledncrcaie gas canons toillion caibac feet annually in the- Gas from the new field is pipedO .kilometer pipelinehawajaak. where it joint theilometer pipeline io Ihe Soviet border. To thwart possible insurgent attacks on Ihe gatfields and pipelines and to eaiurc an uninterrupted flow of gas from Afghanistan, the Soviets have given military rsroteeiion to theob made easier by the fields' proiimiiy io the Soviet border, (id
inances
According to the Afghans, th; Soviet occupation ha* ledevere fall in government revenues. The inability to collect sufficient taxes from domestic sources has -rought havoc with the budget anderioui problem for Kabuluisance Tor the Soviets. Nonetheless, inhe governmentalanced budget ofillion for the *Ww fiscal year ihai began onarch, withercent of revenues originating from clomesiic sources nasalfrom Soviet loam and grsnuf
Receipii from Import,principal source of revenue for Ihedisappeared last year with ihe sharp curtailment in commercial activity. Insurgent activities along major roadsevere drop in government receipts from transport taxes Indeed, the insurgentsbeen collecting
high lofl fees from truckers daring enough io: partially interdicted roadways. The gewernmeni alsoevere shortfall in propel* taxes and. as ofad collected0 of theillion in la* payments il had capecied. To make mailers worse, government receipt! fromand Individual incomes andjhe.tourism Industry amountediiuace
hc Babrak government was scrambling for additional funds for day-to-day govcrninentions. The Soviets increased grams in the form of foodstuffi and other consumer goods, but Kabul was forced to shift dcvclopmenl funds to cover shortfallsfiWi.WlUvs. Current.
duced by the end of the fiscal year becauseighting forced various government offices to denej
Kaburs foreign exchange reserves are in belter shape, but ihe gcvtrarneni is concerned about9 million decline in reserves bet-ten9 andoillion. Under normalihe1 level of reserves would be sufficienl to finance about eight monllx ofhis ralio hai almost certamlyjpcfea*cdbecause cutbacks in commercial imports have reducedon foreign exchange holdings. The reserve de-dine ii partly the resultharpillion io annual remittances from Afghans working in Iran aad otherulf countries priorhe invasion. Abo contributing to ihc decline has been the decision of Afghanporters to leave iheirchange earnings on depcoil abroad. msteadjiLftmitilng earning* to Afghanistan's ceniral bankl he ceniral bank has eaperienced some difficully in managing its fortiga credil transactions, largelyause foreign banks have been concerned about ihe political srtauition is Afghanistan. Indeed, certain fordgn banks have decided to gram letters of credit and credil etirnsion based on ihe credil worthiness of individual traders rathe: than on Ihe solvency or ihe country. Kabul's other liquid assess5 million in gold (valued at current market orfcealillion in Special Drawlng.rjjjhis with ihe International Monetary Fundi
AfsthimiUn;
; Focdfrain Production
Total Ifliu
_
- VrbaT "See *
411
417
4.im
m
4u>
Xt
US
two
mo
A**'-
Eitnutrt. The US DesunnKwer Agriculture, bowewr.muI grains ettimatasiftlon lorn9 ltd ,
' (dKiiunw of AfjtanaUui pwduciiun urgcu.
ThnnetluilV*.
Looking Ahead
As long as mosi of ihe remaining population is able to The military situation in Afghanistan makes an im-obtain close to present amounts of basic neeessiliesr 'proVement miheeconomy unlikely. Insurgent attacks the Afghans will consider the preseiu economic sftua'crvn'read convoys have becometolerable. Fuel and Icod slvortages agaVj""'and in much of ihe countryside Kabul will beinter, however, would huh urban dwellers; ihelosed from activating development projects and other etnmeots mainxonsiitueney; rural inhabitantsprograms. ccJIeeiing.uxeavor-obtaining wheat and. probably suffer little from these problems. |uj
Over the next year, developments in agriculture will likely test ihe government's slaying power. Kabul is estimating this year's foodgrain outputillion tons,illion ionstdusjjon. (sec' oodgrain oulput is an
other agricultural products. The government lacks'. both Ibe popular*support and ihe military forceneeds to win effective control of much of rural Afghanistan. Under these conditions, ii is notng thai the area under government control has .. .
ast year. Divided by bitter factionalism in ibe ruling party, and with much of the bureaucracy to come clcde toeither inexperienced or disaffected, the government
would have difficulty coping with its economiclems even were its military problems to disappear!' '
" reaenirig this level. If shortfalls occur.finance the additional imports rcouired.for transporting substantial amountsare uncertain ai best, because ofinvolyirajpaiof read routes used lo bring
Western
Original document.
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