Afghanistan: Balancing Social and Security Spending in the Context of a Shrinking Resource Envelope
For Afghanistan, the dual prospect of declining donor support and high ongoing security spending over the medium term keeps its government budget tight. This paper uses a general equilibrium model to capture the security–development trade-off facing the government in its effort to rehabilitate growt...
| Main Authors: | , , , , |
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| Format: | Article |
| Language: | English |
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World Scientific Publishing
2014-09-01
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| Series: | Asian Development Review |
| Subjects: | |
| Online Access: | https://www.mitpressjournals.org/doi/pdf/10.1162/ADEV_a_00033 |
| _version_ | 1818729428156416000 |
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| author | Aqib Aslam Enrico Berkes Martin Fukac Jeta Menkulasi Axel Schimmelpfennig |
| author_facet | Aqib Aslam Enrico Berkes Martin Fukac Jeta Menkulasi Axel Schimmelpfennig |
| author_sort | Aqib Aslam |
| collection | DOAJ |
| description | For Afghanistan, the dual prospect of declining donor support and high ongoing security spending over the medium term keeps its government budget tight. This paper uses a general equilibrium model to capture the security–development trade-off facing the government in its effort to rehabilitate growth and fiscal sustainability. In particular, it considers strategic policy options for counteracting and minimizing the negative macroeconomic impact of possible aid and revenue shortfalls. We find that the mobilization of domestic revenues through changes in tax policy is the preferred policy response for the Afghan central government. Such a response helps to place its finances on a sustainable path in the near term and preserve most of the growth potential. Cutting expenditures balances public finances but causes the economy to permanently shrink. Debt financing helps to preserve much of the economy size but can quickly put the sustainability of public finances at risk. |
| first_indexed | 2024-12-17T22:45:44Z |
| format | Article |
| id | doaj.art-7e936ac19002444cb57ecced6bebc381 |
| institution | Directory Open Access Journal |
| issn | 0116-1105 1996-7241 |
| language | English |
| last_indexed | 2024-12-17T22:45:44Z |
| publishDate | 2014-09-01 |
| publisher | World Scientific Publishing |
| record_format | Article |
| series | Asian Development Review |
| spelling | doaj.art-7e936ac19002444cb57ecced6bebc3812022-12-21T21:29:49ZengWorld Scientific PublishingAsian Development Review0116-11051996-72412014-09-0131216519710.1162/ADEV_a_00033ADEV_a_00033Afghanistan: Balancing Social and Security Spending in the Context of a Shrinking Resource EnvelopeAqib Aslam0Enrico Berkes1Martin Fukac2Jeta Menkulasi3Axel Schimmelpfennig4Aqib Aslam: Economist, International Monetary Fund.Enrico Berkes: PhD student, Northwestern University.Martin Fukac (corresponding author, martin.fukac@treasury.govt.nz): Principal Advisor, The New Zealand Treasury; 1 The Terrace, PO Box 3724, Wellington 6140, New Zealand.Jeta Menkulasi: Economist, International Monetary Fund.Axel Schimmelpfennig: Senior Resident Representative to South Africa, International Monetary Fund.For Afghanistan, the dual prospect of declining donor support and high ongoing security spending over the medium term keeps its government budget tight. This paper uses a general equilibrium model to capture the security–development trade-off facing the government in its effort to rehabilitate growth and fiscal sustainability. In particular, it considers strategic policy options for counteracting and minimizing the negative macroeconomic impact of possible aid and revenue shortfalls. We find that the mobilization of domestic revenues through changes in tax policy is the preferred policy response for the Afghan central government. Such a response helps to place its finances on a sustainable path in the near term and preserve most of the growth potential. Cutting expenditures balances public finances but causes the economy to permanently shrink. Debt financing helps to preserve much of the economy size but can quickly put the sustainability of public finances at risk.https://www.mitpressjournals.org/doi/pdf/10.1162/ADEV_a_00033Afghanistanpublic investmentdevelopment spendingsecurity spendingsecurity and growthpublic investment, and fiscal sustainability |
| spellingShingle | Aqib Aslam Enrico Berkes Martin Fukac Jeta Menkulasi Axel Schimmelpfennig Afghanistan: Balancing Social and Security Spending in the Context of a Shrinking Resource Envelope Asian Development Review Afghanistan public investment development spending security spending security and growth public investment, and fiscal sustainability |
| title | Afghanistan: Balancing Social and Security Spending in the Context of a Shrinking Resource Envelope |
| title_full | Afghanistan: Balancing Social and Security Spending in the Context of a Shrinking Resource Envelope |
| title_fullStr | Afghanistan: Balancing Social and Security Spending in the Context of a Shrinking Resource Envelope |
| title_full_unstemmed | Afghanistan: Balancing Social and Security Spending in the Context of a Shrinking Resource Envelope |
| title_short | Afghanistan: Balancing Social and Security Spending in the Context of a Shrinking Resource Envelope |
| title_sort | afghanistan balancing social and security spending in the context of a shrinking resource envelope |
| topic | Afghanistan public investment development spending security spending security and growth public investment, and fiscal sustainability |
| url | https://www.mitpressjournals.org/doi/pdf/10.1162/ADEV_a_00033 |
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