1

Afghanistans Development
Cooperation Report 2012-2014
Highlights

Table of Contents
Executive Summary .................................................................................................. 4
PART I....................................................................................................................... 5
Chapter 1: Effective Development Cooperation for Poverty Reduction and
Economic Growth ..................................................................................................... 5
ODA is the main source of financing for development and poverty reduction... ........... 5
But aid flows are declining. ........................................................................................... 6
Economic growth and domestic revenue are underperforming. .................................... 7
Overall poverty has declined, but some of the poor are worse off. ................................. 7
Key Recommendations ..................................................................................................... 8

Chapter 2: Development Assistance Post-Tokyo Conference ................................. 8

55 % of Tokyos pledges were committed over three years. ............................................ 8
Bilateral donors provided 86.7% of total ODA in 2012-2014, followed by multilateral
agencies (11.7%). ............................................................................................................... 9
Just over two-thirds (67%) of 2012-14 ODA was allocated to development projects. .. 10
Three ANDS sectorsSecurity, Infrastructure, and Agriculture & Rural
Development accounted for 50.5% of total aid spending........................................... 10
Ten Government ministries received 70% of total ODA in 2012-14. ............................. 11
Key Recommendations ................................................................................................... 12

Chapter 3: Alignment of ODA to Country Systems and Priorities ........................ 12

Donors disbursed 48% of ODA on-budget in 2012-14, just short of the 50% Tokyo
Mutual Accountability Target. ....................................................................................... 12
The Government has steadily increased its budget execution rate. .............................. 14
There is still a lack of consensus between donors and the Government on alignment
with National Priority Programs. ................................................................................... 15
Key Recommendations ................................................................................................... 15

Chapter 4: Transparency of Aid for Improving Accountability............................. 15

Almost all known ODA is now captured in the Governments Development Assistance
Database (DAD) ........................................................................................................... 15
However, data is often incomplete and/or submitted too late. ................................. 16
The Government still lacks reliable information on medium-term aid spending and
financing agreements for off-budget projects................................................................ 16
Key Recommendations ....................................................................................................17

Chapter 5: Towards Effective Development Cooperation ..................................... 17

PART II ................................................................................................................... 18
Profiles of Top 10 Donors to Afghanistan 2012-14 ................................................ 18

Executive Summary
The third Afghanistan Development Cooperation Report is a comprehensive
overview of all reported official development assistance (ODA) provided to
Afghanistan between 2012- 2014.This report examines how well the international
community has fared in the years since the 2012 Tokyo Conference in fulfilling ODA
pledges and making progress towards achieving mutual commitments on aid
effectiveness.
ODA continues to be the main source of development finance to Afghanistan. In line
with their Tokyo pledges, international donors provided an average of USD 4.07
billion per year during 2012-14, though aid declined 37% in 2014. Still, at 17% of
GDP in 2014, Afghanistan remains highly dependent on foreign aid for financing
development and government operations. Despite the generous support provided
by the international community, there is no statistically significant change in
nationwide incidents of poverty between 2007-08 and 2011-12. Multidimensional
poverty assessments over the same period indicate, furthermore, that poor are
getting poorer in some provinces. In 2014, due to shocks from the electoral crisis
and the withdrawal of foreign troops, economic growth has plummeted to 2.1%
from a high of 10.9% in 2012 (Chapter 1).
While Afghanistan will need continued donor support to sustain the gains of the
past decade, make progress on poverty reduction and subvert negative impact of
transition on economic growth, parallel progress on aid effectiveness remains
critical. Bilateral donors remain the largest providers of ODA to the country
(86.7%), followed by multilateral agencies and development banks (11.6%). During
2012-14, aid remained project-focused (67%) and fragmented. A high degree of
inconsistency was noted between ODA allocation and development priorities in the
national budget: three of eight development sectors received 49% of total ODA.
Likewise, 10 of 34 provinces received 43% of the total ODA, some of which were not
necessarily the poorest in the country (Chapter 2).
Progress on bringing ODA on-budget, while significant (48%), fell short of the 50%
Tokyo target and did not add the required flexibility owing to constraints of donors
own legal systems and their risk appetite. Pooled funding remained the dominant
mechanism for on- budget assistance (70%). Lack of mutual understanding between
the donors and the government on alignment resulted in divergent views of
progress on alignment of aid with national priorities based on donors and ministry
self-assessments (Chapter 3).
Access to timely, comprehensive and forward looking data on aid allocation - one of
the main requirements for effective national planning and budgeting - remains
limited. Although donors reported 97% of aid delivered during 2012-14, the quality
and comprehensiveness of aid data was uneven. Only 51% of data reported based
on the Afghan fiscal year. Likewise, most donors provide only annual projections for
aid spending, limiting aid predictability. Accountability was primarily driven by the
4

TMAF process and was focused on a limited number of selective reforms, shifting
the focus away from overall development results Analytical work remains largely
uncoordinated among the donors and between the donors and the government, and
financing agreements were signed for less than half of ODA (41%) disbursed outside
the national budget (Chapter 4).
In line with the governments strategy to achieve self-reliance, the time is opportune
to refocus the aid effectiveness agenda and adopt strategies and approaches that
will improve the quality of development cooperation in Afghanistan. The revised
NPPs, the revised Aid Management Policy (2015), and the national budget process
should serves as the guiding frameworks for allocating aid. Aid coordination
mechanisms need to be reinvigorated to make policy and planning Afghan-owned
and led. The share of aid provided through the national budget should increase the
50% target, with more flexibility through modalities of budget support and sector
support. All donor activities and their results must be jointly monitored and the
Government must participate and sign off on all evaluations (Chapter 5).
In tandem with improving its effectiveness, aid should also target revenuegenerating sectors and should leverage other sources of development finance.
Focusing on building state capacity to mobilize domestic resources, developing the
extractives sector, and supporting trade and regional connectivity can help the
government realize its vision for self-reliance. Aid can also leverage diverse sources
of development finance including from non-traditional donors, private finance, and
south-south and triangular cooperation.

PART I
Chapter 1: Effective Development Cooperation for Poverty
Reduction and Economic Growth
This chapter assesses Afghanistans performance on key economic, fiscal, and outlines
aid dependency patterns and projections. Using Multi-dimensional Poverty Index, a
poverty analysis approach that complements monetary measures of poverty by
quantifying overlapping deprivations in standards of living, education and health, a
more detailed picture of poverty experienced by Afghans across the 34 provinces of the
country is offered. The MPI is a powerful tool in helping identify effective allocation of
resources by making possible the targeting of those with the greatest intensity of
poverty in the country.
ODA is the main source of financing for development and poverty
reduction...
During 2012-14, ODA inflows accounted for 64% of all resources available for
development (including domestic revenue) and 90% of total financial inflows to
the country for the same period (Figure 1-1).

Figure 1-1: Financial Flows to Afghanistan 2012-2014

FDI
1%

Remittances
9%

ODA
90%

Source: Ministry of Finance, 2015.

But aid flows are declining.

Afghanistan received a total of USD 12.9 billion in development assistance
between 2012 and 2014, or an average of USD 4.07 billion per year. However,
ODA in 2014 dropped to USD 3.6 billion, a decline of 37% from the previous year.
In 2014, ODA amounted to approximately 17% of GDP, down from 24% and 21%
in 2013 and 2012, respectively (Figure 1-2). ODA support is expected to fall to
16% of GDP by 2016. However, to maintain current levels of discretionary
spending, ODA should stay above 18% of GDP.

Millions

Figure 1-2: ODA as a % share of GDP 2009-2014

7000
6000
5000
4000

42%

40%

3000

26%

2000

21%

24%

2012

2013

17%

1000
0
2009

2010

2011

ODA (left axis)

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

2014

ODA as % of GDP

Source: Ministry of Finance, 2015.

Economic growth and domestic revenue are underperforming.

Between 2012 and 2014, the Afghan economy grew an average of 6.4% a year,
roughly in line with regional economic growth. GDP growth declined sharply to
2.1% in 2014, in part due to shocks owing to the electoral crisis and the
withdrawal of foreign troops. While Government macroeconomic forecasts
predict a recovery to about 4% for 2015, it is expected that economic growth will
remain steady and will not return to previous highs in the medium-term.
Meanwhile, domestic revenue collection underperformed during 2012-2014 and
revenue collection fell in 2014. While a number of new revenue measures have
been introduced, Afghanistan will remain highly dependent on foreign aid for the
financing of new development projects and security sector spending until at least
2025.
Overall poverty has declined, but some of the poor are worse off.
Per capita GDP in Afghanistan is expected to reach USD $750 by 2016, a
substantial increase from approximately USD $100 in 2001. According to
Government data, the percentage of Afghan households suffering from
multidimensional poverty has dropped from 93.2% in 2007/8 to 77.1% in
2011/12 (the most recent data available). However, the intensity of poverty for
those falling under the multidimensional poverty line has worsened in
approximately half the provinces over the same period (Figures 1-3 & 1-4).
Poverty is also worse in rural areas and for groups with less access to services
such as Kuchis .
Figure 1-3 Intensity of poverty (A) - 200708

Figure 1-4 Intensity of Poverty (A) - 201112

Source: AMDs calculation based on Central Statistics Office (NRVA 2007/08 and 2011/12) data.

While the level of deprivation across each of the 3 dimensions of poverty is

relatively similar for the urban population, poor standard of living appears to be
the main contributor to overall MPI for rural and Kuchi populations.
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Figure 1-5 Share of each MPI poverty dimension for various groups, 2011-12

100%
90%
80%
70%
60%
50%

Health

40%

Education

30%

Standard of Living

20%
10%
0%
Urban

Rural

Kuchi

Afghanistan

Source: AMDs calculations based on CSO (NRVA 2007/08 and 2011/12) data.

Key Recommendations

Donors should aim to keep ODA at a minimum of 18% of GDP in the mediumterm.
Donors and the Government should aim for equitable geographic
disbursements of ODA and enhance pro-poor service delivery in provinces
where poverty intensity has worsened.

Chapter 2: Development Assistance Post-Tokyo Conference

This chapter presents an analysis of the performance of ODA provided to Afghanistan

during the fiscal years 2012, 2013 and 2014. The chapter includes an assessment of
donor performance on pledges made at the Tokyo Conference. Further, the chapter
analyzes ODA disbursement to specific sectors, provinces and ministries.
55 % of Tokyos pledges were committed over three years.
The donors pledged USD 16 billion in Tokyo in 2012 ad since then have
committed USD 8.63 billion in grants and technical assistance and USD 121
million in soft loan. This amount to 55% of total Tokyo pledges committed
leaving 45% or USD 7.25 billion to be committed over the next two years (Figure
2-1).
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Billions

Figure 2-1: Donor Performance Against 2012 Tokyo Pledges

18
16

$16.0

14
12
$8.8

10

$9.3
$7.2

8
6
4
2
Pledged

Committed

Disbursed

Pledge not
commited

Source: MoF (2015).

Bilateral donors provided 86.7% of total ODA in 2012-2014, followed

by multilateral agencies (11.7%).
Afghanistans top 10 donors (7 bilateral donors and 3 multilaterals) disbursed
89% of the total ODA over the three years. The United States alone provided 35%
of total ODA during this period (Figure 2-2).
Figure 2-2: Top 10 donors by volume of disbursement, 2012-2014

US

35.3%

JPN

16.3%

GER
UK
ADB

10.7%
5.4%
4.7%

EU

3.9%

WB

3.7%

AUS

3.3%

NOR

2.9%

CAN

2.8%

Source: MoF (2015).

Although they provide the vast majority of ODA, bilateral donors implement only
56% of ODA themselves. About 25% is channeled through multilateral banks
(mainly through pooled funds) and 17.3% is channeled through the UN system.

Just over two-thirds (67%) of 2012-14 ODA was allocated to

development projects.
Another 17% was provided to budget support, 12% to humanitarian assistance,
and 4% to technical assistance (Figure 2-3). The emphasis on individual projects
outside of an overarching and coordinated program carries a higher risk of aid
fragmentation and duplication of donor efforts.
Figure 2-3: ODA Disbursements by Type of Intervention
Humanitarian
Assistance
Technical
12%
Assistance
4%

Support to
Recurrent
Budget
17%
Development
Projects
67%

Source: MoF (2015).

Three ANDS sectorsSecurity, Infrastructure, and Agriculture &
Rural Development accounted for 50.5% of total aid spending.
On-budget ODA spending focuses more on security, infrastructure, and
agriculture, whereas the largest sectors for off-budget ODA are health and
governance (Figure 2-4).

10

Figure 2-4: Comparison of on and off-budget ODA disbursements by ANDS sector, 20122014
Off Budget
On Budget
0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Security

Governance & Rule of Law

Infrastructure & Natural Resources

Education & Culture

Health

Agricluture & Rural Development

Social Protection

Economic Governance

Unclassified

Source: MoF (2015).

Off-budget projects tend to be smaller in size than on-budget projects. 58.7% of
off budget projects were very small (under 1 million USD). By contrast, only
21.7% of on-budget projects were very small and 9.3% were over 50 million.
When there are a large number of small projects, it overwhelms the institutional
capacity of the Government to effectively coordinate donor-financed projects.
Ten Government ministries received 70% of total ODA in 2012-14.

The top recipient was MRRD, followed by MoI, MoPH, and MoE. The rest of
budget entities, 51 in total, received only 21% of ODA, with the remaining 9%
allocated across all ministries.

Millions

Figure 2-5: Top 10 Budget Entities by ODA Disbursement, 2012-14

1600

13%

12%

Off-budget

1400

On-budget
10%

1200

8%

1000

8%
6%

800

5%

600

4%
3%

400

2%

200
DABS

IDLG

MoF

MoEW

MAIL

MoPW

MoE

MoPH

MoI

MRRD

Source: MoF (2015).

11

Key Recommendations
Donors who have fallen behind on commitments should coordinate
with GoIRA to clear any obstacles to disbursement of the remainder of
their pledges.
The administrative and management cost of pooled funds should be
rationalized as the size of such funds continues to grow creating
economies of scale.
All pooled funding mechanisms, as interim arrangements need to
maintain credible exit strategies to gradually transfer the
responsibility for management of funds to the government.
Donors should consider reducing the proportion of small projects in
order to streamline coordination and reduce administration costs.
Involvement in a particular sector should be justified not only on the
basis of strategic interest but also on the grounds such as knowledge
of the sector and comparative advantage relative to other partners in
the field.
Improve ODA reporting at the subnational levelonly 68% of ODA reported
between 2012 and 2014 was specified by province, making it difficult for the
Government to accurately track geographic disbursements.

Chapter 3: Alignment of ODA to Country Systems and

Priorities
Alignment with government priorities and use of country systems is at the heart of aid
effectiveness. This chapter assesses the extent to which donors have aligned ODA with
Governments priorities and their on-budget contributions, as agreed in the Tokyo
Mutual Accountability Framework.
Donors disbursed 48% of ODA on-budget in 2012-14, just short of the
50% Tokyo Mutual Accountability Target.
The share of on-budget ODA fluctuated between the three years, from 49% in
2012, to 46% in 2013, to 50% in 2014. However, the total volume of on-budget
ODA declined 17% from 2013 and 2014, due to the drop in overall ODA spending.
Only 12 donors exceeded the on-budget target in terms of commitments, and only
10 exceeded the target in terms of disbursements (Figure 3-1). Combined, these
10 donors account for 31% of total on-budget assistance.
Figure 3-1: Percentage of Donor Commitments and Disbursements On-Budget, 20122014

12

ADB
CAN 100%
CZE

WB
IsDB

80%

FRA

IND
60%

SWE

SPN

40%
20%

NOR

IFAD

0%

Com
Dis

AUS

ITA

GER

Target

UK
FIN

NED
JPN

EU
DEN

US
ROK

Source: AMDs calculation based on AFMIS and DAD data (2015).

Over the three years, 70% (USD $4.4 billion) of on-budget ODA was provided
through four pooled trust funds1, $2.2 billion of which was provided in the form
of recurrent cost support to the national budget (i.e. salaries, operating costs,
etc.). The other 30% was provided to the budget directly, mainly in the form of
project support. In these cases, funds were used to support a specific activity
through the national budget, with no flexibility for the Government to move
funds from low to high performing projects (Figure 3-2).

These trust funds are: The Afghanistan Reconstruction Trust Fund (ARTF), the Afghanistan Infrastructure
Trust Fund (AITF), the Law and Order Trust Fund (LOTFA), and the Afghanistan Peace and Reconciliation
Trust Fund (APRP).

13

Figure 3-2 Composition of on-budget ODA disbursements by modality, 2012-14

2014

27%

2013

73%

36%

Bilateral

64%

Trust Funds

27%

2012

0%

73%

20%

40%

60%

80%

100%

Source: AMDs calculation based on DAD data (2015).

The Government has steadily increased its budget execution rate.
Budget execution rates increased from 58% of all on-budget ODA in 2012 to 67%
in 2014 (Figure 3-3). Low execution rates are considered one of the main
bottlenecks to bringing more ODA on-budget.

Millions

Figure 3-3: ODA Expenditure as a % of On-Budget Disbursements, 2012-14

2500

2000

1500

1000

61%

67%

58%

500

0
2012

2013
Disbursment

2014

Expenditure

Source: AMDs calculation based on DAD data (2015).

14

There is still a lack of consensus between donors and the Government

on alignment with National Priority Programs.
Donors have committed to align 80% of total ODA with Government-defined
NPPs. According to donors who provided alignment data, USD $9.2 billion of
ODA between 2012 and 2014 was aligned with the NPPs, or 71% of total ODA.
However, according to data collected from line ministries over a similar period,
only $4.4 billion of ODA was classified as aligned with NPPs.2 This highlights the
need for joint assessments of alignment and a revision of the NPPs to make the
process of alignment clearer.
Key Recommendations

The 50% on-budget ODA target should be maintained. Donors who have
not yet reached the target should coordinate with the Government to
discuss options for bringing a higher share of ODA on-budget.

More flexibility should be provided to the Government to re-allocate onbudget aid from high-performing to low-performing projects within a
defined set of programs. This is likely to further increase budget execution
rates, enhance the Governments capacity to monitor projects, and will
allow the Government to respond more quickly to changing development
needs.

The Government will work with donors to review the NPPs to make them
more streamlined, time-bound, and focused on achieving specific and
measureable results. Donors should maintain a minimum target of 80%
ODA alignment with NPPs and jointly monitor progress with the
Government.

Chapter 4: Transparency of Aid for Improving Accountability

Availability of reliable, comprehensive, timely and forward looking aid data and
information has major impact on the governments ability to effectively plan its budget
and improve accountability of results. This chapter discusses progress and challenges
with aid reporting and making aid to Afghanistan more predictable and transparent.
Almost all known ODA is now captured in the Governments
Development Assistance Database (DAD)
In 2014, 97% of total ODA was entered into the DAD, making it the first year that
almost all known ODA was captured in the database. This was up from 58% in

MoF Policy Department Estimates, 2015.

15

2013. The DAD is the Governments main centralized source of information about
ODA and is publicly accessible online3.
However, data is often incomplete and/or submitted too late.
Specific areas for improvement include collecting better quality information on
geographic disbursements and ensuring that donors submit annual data early
enough to be incorporated into the Governments budget planning cycle.
For example, the Government issues ODA Request #1 to donors at the beginning
of each year to collect updated commitment and disbursement data for the midyear review of the national budget. In response to ODA Request #1 in 2015, only
51% of donors provided commitment and disbursement data based on the Afghan
fiscal year4; 42 % of donors provided disbursement data for FY 2014; and 46 % of
the donors provided commitment data for FY 2015. The lack of complete and
timely information undermines the quality of budgetary planning.
Figure 4-1: Donor Response Rate to ODA Request 1 (as a % of all donors), 2015
50%
45%

46%
42%

40%
35%

35%
30%

30%

30%
26%

28%
24%

25%

Total
On-budget

20%

16%

Off-budget

15%
10%
5%
0%
2014 Dis

2015 Com

2016 Proj

Source: AMD/MoF (2015).

The Government still lacks reliable information on medium-term aid
spending and financing agreements for off-budget projects.
Despite commitments to improving aid predictability by providing three to five
year aid projections, most donors continue to provide projections on an annual
basis. There are also inconsistencies between ODA projections provided to the
3

The DAD can be accessed at http://dadafghanistan.gov.af.

The Afghan fiscal calendar is December 21-20. Instead of translating allocation figures based on
the Afghan calendar year, some donors reported based on their own calendar year, resulting in
inaccurate commitment or disbursement figures.
4

16

GoIRA and global figures provided to the OECDfor instance, OECD aid
projections for Afghanistan in 2016 are 50% higher than the amount donors have
thus far reported to the GoIRA. Data submitted to the OECD suggests that multiyear forward spending projections are possible.
Additionally, only 41% of off-budget projects are governed by Financing
Agreements (FAs), which outline the scope, objectives, and details of each project
and help maintain Government oversight. By contrast, 100% of on-budget
projects have FAs in place. Donors have committed to sign FAs for all off-budget
projects.
Key Recommendations

The Government and donors should work together to continue reporting

and entering annual aid information into the DAD in a complete and
timely fashion, according to the Afghan fiscal year.

Donors should work towards providing the Government with mediumterm ODA projections to improve predictability and provide at least sector
level data at the start of the budget process.

Financing Agreements to be signed for all projects.

Mechanisms to facilitate joint assessments and regular program reviews

between donors and the Government should be improved.

Chapter 5: Towards Effective Development Cooperation

This chapter summarizes lessons learned from development cooperation in
Afghanistan over the past three years and proposes recommendations to improve aid
effectiveness going forward. Key to the governments reform agenda is its plan to make
the budget the primary instrument for implementing policy. To achieve this goal,
donor partners will need to ensure that their support to the budget is sufficiently
flexible, adaptive, and responsive to national priorities. The government aims to
further strengthen the aid architecture in Afghanistan in a manner that the
government sets priorities, identifies resource need through the national budget
process and DPs plan their aid allocation around the Afghan budget cycle. Until this
unified process for aid allocation is developed, off-budget support should be
increasingly aligned with the governments priorities with proper accountability and
oversight mechanisms ensuring meaningful participation of the government and other
stakeholders. Other recommendations include:

Donor coordination mechanisms should be reviewed and revised to reflect

changes to the Governments new policy frameworks for Aid Effectiveness.
These mechanisms should also include greater oversight and coordination
of humanitarian activities in Afghanistan.
17

Project proposals should take into account any recurrent operating costs
that will need to be borne by the Government in the future. Clear and
realistic strategies for transferring projects to Government control should
also be included.
A greater proportion of on-budget ODA should be made more flexible,
allowing the Government greater scope to allocate aid where it is most
needed. This can be accomplished by introducing programmatic or sectorbased approaches to development assistance.
Pooled funds should be brought under greater administrative control of
the Government, with appropriate risk-mitigating strategies in place.
Small and medium-sized donors should reduce the number of sectors they
are involved in and make greater use of pooled funds such as ARTF to
deliver aid.
Donors should strive to ensure that off-budget projects are not duplicating
or contradicting an existing government activity. Furthermore, salaries
and benefits provided to Afghan personnel must adhere to governmentdefined salary scales.
All donor activities should be registered in the DAD. Government
counterparts should be provided with the results of any monitoring and
evaluation activities, and GoIRA maintains the right to request an
independent third party or joint donor- government review.
Donors should prioritize projects that focus on increasing the domestic
revenue base of Afghanistan as rapidly as possible, particularly with
regards to the responsible and sustainable development of Afghanistans
mineral and petroleum resources. Development aid can also play a helpful
role in facilitating regional trade and cooperation.
Donors should support GoIRA in accessing alternative sources of
development financing such as Global Funds for development and publicprivate partnerships.

PART II
Profiles of Top 10 Donors to Afghanistan 2012-14
This part highlights details on ODA provided by Afghanistans top 10 donors by
total disbursements in 2012-2014. Each profile provides an overview of
commitments and disbursements during this period and outlines the proportion
of aid channeled through the budget, a breakdown of which sectors and
provinces they supported, and information on their largest projects.

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