Afghanistan Analysts Network – English

Economy, Development, Environment

Realpolitik and the 2021 National Budget: The toxic struggle for money and power that undermined Afghanistan’s Republic

Roxanna Shapour 42 min

The 2021 new year did not get off to a promising start in Afghanistan. The conflict was raging, violence was at an all-time high for winter and the so-called peace talks were hobbling along in Doha. In what turned out to be the waning months of the Republic, lawmakers and government were deep in the throes of their annual wrangling over the national budget, seemingly oblivious to the ominous events unfolding around them. In this report, AAN’s Roxanna Shapour* takes a closer look at the fight over the 1400 national budget. It is an example that showcases the struggle for money, power and influence that was the hallmark of the post-2001 administrations and which shaped the life and fall of the Islamic Republic of Afghanistan.

Afghanistan's then President Ashraf Ghani in parliament for the introduction of ministerial nominees. Photo: Wakil Kohsar/ AFP, 21 October 2020

The business of approving budgets is never without controversy, especially in Afghanistan. In December 2020, with donor funding in decline, the economy reeling from the Covid-19 pandemic, two years of severe drought, and the conflict raging across the country, the 1400 (2021) budget became a serious flashpoint between parliament and government, with MPs delaying their winter recess in favour of continuing the debate on the budget to a resolution. While there had been delays and standoffs before, last year’s level of acrimony was unprecedented.

The account that follows delves into the manoeuvrings of the Republic’s political elite. It is an instructive example of how the quest for money, power and influence created the toxic dynamic that ultimately led to the fall of the regime. It is an astonishing story of men and women too busy lining their own pockets and too intoxicated by the prospects of power to notice the wolf at the door.

Against this backdrop, it is important to note that there were brave reformers, steadfast in their resolve to steer Afghanistan to safe harbours and secure a safe and prosperous future for the Afghan people. They made valiant efforts to tackle the dissonance, nepotism, rampant corruption and the failures of national leaders who failed to push for sustainable plans in the face of diminishing foreign revenues and an advancing Taleban. In the end, the inability, or unwillingness, of Afghanistan’s political elite to overcome the obstacles of their own making and act in the best interest of the Afghan nation, rather than their own self-interest, was the undoing of the Republic.

In this new post-Republic landscape, it is essential to reflect on these accounts, as they say so much of what went wrong and why the Republic collapsed.

Highlights of the report:

  • Afghanistan’s final enacted national budget for fiscal year (FY) 1400 stood at 473 billion Afs (USD 6.14 billion). The operating budget, which is used to run the government, accounted for 311 billion Afs (USD 4.03 billion) and the development budget for 161 billion Afs (USD 2.09 billion). In other words, the operating budget accounted for two-thirds of spending and the development budget for one-third. This meant that for every one dollar spent on development, the government spent two dollars keeping the state running.
  • Lawmakers signalled their intention to reject the budget early, with the speaker calling it “inequitable, unbalanced and blatantly discriminatory against the people of Afghanistan.” They gave 17 reasons for rejecting the budget (later increasing to 19), chief among them were the removal of the customary projects annex, large allocations to contingency funds and the inclusion of a controversial Covid-19 assistance programme. With the battle between the government and parliament raging on, mostly on televised debate programmes, then President Ghani, frustrated with the slow pace of progress, fired his Minister of Finance. The arrival of Khalid Payenda as the new finance minister, a professional with a good track record of service at the ministry, including, importantly in budgeting, represented a sea change, allowing negotiations to move forward to an ultimate resolution.
  • Although it was normal for parliament to reject the budget, the stand-off in 2021 seemed more like a show of force by the Afghan parliament against the government. As the confrontation between MPs and the government intensified, with accusations and counter-accusations of hijacking the budget, coercion and corruption, the budget became the battleground for political ascendancy and over graft between lawmakers and the Palace. One example of this was a reported behind-the-scenes dispute between the government and senior members of parliament, who reportedly had beneficial relationships with the oil companies that sold fuel to the security sector.
  • Having ministers who are acting, ie not approved by parliament, was a bugbear for MPs both when Hamed Karzai and then Ashraf Ghani were presidents and was one of the irritants in the Ghani-parliament conflict. In January, when lawmakers were deliberating the budget, there were five acting ministers, the most controversial of which was the Governor of the Central Bank, Ajmal Ahmadi, who had a history of disregarding the Wolesi Jirga when, as acting commerce minister, he refused to appear in parliament when he was summoned there to answer questions about a hike in fuel prices. The most significant source of rancour was the central bank’s plans to regularise Afghanistan’s traditional and widely-used money transfer system known as hawala.
  • The move to regularise the informal system by requiring each hawala broker to register was one of Afghanistan’s key anti-money laundering commitments. However, the hawala brokers resisted the move, saying it would harm the private sector and lead to a flight of capital. The issue was finally resolved when the union’s chairperson, Mir Afghan Safi, who was also an MP and handily the head of the parliamentary budget and finance committee met with then President Ghani, along with several other hawala brokers, paving the way for the budget to be approved the next day.
  • Finally, after weeks of wrangling, MPs were able to get concessions from the government on four key points. First, the controversial projects annex that had been removed by order of then president Ghani was included in the budget, albeit in a significantly pared-down format down to some 370 projects, about two-thirds less than the original 1,131. Second, contingency funds, put aside in the budget to have money available for unforeseen expenditures, but which MPs said opened the door for unchecked corruption, remained in the budget but were reduced to finance a much-debated increase to civil service salaries. Third, a living wage for low-ranking civil servants had become a battle cry for lawmakers who said they would not approve the budget without provisions to increase salaries. In the end, the government agreed to raise the wages of the lowest-ranking government employees by about USD 25 per month. Finally, the controversial Covid-19 relief programme, Dastarkhwan-e-Meli (National Tablecloth), was removed from the budget.
  • All along, demands, threats and concessions were dressed up as high-minded principles, but appeared driven mainly by self-interest and self-aggrandisement. The new finance minister had saved the 1400 budget but was not particularly happy with it. He was looking forward to preparing the 1401 budget with more care and better negotiations and presenting to the Afghan people a more realistic, more transparent budget that placed greater value on delivering services. That, of course, was not to be.

The budget that was submitted and the one that was enacted

The Ministry of Finance (MoF) presented the first draft of the 1400 (2021) national budget to a plenary session of the Afghan parliament on 7 December 2020. It envisaged spending 452 billion Afs (USD 5.87 billion), [1]All calculations are based on USD 1 = 77 Afs. a 5.6 per cent increase compared to the 1399 budget, which had come in at 428 billion Afs (USD 5.55 billion) (See Table 1 for a breakdown of the budget, including allocations by sector, for the 1399, the first draft and the final enacted 1400 budgets.)

A man counts Afghan currency notes at the money exchange Sarai Shahzada market in Kabul.
Photo:Mohd Rasfan/AFP, 20 December 20, 2021

When he presented the first draft of the budget for parliamentary approval, then Deputy Minister of Finance Abdul Habib Zadran told MPs that the government had set a revenue target of 216.5 billion Afs (USD 2.81 billion) for the year 1400. Many believed this to be overly ambitious and indeed unattainable, especially in light of the Covid-19 pandemic. Afghan government revenue in the first half of 2020 had fallen by 18 per cent compared to the same period in 2019 – a decline of about USD 230 million. (See AAN report on the impact of the pandemic on Afghanistan’s economy here). More bad figures came earlier this year. After the final tally of annual revenues, the World Bank reported in April 2021 that Afghanistan’s domestic revenues had “collapsed to 11.4 percent of GDP in 2020,”or 172.9 billion Afs (USD 2.24 billion). This was about USD 447 million less than domestic revenues in 2019, which stood at Afs 207.3 billion (USD 2.69 billion) and even below the revised revenue target of 177.7 billion Afs (USD 2.3 billion). (See Afghanistan Development Update April 2021 Setting Course to Recovery here.)

As in previous years, Deputy Minister Zadran said, the government had prioritised building roads, schools, mosques and health centres, supporting farmers and establishing cold storage facilities. For the first time, water management received particular attention, with the government planning to build 43 dams in “underprivileged provinces”, namely Ghazni, Khost, Zabul, Logar, Paktia and Paktika. In addition, customs houses were to get three billion Afs (USD 38.96 million) for digital scans, scales and cameras. Other priority areas were mines, which he said could contribute an annual one billion Afs (USD 1.29 million) to the economy; regional connectivity with emphasis on border railways, constructing Aqina-Andkhoy and Khaf-Herat lines and maintaining the Mazar-Hairatan line and; plans to distribute 10 million electronic ID cards (see Hasht-e Sobh report here).

In the end, Afghanistan’s enacted national budget for fiscal year (FY) 1400 stood at 473.04 billion Afs (USD 6.14 billion). The operating budget, which is used to run the government, accounted for 311 billion Afs (USD 4.03 billion) and the development budget for 161 billion Afs (USD 2.09 billion). In other words, the operating budget accounted for two-thirds of spending and the development budget for one-third. This meant that for every one dollar spent on development, the government spent two dollars keeping the state running. (See final enacted budget.)

According to the enacted 1,400 budget, 435.44 billion Afs (USD 5.65 billion) would have come from domestic revenues (216.5 billion or USD 2.81 billion) and foreign aid contributions, including loans (218.94 billion Afs or USD 2.84 billion). This would have left an estimated shortfall of 37.6 billion Afs (USD 488.31 million), of which 20 billion (USD 259.74 million) would have come from government reserves, 17.4 billion (USD 225.97 million) from the International Monetary Fund’s (IMF) Extended Credit Facility (ECF), [2]The ECF provided highly concessional financing to Afghanistan against the achievement of agreed-upon economic benchmarks. In November 2020, the IMF approved a 42-month USD 370 million (28.49 billion … Continue reading leaving a final deficit of 200.08 million Afs (USD 2.59 million).

Table 1: Budget breakdown and allocations by sector, in the 1399, the first draft and the final enacted 1400 budgets

Table 1: Budget breakdown and allocations by sector, in the 1399, the first draft and the final enacted 1400 budget

** See footnote [3]The 1400 budget document defines social protection as: [E]xpenditure on services and transfers provided to households and individuals for: ill and disables, aged, and orphans, cash benefits and … Continue reading *** See footnote [4]The 1400 budget document defines public service spending to be comprised of “executive and legislative organizations, financial and fiscal affairs, external affairs, and general services of which … Continue reading

The battle for control of the budget

Parliament’s rejection of the budget on 30 December 2020 was not unexpected; MPs tended to reject budgets the first time around, a practice that paved the way for negotiations between them and the government (see media report here and ANN report on the provincial annex here). This year, the MPs signalled their intention to reject the budget early. Even before they had fully reviewed it, MPs complained that the government had submitted the budget bill late, leaving them insufficient time to review it in committee. Under the Public Finance and Expenditure Management Law, the budget should have been sent through the upper house of parliament (Meshrano Jirga) to the lower house (Wolesi Jirga) “not less than 45 days preceding the fiscal year.” The 1400 national budget bill was delivered to the Meshrano Jirga late, on 8 November, 43 days before the end of the financial year, which fell on 20 December. It was not presented to the plenary session of the lower house until 7 December, but that delay was a matter for the parliament rather than the government.

MPs also expressed their ire with the government after reading a report published by Kabul-based daily Etilaat-e Roz on the day the budget was presented to parliament. The paper alleged that in the year 1398 (2019), “a significant part of [the contingency] policy code 91 was used unethically and spent for personal purposes.” The MPs used this allegation to attack the government and raise questions about the credibility of the 1400 budget, particularly its use of contingency codes, spending of which was not fixed and subject to presidential discretion, with little accountability to parliament. In its readout of the 19 December 2020 Wolesi Jirga session, news website Ava press reported that lawmakers had accused the government of using code 91 to loot the public purse, with MP Belqis Roshan calling it “the national betrayal code.” In a written statement to Etilaat-e Roz, then government spokesperson Sediq Sediqi denied the paper’s claims, saying “the published documents were publicly available and had been released by the government as part of its transparency policy.”

When they received the first draft of the budget bill, MPs discovered that the customary annex of provincial projects commonly referred to as ‘the MPs annex’ had been removed by order of then President Ashraf Ghani. This was not the first time the government had attempted to do away with this problematic annex (more on this later). However, this year the message to the MPs was clear – the president would not entertain a compromise that would see the annex included in the budget because Afghanistan could not afford to implement the 1,131 projects on the list (see ToloNews’ Farakhabar discussion programme).

Speaker Mir Rahman Rahmani called the first draft of the budget “inequitable, unbalanced and blatantly discriminatory against the people of Afghanistan,” and the Wolesi Jirga rejected it, giving 17 reasons. [5]AAN’s translation of parliament’s list of 17 reasons for rejecting the first draft of the budget (see Dari here) Large allocations to the Presidential Operational Unit and departments that the … Continue reading

The most important of which were: the budgetary allocations to five ministries with acting ministers as well as to state entities created by presidential decree; the removal of the provincial projects annex; large allocations to contingency codes and the Operation and Support Office of the President for National Development (commonly referred to as the presidential operations unit) and; the transfer of the National Rural Access Programme (NRAP from the Ministry of Rural Rehabilitation and Development (MRRD) to the Ministry of Public Works (MoPW).

Lawmakers threatened to re-draft the budget themselves, with MP Mir Ahmad Safi telling Kabul-based daily Etilaat-e Roz: “If the government does not genuinely amend the budget document, the parliament will reject it many times. Finally, if it is still not acceptable, the deputies will bring changes themselves and approve the amendments.” MP Sayed Azim Kabarzany confirmed that parliament had asked its legal experts for an opinion on whether MPs were within their legal rights to bring the necessary changes to the budget themselves if the government did not address their concerns (see ToloNews’ Farakhabar here). MPs also announced that they would delay their winter recess until the budget was approved.

Their stance drew a strong response from then President Ghani. On 6 January 2021, he told a meeting of the Cabinet: “Constitutionally, parliament cannot replace the government. [Article 95 of] the constitution makes it very clear that drafting and presenting the budgeting is the job of the executive branch, and [article 97 provides that] the parliament should either approve or reject it as a whole.” Ghani also warned that he would not consider returning the annex of provincial projects to the budget, which he said were “large and small projects [amounting to] billions [of Afs] that are based on [the] personal preference [of MPs].”

The government submitted the budget for a second time on 12 January 2021. A tweet on the same day by then finance ministry spokesperson Shamroz Khan Masjidi said: “We are sending the second draft of the budget for the fiscal year 1400 with an increase of 20 billion Afs (USD 259.74 million) to the parliament again, today, for approval.” According to a senior finance ministry official, this increase was largely related to the government’s budgetary commitments to the international military, the Combined Security Transition Command – Afghanistan (CSTC-A). Except for this addition, the budget bill remained largely unchanged. True to their word, the MPs, who had warned that they would reject the budget as many times as it took for the government to address their concerns, did so on 16 January 2021, this time citing 19 reasons for their rebuff, adding a demand to increase civil service salaries and their objection to the inclusion of the government’s controversial Covid-19 assistance programme, Dastarkhwan-e-Meli (National Tablecloth) to their original list. [6]AAN’s translation of parliament’s list of 19 reasons for rejecting the second draft of the budget (see Dari here) The annex was removed (proposed amendments by MPs were not even … Continue reading

As the battle for control of the budget continued to play out in the media, President Ghani, apparently frustrated with the acrimonious stalemate between the government and parliament, the slow pace of work at the MoF and “viola[tion] of decrees and directions of the High Office of the President,” dismissed finance minister Abdul Hadi Arghandiwal [7]Arghandiwal was removed from his position as minister of finance on 23 January 2021 by presidential decree for “disobedience of presidential decrees and instructions.” He was also accused of … Continue reading and appointed the former deputy finance minister, Khalid Payenda in his place.

Payenda’s arrival, on 23 January, at the helm of the finance ministry heralded a sea change in the government’s engagement with the Wolesi Jirga. (Read Payenda’s fascinating interview with AAN about his seven-month tenure as the Republic’s last finance minister, part one and part two.) For one thing, the ministry of finance staff, who had been mostly reluctant to grant media interviews, started responding to criticisms levelled against the budget. For example, MoF’s Director-General for Budget Sayed Naseer Ahmad participated in ToloNews’ Mehwar programme and responded to allegations that the ministry had not been forthcoming with information about the details of ‘super-sized’ salaries paid to some government employees. He said: “We can’t provide details for the qualifications and salaries of every single staff member [in the budget document]. If we were to do this, the budget would be sprawling [held up his hand to indicate an oversized document].… I disagree with this allegation. We have provided any information requested by the parliament promptly.” In another televised programme, Shir Khan Naseri, an adviser at the Ministry of Finance, criticised MPs for using acting ministers as an obstacle to approving the budget: “The issue of acting ministers is not related to the budget. Budgets are allocated to institutions, not to individuals. Therefore, discussions around acting ministers should be removed from consideration” (see ToloNews’ Farakhabar here). There was also a marked change in the messaging from the government. It began to quietly acknowledge the role and remit of the parliament and expressed respect for the function of the Wolesi Jirga and its responsibility to scrutinise the budget and have the final say in passing or rejecting it. Speaking to ToloNews, MP Kabarzany noted: “The government accepted the legal status of the Wolesi Jirga. I want to thank my colleagues who demonstrated patience.”

The major driver of conflict between government and MPs over the budget was always the politics of trying to gain control of state spending. Yet there were also practical reasons why there was almost always battles and skirmishes to get it over the line. Integrity Watch Afghanistan’s (IWA) Head of Advocacy and Communications, Naser Timory, said one problem was the highly centralised budget formulation process that lacked sufficient, if any, parliamentary consultation before the budget document was submitted to the Wolesi Jirga. “The MPs only see the budget,” said Timory, “when it’s sent to them for approval and have no understanding of the decision-making process.” Speaking to AAN on 7 February, ie before the third draft was passed, he said he was not convinced that meaningful change could be brought to the 1400 budget at that late stage: “Preparing a budget takes time; any eventual changes to the budget will likely be based on political bargaining.” He predicted, correctly, “The budget will not be seriously amended and will be approved by the parliament with minor changes.”

The third draft of the budget went to the Wolesi Jirga on 4 February 2021. It included amendments in response to some of the MPs’ demands; in particular, Dastarkhwan-e-Meli had been removed and money had been set aside to increase the salary of some civil servants, but the so-called projects annex had not been included. The government said it was ready to make other amendments to gain parliamentary approval. A week later, as discussions continued behind the scenes and in the media, MPs were divided in their assessments of changes brought in the third draft of the budget (see here and here). In a televised press conference on 11 February, Payenda took his case directly to the Afghan people. He said:

All the demands of the MPs that are reasonable, practicable and in line with the government’s available financial resources have been addressed in the third draft of the budget. We have addressed all the concerns of the esteemed representatives, the shortcomings in the budget have been amended and we have presented a better budget. The government and the Ministry of Finance do and always have, respected the authority, ascendance and mandate of the parliament. The Ministry of Finance is the parliament’s main partner on technical matters related to the budget and its financial issues.

Payenda warned of the fallout to Afghanistan’s “relatively small economy” from any further delays in getting the budget approved. He expressed his concern that this would hamper revenue collection, harm the private sector and exacerbate poverty at a time when Covid-19 had already caused the economy to contract. A further delay, he said, would affect Afghanistan’s ability to meet contractual obligations, grow the economy, create jobs and would “deepen the poverty crisis.” He added, “Some of our commitments to the international community will be delayed,” which he said could lead to unfavourable annual reviews and challenge Afghanistan’s “ability to access aid in subsequent years.” Payenda stressed his commitment to seeing the “salaries of teachers and low-ranking civil servants increase significantly” in 1400.

Payenda said that 1.7 billion Afs (USD 22.07 million) had been set aside in a special code that would be used to increase civil service salaries. He added that the government anticipated adding another five to six billion Afs (USD 64.93 to 77.92 million) from savings elsewhere in the budget. Payenda stressed that 16 of the 19 “suggestions that were made when the second draft was rejected were considered and resolved.” The remaining three would need to be discussed and negotiated with the parliament. He specifically mentioned the transfer of the National Rural Access Programme (NRAP) from the Ministry of Rural Rehabilitation and Development (MRRD) to the Ministry of Public Works (MoPW), saying that existing gaps in coordination and the complex nature of building the road network in Afghanistan meant that a single entity should be responsible for roadworks. While the acting finance minister did not specify the other two outstanding issues, it can be assumed these related to the status of the MPs’ projects annex. The annex was eventually added to the revised third draft, albeit in a significantly reduced form (from 1,131 to some 370 projects).

After weeks of public wrangling and controversy, mostly played out in the media, especially on evening television debate programmes (see for example here and here), the MPs scored a win. The government had finally agreed to remove some items from the budget, including the Dastarkhwan-e-Meli; reduce budgetary allocations to the contingency funds; add back in the MPs’ projects annex, even though these had been removed under President Ghani’s instructions and; increase the monthly salaries of low-ranking civil servants and teachers (grades 1-8) by 2,000 Afs (USD 25).

On 22 February, the MPs approved the revised third draft of the budget with an overwhelming majority – only three of the 147 MPs present voted against it. This ended a stalemate that had lasted two months and 17 days. Addressing the plenary session of the parliament after the vote, speaker Mir Rahman Rahmani said it had been:

A historic day for the house of representatives and the people…. As a result of your efforts and principled standpoint the government complied with the parliament’s demand. After two months of resistance and careful study of the budget, the parliament had succeeded in including important and legitimate demands of the people in the budget document…. What we did was neither political nor hostage-taking, but the seizure of the Wolesi Jirga’s powers under the constitution. (see here and here).

Khalid Payenda addressing the Government of Afghanistan and United Nations joint humanitarian appeal on 11 July 2021. Photo: Khalid Payenda Twitter (@KhalidPayenda), 11 July 2021

The political stand-off between lawmakers and the government

Although it was common for parliament to reject the budget, this year’s stand-off, with MPs presenting a united front, seemed more like a show of force by the Afghan parliament against the government. Towards the end of last year, the confrontation between parliament and the government of Afghanistan had intensified, with accusations and counter-accusations of hijacking the budget, coercion and corruption (see ToloNews Mehwar here). On 7 September 2020, in its first plenary session after its summer recess, the Wolesi Jirga called the government’s programme designed to counter crime in major cities, Misaq-e Amniyati (Security Charter), a “militia building” scheme (media report here). Later, on 21 September, MPs levelled criticism against several other government programmes, including the Dastarkhwan-e-Meli (National Tablecloth), the government’s Covid-19 relief effort to distribute rice, flour, beans, oil to 2.9 million households. The more than 20 state entities established or merged by separate presidential decrees over the past few years was another ongoing dispute between the Wolesi Jirga and the Palace. This practice, MPs said, violated Article 90 of the constitution, which gave parliament the power to “creat[e], modif[y] and/or abrogate[e] administrative units.” (See AAN report).

Things reached a tipping point when then Vice-President Amrullah Saleh, speaking at a side event of the international pledging conference in Geneva on 23 November, made counter-accusations that MPs were involved in corruption, including fraud and embezzlement. Saleh said that MPs tried to influence and manipulate the process of formulating the budget by threatening ministers, “cater to their illegal demands or face de-seating them from office.” He said that parliament’s power to de-seat a minister has given MPs “an outsized and unchecked influence.” The next day, an enraged parliament cancelled confirmation hearings for various ministerial nominees and said they would not resume them until Saleh apologised. When they did resume, MPs rejected all five candidates (four ministerial nominees, plus the central bank governor), all from Ghani’s electoral camp (See AAN report).

Saleh’s remarks may have been aimed at addressing a rift between the government and donors concerning Afghanistan’s progress on its commitments to fighting corruption. As pointed out in a UNAMA report in June 2020, “backsliding from government and growing frustration from donors” had “revealed growing disagreements about whether [anti-corruption] targets were reached” (see AAN analysis here). The report also highlighted the difficulty of prosecuting sitting MPs for alleged wrongdoings. According to article 102 of the Republic’s constitution, MPs could be held to account for crimes they are accused of, but parliament’s approval was required for their detention. According to the UNAMA report, “No authorization to remove immunity of any Parliamentarian is on record, which created a culture of de facto impunity.” In this light, Saleh’s statement could have been a warning to the Wolesi Jirga that the government intended to take serious steps to tackle graft by MPs.

One example of this was a reported behind-the-scenes dispute between the government and senior members of parliament, including speaker of parliament Mir Rahman Rahmani [8]Mir Rahman Rahmani was named by Al-Jazeera in the Cyprus Papers as one of the politically exposed persons who “invested” 2 million dollars (USD 2.5 million) to obtain a passport from the Republic … Continue reading who, according to reports in the Afghan media, had beneficial relationships with oil companies – an allegation which was finally put to speaker Rahmani on the floor of the parliament on 27 January 2021 (see parliamentary record here) and one which he has publicly and repeatedly refuted.

The MPs were reportedly unhappy about plans to bring military fuel contracts away from the Combined Security Transition Command (CSTC-A) and place them under the umbrella of the government’s procurement process, with the Kabul-based daily Weesa implicating “some members of the Wolesi Jirga engaged in corrupt oil contracts,” and calling that group of MPs a “fuel mafia.” The report quoted fellow MP Kamal Nasir Osuli as saying: “Fuel imported for international and national forces has a customs exemption; this is where corruption starts and stealing from the national budget begins.” The newspaper Sobh-e Kabul reported:

One of the reasons the 1400 budget was not approved by the House of Representatives is that the oil mafia has taken the 1400 budget bill hostage and does not want it to include fuel contracts for the Afghan Ministries of Defense and Interior…. [and wants to] keep these contracts in the hands of the Combined Transition Forces for Afghanistan (CSTC-A).

In 2019, Osuli stood against Rahmani in a highly contentious contest for the parliamentary speaker’s chair. Rahmani won the speaker’s seat with 123 votes against Osuli’s 55, but there was controversy over three missing ballots, with many MPs demanding a re-vote (see Etilaat-e Roz report here). It took two months of wrangling, and another two rounds of voting and the first of two brawls on the Wolesi Jirga floor on 19 May 2019 (see this ToloNews report), before Rahmani was finally declared Speaker of Parliament after a third vote when 136 ballots were filed in his favour against his opponent Mohammad Khan Wardak’s 96. Another brawl broke out in parliament on 19 June as Rahmani was being seated as speaker (see this Radio Free Europe/Radio Liberty report). The majority finally prevailed and Rahmani was seated as Speaker of the Afghan parliament on the same day. 

The report also quoted MP Maryam Sama as saying: “Some [MPs] are not approving the budget, not for the benefit of the people and to make the budget more balanced, but because of [contracts for] projects [worth] millions to companies they own.” Media reports also cited claims by an anonymous government source that several MPs “had taken the budget hostage” in order to remove fuel contracts from the budget and return them to CSTC-A (see here and here).

Finally, during a plenary session of the parliament on 27 January, MP Sayed Ahmad Selab put the question directly to the speaker and asked him to clarify his involvement in “the cancellation of oil contracts” and its role in the budget dispute. Rahmani responded: “It is the president, [Fazel] Fazly (head of the administrative office of the president and [Hamdullah] Mohib (national security advisor) [who] have taken it [the budget] hostage.” He challenged his accusers to present evidence of their allegations before adding: “It is obvious that the mafia is in the Palace.” No evidence to prove these allegations has been made public as of this writing.

The accusations and counter-accusations went both ways, as described by another MP Habib ul-Rahman Pedram and reported by ToloNews: “Mr Mohib has started from one side, Mr Fazli from another, the state minister from another side and now the NDS chief has entered the arena while he should do his intelligence activities and should not get involved in the budget.” Lawmakers, reported Tolonews, accused the government of trying to bully them by firing their relatives from government jobs, including “in the NDS, the brother of Hamida Ahmadzai, the husband of Robina Jalali, Lailuma Wali Hukmi’s husband, and others whose relatives voted against the budget” (see here and ToloNews here).

In another heated clash, the president’s wife, Rula Ghani, provoked a parliamentary backlash after a 19 December 2020 interview with the Afghanistan service of Radio Free Europe / Radio Liberty’s, Radio Azadi. Commenting on the rejection of five ministerial nominees, including two women by the Wolesi Jirga, Mrs Ghani said the parliament had “become an arena for trading [votes].” She went on to say that the rejected ministers would remain in their posts regardless of what parliament wanted. MPs denounced her statements in an open session of the Wolesi Jirga on 24 December and lashed out angrily at the government; some MPs called for Rula Ghani to be stripped of her Afghan citizenship. MP Sayyed Eshaq Gailani said: “This is a dictatorship whose source is the presidency. Now, the president’s wife is speaking without any legal authority” (See media reports here and here).

Manoeuvring over acting ministers

Having ministers who are acting, ie not approved by parliament, was a bugbear for MPs both when Hamed Karzai and then Ashraf Ghani were presidents and was one of the irritants in the Ghani-parliament conflict. While the Law on Acting Ministers and Officials (article 4, see official gazette here) limited the acting period for ministers to two months, the practice of keeping candidates in their post even after the parliament had rejected them (in some cases to around two years) was ubiquitous. In fact, President Ghani was unable to have a single fully endorsed cabinet during his entire first term in office. Just a month before the 2019 presidential election, for example, there were at least 15 acting ministers, including those dealing with security (AAN reporting here).

In unusual practice, President Ghani took 25 cabinet nominees to the parliament on 21 October. The parliament confirmed 20 and rejected five others. Photo: Presidential Palace’s Facebook, 21 November 2020

For his second term, it took seven months after his inauguration for Ghani to present a full list to parliament, which he did on 25 October 2019. As AAN previously reported, despite ongoing tensions between the Palace and Wolesi Jirga, lawmakers did then confirm 20 of the 25 proposed ministers, “extend[ing] an overwhelming show of support to the government’s nominees in the face of a precarious security situation and ongoing talks with the Taleban” (see AAN report here). However, five candidates were rejected, all from the Ghani electoral camp, after the first vice president, Amrullah Saleh speaking at the 2020 pledging conference in Geneva, accused MPs of being involved in corruption. Not only did MPs reject the five proposed ministers they also called for Saleh’s resignation and referred him to the Attorney General’s office for prosecution for “breaking the law.”

Notably, all five remained in their posts as acting ministers until the fall of the Republic on 15 August 2021, despite repeated calls by parliament for Ghani to end the practice of keeping rejected nominees on as acting ministers (see Hasht-e Sobh here and ToloNews here.)

The most controversial of these was the continued tenure of Ajmal Ahmadi as the Governor of the Central Bank. Ahmadi had a history of “disregarding”, as Tolonews put it, the Wolesi Jirga. In January 2020, Ahmadi famously refused to appear before parliament to answer questions about a hike in petrol prices when he was acting Minister of Commerce and Industries, prompting lawmakers to suspend the ministry’s budget and demand his removal (see AAN reporting here). This time, the most significant source of rancour was the central bank’s plans to regularise Afghanistan’s traditional and widely used, money transfer system known as hawala (see here).

The move to regularise the flow of money

The hawala system fulfils an essential function for Afghans in the diaspora who send remittances to their families back home as well as people inside Afghanistan who send money to remote parts of the country; even the government used the system to send funds to districts where banking services are unavailable. But there is a darker, more sinister side to this opaque and largely off-the-record system – money laundering and terrorist financing.

A Hawaladar counts banknotes at Sarai Shahzada exchange market in Kabul. Photo: Wakil Kohsar/AFP, 21 June 2021

The move to regularise the informal system by requiring each hawala broker (also called hawaladar and saraf) to register as financial services companies was one of Afghanistan’s key commitments to the international anti-money laundering body, the Financial Action Task Force (FATF), which in 2015 removed the country from its ‘grey’ list of countries with questionable banking systems (see here). Yar Muhammad Rostam, a DAB director-general, told BBC Persian: “The central bank’s commitments to international institutions and partners require better scrutiny of currency brokers and providers of financial services,” which is “part of the fight against money laundering and terrorist financing.” (See the 2014 Financial Action Task Force report on Financial flows linked to the production and trafficking of Afghan opiates and its 2013 report on the role of hawala in money laundering and terrorist financing here and here.)

After a weeks-long stalemate, the National Union of Hawaladars announced a nationwide general strike. The union’s chairperson, Mir Afghan Safi, was also an MP and handily the head of the parliamentary budget and finance committee. He told Hasht-e Sobh, on 6 February, that hawaladars across Afghanistan had closed shop and “would not resume their activities until the central bank accepted their demands and recommendations.” In a press conference on the same day, Safi accused the government of harming the private sector and said that this requirement would lead to the flight of capital from Afghanistan (see Etilaat-e Roz here and this video). A resolution was finally reached on 22 February, the evening before the Wolesi Jirga was scheduled to vote on the third draft of the budget. On its Facebook page, BBC Dari posted a video of an unidentified member of the hawaladars union who said that representatives from the union had met President Ghani who had promised to “personally review and address all issues within a week. This was later confirmed by lawmaker Mir Afghan Safi who spoke to BBC Persian in his capacity as chairperson of the hawaladar union and confirmed that an agreement had been reached to end the strike: “The Central Bank has accepted all but two of our proposals.” According to several sources who spoke to AAN on condition of anonymity, the eleventh-hour deal, brokered by Ghani, gave the president a week (read an indefinite amount of time) to review and find a solution. It helped the government clear the last hurdle and paved the way for parliament’s approval of the budget the following day.

19 objections and four concessions

When lawmakers rejected the budget for the second time, they offered a list of 19 reasons for their rejection. In the end, after weeks of wrangling, they were able to get concession from the government on four key points. In the section below we take a deep dive into the particulars of these issues. Why were they important to the MPs and what in the end was enough to gain their support for the budget.

What was the ‘project annex’ and why was it important to MPs and government?

Every year, members of parliament included a list of proposed projects as an annex to the national budget, which they said they had promised to their constituents. This year, President Ghani removed the annex of some 1,131 projects in its entirety from the budget, arguing that Afghanistan did not have sufficient financial resources to finance them and that the projects were based on the MPs “personal preferences.” Lawmakers put their foot down; after twice rejecting the budget, they threatened to do so a third time if the government failed to comply with their demands, including reinstating the annex (see ToloNews coverage here.)

This was not the first year that the government had attempted to remove the annex. The first attempt was made in 2018 as one of a set of ambitious reforms introduced by then Minister of Finance Eklil Hakimi to make the budget more realistic and transparent. Hakimi’s ‘reformed budget’ was passed by parliament only after the Ministry of Finance agreed to include the annex (cited in this report). As AAN has previously reported, in 2018, Hakimi faced

…a historical legacy – two billion dollars’ worth of ‘development projects’ which had been introduced under parliamentary pressure in earlier years and agreed by the government without specific funding sources…. These had, said Finance Minister Eklil Hakimi, made the budget “unreliable and bogus” One of the Ministry of Finance’s strategies was to end the practice of having an annex of projects. Rather, it brought all that it thought worthwhile and could be funded into the main budget document. “Our biggest struggle,” [then] Deputy Minister Payenda told AAN, was to reduce the number of projects.

(See also ANN’s report on the budgetary reforms introduced in 2017 for the 2018 budget.) Integrity Watch’s Naser Timory provided background to this contentious issue:

In previous years, when the budget was rejected by parliament, the Ministry of Finance, because it couldn’t make serious changes, agreed to include the annex. Over the years, it became a budgetary commitment that had no financial allocations but was formally included in the budget. Including projects, with budget codes but without any funding negatively affects the credibility of the budget. It turns the whole budget into a game of numbers, where money can be moved around to fund an influential MP’s project. It makes accountability and oversight challenging and any kind of oversight difficult, if not impossible.

Timory expressed doubts that the MPs in the winter of 2020/2021 had any serious intentions of wanting to make the budget more equitable, saying:

They raise this as an issue every year, but they’ve never taken a serious step to address it. Instead, they make deals with the government. There are no indications that this year will be any different. In my view, the real red line [for the MPs] is the annex and the only way to get the budget passed is to put the annex back in and make some small changes.

The unfunded projects in the annex are a significant entry point for what economist Andrew Laing, who has worked as an advisor at the Ministry of Finance, calls ‘auction-based budgeting’. In a paper for the Institute for State Effectiveness (ISE), Laing explains how budget auctions work, particularly in aid-dependant countries and how “the budget approval process in parliament” is “where the standard horse trading and deal-making occurs.” As Kate Clark wrote in a 2017 AAN report:

As soon as a project has an approved budget and number, one official said, people can start selling contracts and sub-contracts on it…. There are many stages in a project which have ‘rent-seeking opportunities’, including: the feasibility study, design, procurement, contract and sub-contract management, monitoring and evaluation, and  invoicing, when a ‘facilitation payment’ may be required for a payment to be released to the contractor.

Integrity Watch Afghanistan highlighted the vulnerability of development projects to political influence in a 2017 report. It estimated that “half of the total number of projects are vulnerable to political influence. In monetary terms, 48 percent of the development budget amounting to USD 1.2 billion were vulnerable to political influence in 1396 [2017].”

Importantly, excluding the annex would not mean that provincial development projects were excluded from the budget. IWA’s Economic Integrity Officer, Ibrahim Khan told AAN that the government had included several hundred ‘public-demand projects’ in the budget over the past three years. These, he said, “are projects that are sent to Kabul from the provinces through the Provincial Development Councils to be included in the budget. This year, the budget includes about 400 of these projects.”

The compromise reached in the 1400 budget was a significantly pared-down annex of some 370 projects, about two-thirds less than the original 1,131. Payenda told AAN he was resigned to the trade-off: “We just don’t have the money for most of these projects and we had to work with the MPs to prioritise. Also, most of these projects had not gone through a formal due diligence process, for example, feasibility studies.” Payenda had been brought into the budget process half-way through and there was a limit to what he could influence in 2021, but he believed 1401/2022 could be different: “Next year,” said Payenda, “we will start the budget formulation process early. We will have an inclusive process. The MPs and the public have to be a part of it.”

Contingency codes and why they were so controversial

Contingency funds are set aside in the budget with the aim of having money available for unforeseen expenditures that were not anticipated when the national budget was approved. Afghanistan’s national budget usually has a handful of contingency lines, mainly codes 91 and 92. While the Afghan parliament approved budgetary allocations for contingencies as part of the annual national budget, for the most part, the authority for using the funds sat with the president.

Lawmakers criticised large allocations of money to contingency codes, particularly codes 91 (the policy code) and 92 (the emergency code) – two billion Afs (USD 25.97 million) and 13 billion Afs (USD 168.83 million), respectively (see also ToloNews here). There was also an allocation of 9.7 billion Afs (USD 125.97 million) to the presidential operations unit [9]In November 2018 – nearly a year after it was established — the presidential operations unit was tasked by presidential decree 388 with “harmonising, organising and implementing major … Continue reading and the National Development Company, [10]The presidential operations unit managed the National Development Corporation (see here), which came into existence when President Ghani merged eight state entities into a single one, delivering a … Continue reading both managed by the president’s office, which were involved in major development projects, from building dams to rebuilding monuments. The MPs claimed these units competed with the government proper and the private sector, both taking away precious government jobs and weakening the private sector. MPs also said that because these entities were not budgetary units (a ministry or other state entity that, by law, can have allocations in the national budget), they were not obliged to account to parliament for their spending and were therefore not transparent. The speaker also accused the Palace of undermining government institutions by transferring “All projects from sectoral ministries to the [presidential] operations unit” (see video here and ToloNews’ Mehwar here).

Article 32, item 9 of the Public Finance Management and Expenditures Law allowed for a maximum appropriation of three per cent of total expenditures on contingencies. While the actual amount set aside for contingencies varied from year to year, in recent years, this tended to be between 1.5 to 2 billion Afs (about 26 million USD) per fiscal year. These contingency funds have tended to bloat, with funds added to these codes mid-year to be spent at the president’s discretion. The 2018 Afghanistan Public Expenditure and Financial Accountability (PEFA) Assessment, which reports on the strengths and weaknesses of public financial management (PFM) found:

Contingency included in the budgets for SY1393 (2014), SY1394 (2015), and SY1395 (2016) accounted for 5 percent, 2 percent, and 4 percent, respectively, of the budgeted expenditure for each year. However, the actual contingency share was 9 percent, 7 percent, and 11 percent of the total budget expenditure in the respective years.

The report went on to say that “The contingencies in all three years were not used for emergency purposes or for urgent and/or unpredicted reasons.” A 2020 Integrity Watch Afghanistan report highlighted these issues dating back to the Karzai administration but noted that it had gotten worst during the National Unity Government (NUG). The report noted that in 2019, “The funds in code 91 were increased from the AFN 1 billion (USD 12.9 million) to AFN 3 billion (USD 38.9 million),” adding that “the increase in this code was made without approval from the parliament.”

Fuelling the controversy was an investigative report by Kabul-based daily, Etilaat-e Roz, published on 7 December 2020, the day before the budget was first presented to parliament, alleging irregularities in accounting for vast sums spent from code 91 in the 1398 (2019) budget. They included spending on ‘personal purposes’ such as “hundreds of millions of Afs from policy code 91 [that] have been spent on buying and renting houses, armoured vehicles, apartments, [air] tickets, medical expenses, cash benefits [to senior officials] and other personal expenses.” According to the report:

[T]hese expenditures were authorized through 197 presidential decrees and 95 decrees from the Chief Executive [Abdullah Abdullah] benefitting dozens of people, including advisers to the president, government employees, ambassadors, a number of families and individuals outside the government…. For example, only 15 well-known individuals spent more than 123 million Afs (about 1.6 million USD) on rent, accommodation, travel expenses, cars / armoured vehicles, apartments, and salaries.

Speaking to BBC Persian, then spokesperson for the Ministry of Finance, Shamroz Khan Masjidi, said: the president can use these funds “to ensure stability, good governance and other necessities of government.” He defended the use of the money for rent, utility bills and other matters, saying, “The money spent on the code does not go against its intended purpose and has been spent in accordance with the law.”

But as previously reported by AAN, unallocated contingency funds are prone to “bargaining, rent-seeking and corruption during budget implementation” (see here and here):

Unspent contingency funds can be and are shifted to other uses during budget implementation, with less transparency and greater risk of corruption. Drastically reducing contingency allocations would not only be good for transparency and budgeting, it would also reduce the space for bribery and other irregularities to occur as contingency funds are allocated for specific purposes during the fiscal year.

The same AAN report highlighted the risk inherent in allotting contingency funds, quoting the 2018 budget:

[There has been] ‘systematic over-budgeting particularly on the discretionary budget.’ Such allocations are extremely vulnerable to corruption, for example, money might only be released after payments were made. The elimination of discretionary carry-over of unspent budget allocations into the following year’s budget should also reduce vulnerability to corruption.

The Afghan government said some contingency funds were necessary to ensure the government had enough money set aside to cope with unforeseen expenses, such as the Covid-19 pandemic and the impact of the drought. However, MPs and others said this was not what the funds were actually used for. According to the London-based Independent Farsi news website, “95 per cent [of code 91 funds] are spent on large projects.” Yet large projects, the MPs pointed out, should be placed in the budgets of the relevant line ministry or other budgetary units, which were subject to parliamentary oversight. They wanted to eliminate code 91 from the budget saying that it and other unallocated funds, were prone to corruption and spending from the public purse without oversight or accounting.

The government said it had reduced contingencies from 27 billion Afs (USD 350.65 million) in 1399 to 15 billion Afs (USD 194.8 million) in 1400 (see Independent Farsi). The Supreme Audit Office confirmed this downward trend in its 1398 (2019) report, which found the contingency funds for that year standing at 5.85 per cent of the budget and noted that this represented an “18.4 per cent decrease compared to the previous year.”

Speaking to AAN, a senior finance ministry official said that one of the priorities of the reforms being conducted at the ministry was to reduce the amount of funds earmarked for contingencies. He said that while contingencies were part of “all credible national budgets,” the large amounts earmarked for this purpose in Afghanistan’s national budget were partly a result of poor planning. For example, he said:

This year, we had to put money aside in a contingency code to pay DABS [Da Afghanistan Breshna Sherkat] for outstanding electricity bills. This is because the ministries didn’t allocate enough money for this in the annual budgets. It’s a debt we have to pay. But in this budget, we’ve taken the average spend on electricity over three years and made budgetary allocations directly to the relevant entity. For next year’s budget, we’ll work with the budgetary units to help them develop realistic budgets so that some of the funds which are in the contingency codes can be allocated directly to the relevant budget code.

A living wage for civil servants

For several years, calls to increase the salaries of government employees, along with criticism of the National Technical Assistance (NTA) salary scale which afforded some civil servants’ super-sized’ salaries, had been a perennial issue on the agenda of both the government and Wolesi Jirga. Numerous media reports and a Facebook blog titled “Petitioners for equalising the salaries of government employees” focused attention on the economic plight of low-ranking civil servants (see for example here).

Civil servants in Badakhshan province stage protest to demand a pay rise. Photo: Petitioners for equalising the salaries of government employees’ Facebook blog, 14 February 2021

In response, the Cabinet approved a plan in December 2018 to create parity by increasing the salaries of low ranking employees and reducing the wages of high-ranking staff. Two committees (leadership and technical) under the direction of the finance ministry and the Independent Administrative Reform and Civil Service Commission (IARCSC), respectively, were tasked with implementing the so-called “Civil Service Salary Management Policy” (see BBC Persian report here). However, while the government reiterated its commitment to deliver on its promise to civil servants, with the two committees engaged in a blame game, no progress was made to make this pledge a reality. The Ministry of Finance said it was waiting for the technical committee’s plan and the IARCSC said it was waiting for the leadership committee’s budgetary decisions and plans (see here).

Two years later, when the 1400 budget went to parliament, no provision had been made to finance the much-touted salary increases touching off an avalanche of reports in the Afghan media (see for example here and here and also this comedy sketch).

While a demand for creating parity in civil service salaries had not been included in parliament’s original list of objections, its inclusion in the second list focused the media and public’s attention on this important issue. The MPs used the issue to great effect to frame the conversation and question the practice of ‘super-sizing’ the salaries of some civil service staff through the National Technical Assistance (NTA) salary scale (see for example here). With the aim of getting public opinion on their side, civil service salaries became the MPs’ battle cry, with speaker Rahmani calling it “parliament’s red line for approving the budget.”

Finally, lawmakers accepted the government proposal to increase the monthly salaries of low-ranking civil servants, including teachers (grades 1-8) by 2,000 Afs (USD 25) by re-allocating 1.7 billion Afs (USD 22.07 million) from code 91 to a special code which was to be used for this purpose. They also agreed to add another 5-6 billion Afs (USD 64.93 to 77.92 million) from other savings, including from contingencies to this special code. MPs gave the government three months to present its comprehensive plan for increasing the salaries of civil servants (see ToloNews’ Farakhabar here and Mehwar here).

Dastarkhwan-e Meli – a national table cloth for the poor or an opening for graft

The inclusion of the government’s Covid-19 relief programme, Dastarkhwan-e-Meli, which MPs had previously vetoed, was another reason parliament rejected the budget. The name of the programme, ‘national tablecloth’, provides for Afghans the image of a communal meal with everyone seated around it to eat, with connotations of generosity, equality and hospitality. The programme, which was implemented in conjunction with the Citizens’ Charter, provided an estimated 4.1 million households living on less than two dollars a day with a one-time distribution of flour, rice, beans, cooking oil and soap valued at 4,000 Afs (USD 57) per package (see Kabul municipality’s list of items included in the aid packages). The World Bank’s COVID-19 Relief Effort for Afghan Communities and Households (REACH) project was due to provide USD 155 million to support 2.9 million households and another USD 125 million would have come from the Afghanistan Reconstruction Trust Fund (ARTF) to support parallel activities by the Citizens’ Charter (see the World Bank’s announcement and Dastarkhwan-e-Meli website). Opposition to Dastarkhwan-e Meli started immediately after it was launched. MPs cited media reports alleging widespread corruption in national bread distributions, the government’s previous initiative to provide Covid-19 relief to vulnerable Afghan families, which began in May 2020 (see media report here and here).

In an 18 July 2020 ceremony announcing the programme’s launch, then President Ghani said that it would support more than 90 per cent of the Afghan population who “live below the poverty line,” adding, “poverty is not an accident, it is a disaster. A government is responsible for taking the suffering of its people seriously, taking action and making clear that there is a social contract between the nation and the government.” While Ghani praised the success of the bread distribution programme, without mentioning the allegations of corruption, he did issue a staunch warning to would-be grafters and said: “The misuse of money [earmarked] for the poor, is not only a betrayal of the people, but also a betrayal of God, and we will prevent corruption” (see here).

Across Afghanistan, bread distributions, which gave 10 loaves of bread to more than 347 thousand households (see media report here), were plagued with logistics problems, complaints from citizens and allegations of nepotism, corruption, inflated costs and dubious contracts (see here). These allegations emerged in July 2020, when Hasht-e Sobh reported: “More than 800 million Afs (about USD 10 million) of the funds allocated for the distribution of bread in Kabul have been embezzled by municipal officials, the Kabul Bakers’ Union and bakeries.” The daily quoted MP Fatemeh Aziz acknowledging that distributing dry bread in Kabul was challenging, but in this programme, it was “distributed only to those with connections. [Aziz] mentioned the fifth district of Kabul, where the needy did not have access to bread cards at all.”

Another lawmaker, Fatema Kohestani, told Etilaat-e Roz: “There is undoubtedly corruption in compiling the list of the needy,” which she attributed to “the lack of a comprehensive plan and accurate statistics on the number of people in need which make the plan non-transparent and ineffective.” The daily also quoted Kabul residents and officials saying, “due to a lack of transparency in the process, some families have managed to get more than one card, enabling them to receive several times their daily allowance.” For example, the daily quoted a Kabul taxi driver who admitted to receiving “40 loaves of bread a day using four cards” for his ten-person family. Etilaat-e Roz also published posts, including photos showing groups of people waiting for bread, from social media users who criticised the government for organising super-spreader events and putting the public at risk of contracting Covid-19. For example, the daily published a Facebook post from Zia Saramad: “Every day the Ministry of Public Health gives us serious warnings to stay at home and refrain from contacting each other, but the esteemed government, with their interesting programmes and assistance, will drown the people in Corona.”

While the Palace did not directly address allegations of corruption in the government’s Covid-19 assistance, President Ghani ordered the then ombudsperson to investigate allegations of wrongdoing (see here). Ghizaal Hares outlined the findings of her office’s preliminary investigation into the use of Covid-19 relief funds in a 7 February press conference. Hares said that, of the 23 provinces investigated up to that point, they had found cases of “unprecedented” and in some instances “high-level” corruption in 16 provinces: “After examining 907 million Afs (USD 11.7 million) so far, we found that the purchases made were 330 million (USD 4.28 million) above the market rate, which shows 30 to 40 per cent higher costs.” In addition, she said that a survey of 700 beneficiaries carried out by her office showed that “only 32 per cent of these people received aid, 43 per cent did not receive any assistance and 23 per cent of the files were either incomplete or incorrect.” She added that there were also a number of “imaginary persons” included on the list. (See readout from the press conference and BBC Persian’s report).

On 19 May, the Office of Public and Strategic Affairs of the President released the ombudsperson’s annual report, which included her investigation’s final findings into the misuse of Covid-19 funds. According to the report, the ombudsperson’s office found corruption in the majority of the cases it investigated, adding: “As a result of the inspections, so far 232 people at the level of minister, deputy minister, governor, deputy governor, heads of relevant departments and members of procurement committees have been introduced to the Attorney General’s office.”

Hares’ resignation, on 23 May, led to speculation that her departure might be related to accusations levelled by her office against “dozens of senior officials” in the misuse of Covid-19 funds (see here). In a short statement on Twitter, Hares hinted at this. She said her resignation was to do with the lack of a “unified vision for fighting corruption” in the government. (For details on the state of the pandemic in Afghanistan, see AAN’s dossier on Covid-19).

Lawmakers accused the government of disregarding the parliament’s powers by not consulting with them in advance. Lawmaker Sayed Azim Kabarzany accused the government of devising band-aid solutions, speaking on ToloNew’s Mehwar programme. He called on the government to use the funds for development projects, saying, “I don’t want any more fish; I want to be a fisherman.” Speaking to parliament on 21 July 2020, deputy finance minister Zadran explained: “The programme’s budget is from non-discretionary funds allocated to the government by the World Bank, which the government has included in the national budget.” In other words, these funds were provided by the World Bank solely for Covid-19 relief and could not be re-allocated to development projects. He insisted: “The implementers of this programme, the Ministry of Rural Rehabilitation Development, municipalities and local government departments, will be accountable to parliament for the transparency of their work.” But lawmakers would not be persuaded by the deputy minister’s assurances. They said the programme was unconstitutional and cited article 91 of the constitution as giving them the power to “decide on the development programmes as well as the state budget.” Lawmaker Abdul Rauf Enami said the government’s disregard for the Wolesi Jirga’s constitutional mandate was a “red line.” He also said the programme was “too broad and uncontrollable. Given the experience of distributing bread and flour, the ground is rife for major corruption” (see media reports here and here.)

The government reacted strongly, accusing lawmakers of ignoring the dire situation facing the nation. First Vice President, Amrullah Saleh, lashed out at MPs and accused them of “discard[ing] the tablecloth of the poor in haste and anger,” in a Facebook post addressed to the Wolesi Jirga. He added: “Your rejection of the Dastarkhwan-e-Meli does not mean that the World Bank can be compelled or persuaded to allocate this money to infrastructure projects. No. This budget is a fundamental part of efforts to reduce hunger – not even poverty…. It is as if you want to convince a hungry family not to eat bread but to save [money] to build a house. The hungry dream of bread [they don’t dream] of houses…. Taking food away from the poor is neither virtuous nor courageous.”

Nevertheless, according to ToloNews, lawmakers who had dubbed the programme “Dastarkhwan-e-Dozdi (the thievery tablecloth)” declared it to be one of their red lines and persisted in the demand for it to be removed from the budget. Finally, the government yielded to parliament’s demands and removed The programme from the budget. It seems the government had decided to give it up in favour of getting an approved budget and fighting another day for its covid-19 relief programme. However, according to the Sobh-e Kabul news website, it proceeded as planned, at least that was the plan on 6 February 2021 (see here).

Conclusion

We are publishing this report on what would have been the final day of Afghanistan’s 1400 national budget cycle. At the start of this financial year, the country was facing an uncertain economic outlook – aid flows were in decline, the Covid-19 pandemic had hit domestic revenues hard and two years of severe drought had wreaked havoc on the agriculture sector and people’s food security. The Taleban were also fast approaching the gates of power. Overcoming such grim circumstances would have required decisive, coordinated and courageous action by Afghanistan’s political elite. Yet, looking back, it seems the leaders that the Afghan people had entrusted their future to were too engaged in an eleveenth-hour pilfering of the last of Afghanistan’s resources to heed the perils ahead.

Afghanistan’s economy is now in free fall, with an estimated 55 per cent of the population expected to be facing crisis levels of food insecurity by March 2022 (see the latest Integrated Food Security Phase Classification (IPC) report), as AAN previously reported:

Driving the hunger, the IPC predicted, will be continued drought, high food prices, sanctions on the Taleban, growing unemployment and possibly increased displacement, reduced incomes, lower international and domestic remittances and continuing obstacles to humanitarian assistance.

Afghanistan’s former leaders, wherever they may be, may now be taking stock of the opportunities that were on offer, how they squandered them over the course of two decades, and how they recklessly traded away the future of their country and the hopes of the Afghan people.

Edited by Kate Clark

* Roxanna Shapour is a communications and media professional with nearly two decades of experience focusing on Afghanistan. She has worked for international organisations, including the BBC World Service and from May 2016 to December 2017 as a senior strategic communications advisor at the Ministry of Finance. She joined the AAN team in 2020 as an editor and analyst.

References

References
1 All calculations are based on USD 1 = 77 Afs.
2 The ECF provided highly concessional financing to Afghanistan against the achievement of agreed-upon economic benchmarks. In November 2020, the IMF approved a 42-month USD 370 million (28.49 billion Afs) credit facility to “support Afghanistan’s recovery from the Covid-19 pandemic, anchor economic reforms, and catalyse donor financing.”
3 The 1400 budget document defines social protection as:

[E]xpenditure on services and transfers provided to households and individuals for: ill and disables, aged, and orphans, cash benefits and benefits-in-kind to households with dependent children, benefits in cash and kind for the household and children in need of help, likewise helping those who are capable of work and available for work but are unable to find suitable employment, Of course, the subsidy provided to the families are commensurate with the living cost of that particular family. The subsidy might be in cash or in-kind, to people who are socially isolated or at risk of being isolated, like; People with disabilities, lower wages and salaries, refugees, rural population, violence victims, etc.

4 The 1400 budget document defines public service spending to be comprised of “executive and legislative organizations, financial and fiscal affairs, external affairs, and general services of which executive, financial and foreign affairs, and legislative organizations make 73% (AFN 43 billion [or USD 558.44 million]) of the total.”
5 AAN’s translation of parliament’s list of 17 reasons for rejecting the first draft of the budget (see Dari here)

  1. Large allocations to the Presidential Operational Unit and departments that the parliament has not approved
  2. Removal of the rural road construction programme from the Ministry of Rural Development and its transfer to the Ministry of Public Works
  3.  Removal of provincial projects and annexes from the budget document
  4. Increased budget to a number of contingency codes
  5. Budgetary allocations to entities with acting ministers
  6. Failure of the Ministry of Finance to agree on a specific time to review the budget for the fiscal year
  7. Failure of the Ministry of Finance to standardise concessional salaries and benefits in the proposed budget
  8. Lack of agreement of the Ministry of Finance to resolve problems in the budget execution plan
  9. Lack of clarity in the details of domestic resources in the budget document and lack of planned revenue compared to ground realities
  10. The operation budget is higher than the development budget
  11. Inclusion of new budget units without parliamentary approval in the national budget
  12. Issues related to the budget of municipalities
  13. Projects included in the budget document but not included in the list of projects of the departments
  14. Problems in the proposed entities and lack of information on structures
  15. Lack of total figures of NTA staff and total number of staff working for the government in the budget document
  16. Existence of a number of capacity building projects in government offices
  17. Numerical and spelling mistakes in the budget plan
6 AAN’s translation of parliament’s list of 19 reasons for rejecting the second draft of the budget (see Dari here)

  1. The annex was removed (proposed amendments by MPs were not even considered)
  2. Dastarkhwan-e-Meli was included
  3. Removal of several important projects from the budget bill
  4. Allocations to the Administrative Office of the President (Afs 4.3bn; $55m)
  5. Reassignment of roads projects [National Rural Access Programme (NRAP )] from the Ministry of Rural Rehabilitation and Development (MRRD) to the Ministry of Public Works (MoPW)
  6. Removal of provincial projects from the budget
  7. Budgetary allocations to ministries or institutions with caretaker leadership
  8. The civil service wage gap
  9. Benefit packages for government officials
  10. Ignoring MP suggestions for managing national resources
  11. Lack of transparency is domestic resources
  12. 15 billion Afs increase in the development budget
  13. Budgetary allocations to new state institutions without parliamentary approval
  14. Issues in the municipalities’ budget, related to revenues
  15. Removal of 13,000 staff from the civil service roll (job cuts)
  16. Inclusion of government capacity programme, opposed by MPs
  17. Proposal to [borrow] 19.9 b Afs from IMF to fill the budget deficit
  18. Inclusion of 29 projects over the objections of the public and MPs
  19. Increased allocations to the contingency codes 91 and 92
7 Arghandiwal was removed from his position as minister of finance on 23 January 2021 by presidential decree for “disobedience of presidential decrees and instructions.” He was also accused of “delays in revenue collection, lack of cooperation with the Joint Investigation committee investigating unlawful appointments at the Ministry of Finance and obstruction of inspections, poor management, lack of commitment to the values of good governance” (see media reports here and here). In addition, according to documents leaked to TOLOnews, the Administrative Office of the Presidential accused Arghandiwal of corruption and nepotism, particularly illegal appointments and failure to dismiss some sixty MoF staffers who had previously been ousted by the president and introduced to the Attorney General (see here). Two days after his dismissal by president Ghani, Arghandiwal addressed accusations levelled against him and said that interference from “certain circles in the palace” made it impossible for him to do his job. He accused unnamed persons of asking him to ‘give them’ two customs offices. He said: “When their interests are under threat, when Arghandiwal is at the finance ministry, when he prevents them from amassing fortunes, it stands to reason that they will seek to sideline him” (see the press conference here).
8 Mir Rahman Rahmani was named by Al-Jazeera in the Cyprus Papers as one of the politically exposed persons who “invested” 2 million dollars (USD 2.5 million) to obtain a passport from the Republic of Cyprus (see also Transparency International’s report). According to Al-Jazeera, Rahmani’s wife and three daughters are also citizens of the Caribbean country St Kitts & Nevis.
9 In November 2018 – nearly a year after it was established — the presidential operations unit was tasked by presidential decree 388 with “harmonising, organising and implementing major development projects in the centre and provinces” (see here). According to a January 2020 ToloNews investigative report, “the unit has undertaken 835 construction and reconstruction programs under the 57 big projects. From the total, 113 programs have been completed,” including the Daralaman Palace, Machalgho Dam, the Kabul airport and Pol-e Charkhi prison. (see here) When ToloNews and independent journalist, Mujtaba Begzad, requested information about its activities, the unit sent two different sets of documents to each requestor. Begzad told ToloNews: “Projects were removed in some provinces. The name of the project was there but the amount (of its budget) was deleted.” The article also quoted IWA’s Executive Director, Ekram Afzali: “The operations department is spending 30 to 40% of the government’s development budget and it is a very big amount…. But, responsiveness and transparency in this institution are still questionable” (see here). The media outlet also quoted the CEO of Afghanistan’s Chamber of Commerce: “There are fewer international projects, foreign aid has decreased and the government is the only source of funding for projects. If these projects are awarded to the presidential operations unit through a single source [procurement process], the ability of the private sector to be active, compete and invest will be severely restricted” (see here).
10 The presidential operations unit managed the National Development Corporation (see here), which came into existence when President Ghani merged eight state entities into a single one, delivering a blow to an already ailing construction sector. The January 2020 move drew strong condemnations from the parliament and the construction sector, including the Afghanistan Builders Association (ABA), who accused the government of impeding their ability to successfully bid for infrastructure projects in a process that they say was already rigged “against them” (see ToloNews here).

Tags:

Parliament Wolesi Jirga Politics Corruption Economy Government national budget

Authors:

Roxanna Shapour

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