Home » Afghanistan: Balancing Social and Security Spending in the Context of Shrinking Resource Envelope by Aqib Aslam
Afghanistan: Balancing Social and Security Spending in the Context of Shrinking Resource Envelope Aqib Aslam

Afghanistan: Balancing Social and Security Spending in the Context of Shrinking Resource Envelope

Aqib Aslam

Published May 30th 2013
ISBN : 9781484335925
ebook
35 pages
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 About the Book 

For Afghanistan, the dual prospect of declining donor support and high ongoing security spending over the medium term keeps the government budget tight. This paper uses a general equilibrium model to capture the security-development tradeoff facingMoreFor Afghanistan, the dual prospect of declining donor support and high ongoing security spending over the medium term keeps the government budget tight. This paper uses a general equilibrium model to capture the security-development tradeoff facing the government in its effort to rehabilitate macroeconomic stability and welfare. 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 Afghan central government. Such a response helps to place its finances on a sustainable path 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 jeopardize the sustainability of public finances.