How Foreign Aid Ruined Afghanistan

By Joshua Foust, in TCS Daily (ht Registan):

Since the Soviet invasion of Afghanistan in 1979, Non-Governmental Organizations have filled in the gaps left by an otherwise absent government—schools, health care, employment, and so on. After the American invasion in 2001, billions of dollars have flowed into the country, funding a massive reconstruction effort. The story of aid in Afghanistan is not all unicorns and sunshine, however. Its very abundance—over $8 billion pledged this year alone—is harming the country's ultimate chances of success.

Overabundance is not a problem traditionally associated with humanitarian missions. Indeed, quite often the opposite is true with programs lacking the funds required by their mandates.

The unfortunate reality in Afghanistan is that, no matter the amount donated, it would be too much. This is because Afghanistan's biggest problem is not poverty, but government.

Before the 2001 invasion, there were no institutions to speak of—no government, no services, no formal economy. There was simply no way to provide basic services, like police or fire fighting or medicine.

Yet even after years of what the IMF calls "building capacity," Kabul cannot manage its resources effectively. Trying to unravel the financial mess, the World Bank in late 2005 drafted a report on Afghanistan's public finances. It contains some sobering statistics: domestic revenues are only 5% of GDP, the fiscal deficit is financed entirely by a foreign aid, the entire operating budget is managed by a trust fund. The government cannot directly channel the reconstruction money, so it delegates to NGOs and the U.S. Agency for International Development (USAID). As a result, it exercises no control, no accountability, and, most ominously, no legitimacy over the reconstruction process.