Country Report Afghanistan January 2011

Outlook for 2011-12: Fiscal policy

According to the latest IMF estimates, domestic revenue collection as a proportion of GDP reached 9% in fiscal year 2009/10 (March 21st-March 20th), up from an average of 7.1% of GDP in 2006/07-2008/09. The rise has been aided partly by the improved ability of the customs agency to charge tax on fuel imports, and by amendments to the income tax law. A further boost was provided by the introduction of a business tax on imports before the start of 2009/10. Tax revenue collection continued to rise in the first four months of 2010/11, according to government estimates. Afghanistan's tax revenue could increase by as much as 25% by the end of 2010/11. Despite these recent improvements, increasing revenue remains an urgent priority, given that donors are likely to wind down budgetary support in the coming years. Afghanistan will continue to have one of the world's lowest ratios of fiscal revenue to GDP in the forecast period. The government will also want to address its failure to spend its development budget: at present, many ministries lack the capacity to plan and implement development programmes.

© 2011 The Economist lntelligence Unit Ltd. All rights reserved
Whilst every effort has been taken to verify the accuracy of this information, The Economist lntelligence Unit Ltd. cannot accept any responsibility or liability for reliance by any person on this information
IMPRINT