Senate report: Afghanistan faces economic downturn

[June 08, 2011]  WASHINGTON (AP) -- Afghanistan is at risk of a deep financial crisis when foreign troops leave in 2014 if the United States is unable to overhaul its multibillion-dollar package of nation-building assistance, according to a congressional report that comes as President Barack Obama weighs the size and scope of the initial phase of a U.S. troop drawdown.

The report, completed over two years by Democrats on the Senate Foreign Relations Committee, said the U.S. stabilization programs in Afghanistan have had limited success despite about $18.8 billion in U.S. foreign aid over 10 years -- more than any other country, including Iraq.

Misspent foreign aid can result in corruption, alter markets and undercut the ability of the Kabul government to control its resources, said the report, which was posted Tuesday night on the Senate committee's website. The World Bank found that a whopping 97 percent of the gross domestic product in Afghanistan is linked to spending by the international military and donor community.

"Afghanistan could suffer a severe economic depression when foreign troops leave in 2014 unless the proper planning begins now," the report said.

The State Department and the U.S. Agency for International Development are spending about $320 million a month on foreign aid there, relying on the money to "win hearts and minds." Among the successes has been a sevenfold increase in the number of children attending school and gains in health care.

But the report said the United States must take a closer look at how it spends the money, relying heavily on contractors. The U.S. must do a better job of oversight, especially as it funds more aid through the Afghan government. One recommendation was to standardize Afghan salaries and work with the government on staff limitations.

The panel's Democrats also suggested that Congress implement multiyear aid programs and closer scrutiny of stabilization programs

"Transition planning should find the right balance between avoiding a sudden drop-off in aid, which could trigger a major economic recession, and a long-term phase-out from current levels of donor spending," the report said.

The report came a day before the Foreign Relations Committee's confirmation hearing for Ryan Crocker, Obama's choice to serve as U.S. ambassador to Afghanistan. Crocker is certain to face several skeptical and war-weary lawmakers wondering about the U.S. investment in Afghanistan in the 10th year of the war and after the killing of al-Qaida leader Osama bin Laden.

Republicans and Democrats are pressing for a robust drawdown of the 100,000 U.S. forces from Afghanistan, expected to begin in July, especially in a time of serious U.S. financial woes. The administration is seeking about $3.2 billion in foreign aid for Afghanistan in next year's budget, an amount likely to be closely reviewed.

[Associated Press; By DONNA CASSATA]

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