Democratic Progress Boosts Economic Prospects

Prior to the election Mr. Karzai took bold steps to remove wartime leaders from government authority, first by dropping Defense Minister Fahim from the vice president candidacy, and then removing Ismail Khan as governor of Herat which triggered some local violence. While the parliamentary elections have had to be postponed till 2005, the first-ever democratic direct elections were met by high voter turnout, particularly among women, and without major disruptions by opposing leaders or the Taliban. While boxes of ballots are being transported (some by pack mules) to counting centers as of this writing, an early indication is that Mr. Karzai is expected to win a majority without the need for a run-off with the likely second-placed candidate, Mr. Qanooni.² The election is already seen as having reinforced the legitimacy of the Afghan government and should solidify continued support from the international donor community.

Despite the still uncertain security situation in many parts of the country, the Afghan transitional government has so far demonstrated a strong commitment to an economic system conducive to private-sector-driven growth. The present reconstruction effort is two-pronged: it is focused on rebuilding critical physical infrastructure on the one hand and on the other rebuilding public sector institutions from Soviet style central planning to market-led development. Macroeconomic planning and management at present is still hampered by poor information, weak systems of service delivery, and laws and regulations that need to be revised to fit a market economy. Nevertheless, the authorities, notably the Ministry of Finance and the central bank, have demonstrated a strong ownership in such effort with donor support.

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