Afghan economy faces serious revenue shortfall as state undertakes transition --- When the next president of Afghanistan takes office later this year, he will inherit a growing budget shortfall that could leave tens of thousands of civil servants unpaid and force key public programmes to shut down. -- After more than a decade of western aid projects designed to make the Afghan economy self-sustaining, government revenue continues to fall short of projections, leaving the country in dire economic straits just as foreign funding begins to dry up. -- The current budget shortfall – roughly 20% of overall Afghan expenditures – has worsened as the country navigates a tenuous political transition, sending a shockwave through Afghanistan's nascent economy. --- Afghan officials plan to request additional funds from foreign donors, but as the US and Nato draw down financial and military assistance this year, those emergency funds are far from guaranteed. "If we do not receive extra funds in the next two months, we will face a problem with the operating budget, which is mostly salaries," said Alhaj Muhammad Aqa, director general of the treasury at the finance ministry. Aqa said the government has roughly $400m less than the $2.5bn it was projected to spend this year, leaving officials to weigh potential cuts. That hole is expected to deepen as the country prepares for a divisive second-round election and an active fighting season in the war against the Taliban. -- Afghanistan will need more than $7bn annually for the next decade to sustain a functional government and infrastructure and fund the army and police, according to the World Bank. But there are signs that foreign donors might not relish such a commitment. The Obama administration requested $2.1bn in financial assistance for Afghanistan this year, but Congress has approved only half that amount. -- US officials acknowledge the gravity of Afghan economic problems, but argue that the country should be able to steady the budget without halting government salaries. They also suggest that revenue could increase if key reforms are implemented. "It is not a matter of providing more donor funding. Certain actions by the government need to be taken which will have a quick impact on their ability to generate more revenue," said Ken Yamashita, co-ordinating director at the US embassy in Kabul. -- "There's definitely that significant economic contraction that's coming with the transition," Yamashita said. But he said the Afghan government should be able to cut other expenditures so employees continue being paid. -- In spite of dozens of western-funded programmes aimed at increasing domestic revenue,the government is still almost entirely dependent on foreign donors to shore up its budget. Taxes and customs tariffs are the only significant sources of revenue, but those collection processes are still riddled with problems. According to a report released last Tuesday by the Special Inspector General for Afghanistan Reconstruction (Sigar), "corruption impacts all levels of the customs process". - More, Kevin Sieff , Guardian, at: http://www.theguardian.com/world/2014/apr/22/afghanistan-economy-revenue-budget-shortfall