World Bank2012-03-192012-03-192010-04-01https://hdl.handle.net/10986/2864Afghanistan and its donor community face a dilemma that is critical to the country's sustained development: how to channel more foreign assistance through the government's budgetary system (i.e., core budget) in the face of a huge capacity gap to ensure effective administration of such expenditures. Without more money on budget, national objectives such as poverty reduction and the building of a stable state cannot be fully realized. Currently, 90 percent of the national budget' is externally financed. Overall aid in 2008-09 amounted to US$5.5 billion or 47 percent of Gross Domestic Product (GDP). The critical issue, however, is not so much the amount of aid, but weaknesses in its mode of delivery and impact. Three quarters of the aid bypasses the government's own budget system, moving through what is known as the 'external budget'. This dual budgetary system means that most economic activity in Afghanistan takes place outside the government's fiscal control, thus undermining the government's legitimacy and relevance to the Afghan people and weakening the budget's primacy as the tool of national policy. The aid needs to be on-budget and aligned with Afghan priorities. If the success of aid can be gauged by the extent to which it enables a recipient country to free itself of the need for that aid, then the Afghanistan foreign assistance program, as currently structured, is failing its mission. Afghanistan's fiscal sustainability, after having risen to a plateau in recent years, regressed in 2008-09 due to rising operating expenditures, mainly for security, and the country remains one of the world's most aid-dependent.CC BY 3.0 IGOACCOUNTINGADMINISTRATIVE REFORMANNUAL BUDGETANNUAL BUDGET FORMULATIONAPPROPRIATIONAPPROPRIATIONSARTICLEAUDIT COMMITTEEAUDIT OFFICEAUTHORITYBANK ACCOUNTSBANK FINANCINGBANKSBUDGET ACCOUNTSBUDGET BALANCEBUDGET CIRCULARBUDGET DATABUDGET DEPARTMENTBUDGET ESTIMATESBUDGET EXECUTIONBUDGET FORMULATIONBUDGET FORMULATION PROCESSBUDGET STRUCTUREBUDGET SUBMISSIONBUDGET SYSTEMBUDGETARY SYSTEMCAPACITY BUILDINGCAPACITY CONSTRAINTSCAPACITY-BUILDINGCAPITAL EXPENDITURECAPITAL INVESTMENTSCASH MANAGEMENTCIVIL SERVANTSCIVIL SERVICECOLLECTION PROCESSESCONSOLIDATIONCONTINGENT LIABILITIESCORRUPTIONCOST ESTIMATESDATA COLLECTIONDECENTRALIZATIONDECISION MAKINGDEVELOPMENT BUDGET EXPENDITURESDEVELOPMENT EXPENDITURESDISBURSEMENTDISBURSEMENTSDISCRETIONARY POWERSDIVISION OF LABORDOMESTIC BANKDOMESTIC REVENUEDONOR ASSISTANCEDONOR FUNDSEQUIPMENTEVALUATION OF PROJECTSEXPENDITURE CEILINGSEXPENDITURE ESTIMATESEXPENDITURE FRAMEWORKEXPENDITURE MANAGEMENTEXPENDITURE NEEDSEXPENDITURE POLICIESEXPENDITURESEXTERNAL ASSISTANCEEXTERNAL AUDITEXTERNAL AUDITSEXTERNAL FINANCINGFINANCESFINANCIAL ACCOUNTABILITYFINANCIAL COSTSFINANCIAL MANAGEMENT INFORMATIONFINANCIAL MANAGEMENT INFORMATION SYSTEMFINANCIAL MANAGEMENT SYSTEMFINANCIAL RESOURCESFINANCIAL REVIEWFINANCIAL SITUATIONSFINANCING SOURCESFISCAL AGGREGATESFISCAL CONTROLFISCAL DEFICITFISCAL IMPLICATIONSFISCAL POLICYFISCAL SPACEFISCAL SUSTAINABILITYFISCAL YEARSFOREIGN ASSISTANCEFORWARD ESTIMATESGOVERNMENT AGENCIESGOVERNMENT CAPACITYGOVERNMENT OFFICIALSGOVERNMENT SYSTEMSGROSS DOMESTIC PRODUCTHUMAN DEVELOPMENTHUMAN RESOURCESINFORMATION TECHNOLOGYINFRASTRUCTURE INVESTMENTINFRASTRUCTURE INVESTMENTSINSTITUTIONAL ARRANGEMENTSINTERNAL AUDITINTERNAL AUDITSINTERNATIONAL DEVELOPMENTINVESTMENT PROJECTSKEY FISCAL INDICATORSLEGAL FRAMEWORKLEGISLATURELEGITIMACYLEVEL OF GOVERNMENTMACROECONOMIC STABILITYMEDIUM-TERM EXPENDITUREMEDIUM-TERM EXPENDITURE FRAMEWORKMEDIUM-TERM FINANCINGMEDIUM-TERM FISCALMEDIUM-TERM FISCAL FRAMEWORKMEDIUM-TERM PROJECTIONSMID-TERM REVIEWMINISTERSMINISTERS OF FINANCEMINISTRIES OF DEFENSEMINISTRY OF ECONOMYMINISTRY OF FINANCEMULTIYEAR PROJECTIONSNATIONAL AUTHORITIESNATIONAL BUDGETNATIONAL DEVELOPMENTNATIONAL EXPENDITURESNATIONAL OBJECTIVESNATIONAL POLICYNATIONAL PRIORITIESNATIONAL SECURITYOPERATING EXPENDITURESPENSIONPENSION LIABILITIESPENSION REFORMSPENSIONSPERFORMANCE ASSESSMENTPERFORMANCE AUDITSPERFORMANCE MONITORINGPERFORMANCE REPORTSPLAN FOR PERFORMANCEPOLICY DISCUSSIONPOLICY FORMULATIONPOLICY RECOMMENDATIONSPOOR GOVERNANCEPOVERTY REDUCTIONPOVERTY REDUCTION STRATEGYPRIVATE SECTORPROCUREMENT ASSESSMENTPROCUREMENT FUNCTIONPROCUREMENT POLICYPROCUREMENT PROCESSPROGRAM BUDGETINGPROGRAMSPROVINCESPROVINCIAL OFFICESPUBLIC EMPLOYEESPUBLIC EXPENDITUREPUBLIC EXPENDITURE POLICYPUBLIC EXPENDITURE REVIEWPUBLIC EXPENDITURESPUBLIC FINANCEPUBLIC FINANCIAL MANAGEMENTPUBLIC FUNDSPUBLIC PROCUREMENTPUBLIC RESOURCESPUBLIC SECTORPUBLIC SERVICEPUBLIC SERVICE DELIVERYPUBLIC WORKSQUALITY ASSURANCEREFORM PROCESSREHABILITATIONRESOURCE ALLOCATIONSRESOURCE AVAILABILITYRESOURCE CONSTRAINTSRESOURCE MANAGEMENTSALARY PAYMENTSSECTOR MANAGERSSECTORAL EXPENDITURESERVICE DELIVERYSTATE ELECTRICITYSTATE-OWNED ENTERPRISESSTRUCTURAL BENCHMARKSSUB-NATIONALSUSTAINABILITY OF REFORMSSWAPSWAPSTECHNICAL ASSISTANCETRANSPARENCYTREASURYTRUST FUNDUNREALISTIC BUDGETSWAGESWorld Bank10.1596/2864