Afghanistan News November 15, 2004

November 15, 2004

Afghans in Kabul celebrate Eid joyfully despite kidnappings
Monday November 15, 11:44 AM AFP
Three years after the fall of the hardline Taliban regime, residents of Afghanistan's capital are celebrating the Eid al-Fitr festival in upbeat mood despite the kidnapping of three UN workers in the city.

Wearing a newly tailored traditional Afghan shalwar-kameez trouser suit, electronic engineer Qadratullah said the country was "reborn" when the Taliban were toppled in Kabul in November 2001 by a US-led military campaign.

"I am feeling quite good about what we have in this year's Eid. Compared to the past under the Taliban I feel that we have risen to heaven from the depths of hell," added the 32-year-old as he marked the end of Ramadan.

Under six years of Islamic fundamentalist rule, Qadratullah was lashed for failing to grow a beard and his wife was beaten for not wearing the all-enveloping burqa.

Afghanistan's war-weary people have enjoyed more freedoms in the past three years although there are still fears that Islamist militants pose a threat to government officials, troops and aid agencies.

Militants linked to the Taliban still hold three UN employees seized in broad daylight in Kabul on October 28. They have set a Monday deadline for Afghan authorities to release 26 prisoners.

Annetta Flanigan of Northern Ireland, Filipino diplomat Angelito Nayan and Shqipe Habibi of Kosovo were overseeing the country's first-ever presidential election, which was won by US-backed incumbent Hamid Karzai.

"The kidnappings don't scare me but sadden me -- the UN workers were our guests, they were here to help us with the elections," said Mohammad Daud, also celebrating the festival at the end of the Islamic fasting month.

Foreign United Nations staff and many aid workers have restricted their travels and are obeying a curfew since the kidnappings but many Afghans had few security fears over the holiday.

"I think we have seen a very positive security environment over Eid. To be able to witness the Afghan public out there enjoying the festive season, smiling, is a great development," said a spokesman for NATO-led peacekeepers patrolling Kabul and some northern provinces.

During the three days of Eid Afghans welcome relatives and friends to their homes with cookies and sweets, a tradition dating back centuries. Small children played in the streets wearing new clothes for the holiday.

"It is just another day but much better than the Taliban time," said Abdul Hamid, a 25-year-old soldier guarding the entrance to Karzai's heavily fortified presidential palace.

"My friends are celebrating back home but I'm on duty," he complained, but with a smile.

Karzai, who was interim leader for three years before winning the October 9 election, on Saturday led dozens of faithful in Eid prayers at his palace mosque -- watched over by his American bodyguards.

"To my all countrymen and women, 'Eid Mubarak' (Happy Eid)," he said in a message to his people.

Afghan kidnappers set new deadline for UN hostages, slam US interference
Sun Nov 14, 8:37 AM ET
KABUL (AFP) - Militants threatening to kill three UN workers held hostage in Afghanistan set a fresh deadline for their demands to be met and blamed the United States for slowing up negotiations.

Jaishul Muslimeen (Army of Muslims), which seized the three foreign workers on October 28, said the Afghan government had until Monday to meet its demands.

"We have extended the deadline," said Sayed Khaled, who claims to speak for the group which has set and broken a series of deadlines.

"If they did not act on what they had promised and if they did not meet our demands then our shura (tribal council) will make the final decision Monday evening."

Khaled, speaking by telephone from an unknown location, blamed comments by US Deputy Secretary of State Richard Armitage for hindering negotiations.

The group has handed over a list of 26 prisoners it wants to swap for the hostages and was in talks with the Afghan government earlier this week.

Khaled said the government had been able to locate 18 of the 26 prisoners on the list and was searching for the remaining eight when comments by Armitage stalled the process.

On a visit to Afghanistan Wednesday, Armitage said the United States believed negotiating with hostage-takers would only encourage more kidnappings.

"The talks were going on and there was good enough development to release our prisoners," Khaled said.

"Armitage slowed down the process. We call on UN if they are an independent organization and if the Afghan government is independent then they should act on their own initiatives, not on instructions by Armitage. Otherwise it is they who will lose, not us," he added.

There had been hopes that the hostages would be freed Saturday, on the eve of the three-day Eid al-Fitr holiday, which marks the end of the Muslim fasting month of Ramadan.

Khaled also repeated the threat to kill the three hostages if the kidnappers' demands were not met.

"Our prisoners will be finally released if not now in months' time or in years but it will be their workers who will lose their lives. They should remember that it is the question (of) three people's lives," he said.

Annetta Flanigan from Northern Ireland, Shqipe Habibi from Kosovo, and Angelito Nayan, a diplomat from the Philippines, were snatched from their vehicle in busy lunchtime traffic in Kabul on October 28.

They had been overseeing the war-battered country's first-ever presidential election, won by US-backed incumbent Hamid Karzai.

The kidnapping has cast a pall over what was widely seen as a successful election without the widely feared bloodshed despite threats by the Taliban.

United Nations staff are under tight security in the capital following the kidnappings with a curfew, limited travel in the capital and escorts for UN personnel.

Foreigners in the capital have curtailed their movements, leaving almost empty restaurants and areas such as Chicken Street which was the site of a suicide bombing last month that killed one person. Life for most Afghans however continues as normal.

Ordinary Afghans have condemned the hostage-taking as contrary to Afghan and Muslim traditions of hospitality with 20 Afghan women offering Thursday to swap places with the UN hostages.

Pakistan military aims to wipe out Al-Qaeda militants soon
Nov 14
ISLAMABAD (AFP) - Pakistani forces plan to "cleanse" Al-Qaeda linked militants from a district near the Afghan border by the year's end after the biggest offensive yet launched this month, state media reported.

"Pakistan Army troops are all set to cleanse the South Waziristan Agency of terrorists by the advent of new year," the Associated Press of Pakistan (APP) quoted major general Niaz Khattak as saying on Sunday.

"We hope, the new year will arrive with news of peace and normalcy," said Khattak who is the field commander of troops hunting Al-Qaeda linked militants in South Waziristan tribal zone.

"The troops have ensured their presence in three-fourth area of Waziristan by removing the terrorist elements and the remaining would be flushed out by the end of this year," APP quoted Khattak as saying.

Khattak said troops recovered a huge cache of arms and ammunition from the "den" of a former Guantanamo Bay prisoner Abdullah Mahsud, who is also said to have masterminded the kidnapping of two Chinese engineers in Pakistan last month.

Mahsud is one of Pakistan's top targets since the kidnapping incident, in which one of the two hostages died. Troops discovered a training camp nearby and found some caves used as hideouts, Khattak said.

Military officials have said up to 40 suspected militants have been killed by Pakistani troops and several militant hide-outs had been destroyed in the ongoing offensive.

The death toll marks a dramatic acceleration in the campaign which Pakistan, a major ally in the United States' "war on terror", has been waging for the past eight months.

Pakistan's military said early this month that about 250 militants had been killed since the operation began in March. Officials estimate hundreds of Al-Qaeda and Taliban fugitives poured into the Pakistani tribal region from Afghanistan in late 2001, when a US-led invasion toppled the hardline Islamic Taliban regime.

Pakistan has since killed and arrested hundreds of Al-Qaeda suspects and witnessed a string of extremist attacks and bombings on Western and government targets.

‘Pakistan to work for Afghan women’s rights’
PESHAWAR: The government will continue to support democracy and women’s rights in Afghanistan, Aftab Ahmed Khan Sherpao, the federal minister of interior, has said. He said the women in Afghanistan should be given equal representation in every sphere of life as it would act as a harbinger for social and democratic change.

Talking to a delegation from Afghanistan led by Malalai Joya, member of the Loya Jirga of Afghanistan, on Saturday, Mr Sherpao said violence had caused heavy human and material losses to Afghanistan and the Afghan women should come forward to play their role for the rehabilitation of their motherland. He asked the Afghan women to participate in the ensuing parliamentary elections in Afghanistan. app

Now, Bollywood dances, Britney Spears taboo in Kabul
ANI 11/13/2004
Hip-swivelling Bollywood dancers and a prancing Britney Spears are now taboo in the Afghan capital of Kabul, following a ban imposed by the country's Supreme Court.

Islamic fundamentalists judges have reportedly ordered Kabul's Tolo Cable TV to be switched off across the city this week, claiming that many Afghans have become addicted to "unIslamic" and raunchy Bollywood and Hollywood films that it is showing. Afghanistan's Culture Minister, a highly esteemed Sufi poet and liberal, has endorsed the apex court's stand.

"The cable networks are annoying and misleading people. There should be harmonisation in line with Islamic and Afghan values," The Independent quoted Sayed Raheen, Afghanistan's Minister of Information and Culture, as saying.

The ban was introduced soon after Tolo TV went on air last month, although terrestrial viewers can still see Tolo TV's programmes, because the ban extends only to cable television.

The new station has pioneered a breezy format created by a trio of Afghan brothers who grew up in Australia and who returned to become Afghanistan's first media tycoons, with a nationwide network of radio stations and a magazine for Kabul's expat community.

The minister has often expressed his concerns about Bollywood films and the threat they pose to Afghan music and culture. The Bombay films are followed in Afghanistan with as much enthusiasm as they are in India.

Only three years ago, the Taliban jailed people caught watching smuggled Indian films, confiscated TV sets and draped trees with tape torn from forbidden videos. Police from the Ministry for the Prevention of Vice and Promotion of Virtue searched homes looking for evidence of video viewing, and stopped cars to hunt for Indian music tapes.

Youngsters in Kabul too have not taken this move by the mullahs very encouragingly. "Life here can be grim. Bollywood is a beautiful world to escape into," a 25-year-old Farhad, was quoted as saying.

Though the female newsreaders and presenters are enclosed in headscarves, they openly chat and laugh with their male counterparts, something considered sacrilegious by conservatives.

Cable TV operators have however, not taken this alliance and their diktats in a light manner. They have termed it unholy and a ban on the assault on the freedom of expression.

"We have to let the masses decide whether they like Britney Spears. We think the masses have spoken, and we will give them what they are after. This is a real surprise. Raheen has done so much to resist the fundamentalists in the past. Ultimately, here he wants the fundamentalist lobby pleading his case with the President. Many people are very, very disappointed in him; the things some people will do for power," Saad Mohseni the eldest of the brothers who run Tolo TV was quoted as saying.

Divided they stand
Editorial 11/14 The Nation
MAULANA Fazlur Rehman’s meeting with Mian Nawaz Sharif in Jeddah seems to be part of the MMA’s persistent effort to woo the ARD for launching a joint anti-uniform movement, but so far it has not met with any success. Earlier when the Maulana contacted Ms Benazir Bhutto, he was told to first renounce the 17th Amendment that helped General Musharraf legitimise his presidency while also validating the ‘reforms’ carried out by the military regime before the present dispensation was put in place. Sometime back Qazi Hussain Ahmad had also met Mian Nawaz but failed to get any assurance from him on forming a grand alliance. This is despite the fact that Mian Nawaz has a soft corner for at least the Jamaat-i-Islami, which he has often described as the PML-N’s natural political ally. He stuck to this stance in his latest meeting with Maulana Fazl, except for agreeing to mutual cooperation between the two opposition alliances. That means the MMA and the ARD leaders would participate in each other’s protest programmes until they decide to launch any joint struggle after December 31, the day General Musharraf is supposed to doff his uniform.

Meanwhile, the ARD parties are expected to meet in Islamabad on November 20 to devise a strategy in accordance with the instructions of their exiled leaders to adopt a ‘careful policy’ on the issue of mutual cooperation with the MMA. Before this the PPP would take up this issue at a joint meeting of its Central Executive Committee and Federal Council on November 19. Perhaps the prevalent mistrust caused by the MMA’s hobnobbing with the ruling coalition continues to restrain the mainstream opposition parties from entering into any formal alliance with it.

But the MMA itself is divided internally on the issue of a mass agitation against General Musharraf’s backtracking. The JUI is still soft-pedalling. According to news reports Maulana Fazl keeps insisting on a low-key protest to avoid any danger to the NWFP Government. He also may not want to put his National Assembly Opposition Leadership at stake. Recently Mr Akram Durrani announced he would attend future NSC meetings. The intra-MMA differences became evident when Qazi Hussain had to compel Maulana Fazl to ensure the presence of JUI members in the Balochistan Assembly during voting on a ‘uniform resolution,’ which eventually fizzled out.

Meanwhile, the calls from the Treasury Benches for national reconciliation indicate that the backstage players understand that attempts to drive the MMA against the wall might lead to the emergence of a greater opposition alliance. IT would be better if they realise that the easiest way to ward off this situation is to fulfil commitments on the uniform issue. Attempts to divide the opposition through a deal with the PPP may not help the government, even if such a deal is done, which is by no means certain.

U.S. Plans Assault On Afghan Heroin
Poppy Growing Still Widespread
By Bradley Graham Washington Post Staff Writer Monday, November 15, 2004; Page A16
Worried about a vast and still growing heroin industry in Afghanistan, the Bush administration has devised a more aggressive counternarcotics strategy aimed at greater eradication of poppy fields, promotion of alternative crops and prosecution of traffickers.

The plan, a mix of stronger carrots and sticks, attempts to bring more coordination, more money and more muscle to Afghan and international programs launched over the past three years that have not made much of a dent in the lucrative drug business.

The intensified campaign stops short of using U.S. troops to target opium labs and attack drug kingpins. Instead, at the Pentagon's insistence, U.S. forces will be limited to supporting Afghan law enforcement efforts by providing airlift and intelligence leads to Afghan police and by helping tighten security along Afghanistan's borders, administration officials said.

The new approach emerged from a high-level administration review this summer of U.S. operations in Afghanistan. The review acknowledged the gravity of the drug problem and the ineffectiveness of past measures to confront it, according to several officials who participated.

President Bush is scheduled to be briefed this week on the revised U.S. strategy, which his principal national security advisers approved in outline form in mid-September. To fund it, officials expect to notify Congress soon of plans to shift more than $700 million from other programs into Afghan counternarcotics activities in 2005. That compares with about $123 million spent by the Pentagon and State Department in 2004.

"The issue in Afghanistan, I think from my viewpoint, is the drug issue. . . . That's the next big challenge in Afghanistan," Air Force Gen. Richard B. Myers, chairman of the Joint Chiefs of Staff, told a meeting of the Institute of Land Warfare earlier this month.

In an impoverished country with an average per capita income of less than $200 a year, the cash lure of the poppy plant is hard to resist. Afghanistan ranks as the world's largest producer of heroin, with more than 450 square miles of poppies under cultivation -- an area about the size of Los Angeles.

The country's earnings from the opium trade, estimated last year to exceed $2.3 billion, amount to more than half of Afghanistan's legal gross domestic product. Assessments of this year's crop by the CIA and the United Nations are due soon and will show a jump to record levels, officials said.

Most of the opium produced by Afghanistan goes to Europe, not the United States, feeding 95 percent of Europe's heroin demand. But the drug business has become a critical strategic concern for U.S. authorities because it helps finance the activities of insurgents and regional warlords. U.S. and Afghan officials now frequently cite the danger of Afghanistan becoming a "narco state," with drug-related corruption threatening to undermine the country's fledging democratic institutions.
Given the scope and urgency of the problem, some in the administration, in Congress and elsewhere have argued for direct U.S. military action against traffickers. They say Afghan forces are not yet large or strong enough to manage enforcement actions alone or ensure security for aerial spraying and other eradication efforts.
"Short-term, in order to eradicate the poppy and eliminate the income for those shooting at American soldiers, the U.S. military is going to have to provide protection to those doing eradication," said Rep. Mark Edward Souder (R-Ind.), who chairs a Government Reform subcommittee on drug policy. "There is no other option."
But U.S. commanders and senior Pentagon civilians contend that battling the drug trade is primarily a law enforcement problem, not a military one, and must be led by homegrown Afghan forces. Enmeshing U.S. troops in drug fights, they say, would alienate many Afghans -- some of whom have become useful intelligence sources -- and also divert attention from the core U.S. military missions of combating insurgents and aiding reconstruction.

"The last thing we want to do is have U.S. forces running around the countryside doing this sort of thing," said Col. David Lamm, chief of staff for the U.S. military command in Afghanistan. "That would change our relationship with the Afghan people, which right now is very positive."

Pentagon guidance allows U.S. troops in Afghanistan to destroy drugs they come across in the course of combat operations against al Qaeda and Taliban fighters. But senior defense officials resisted a proposal earlier this year that would have designated counternarcotics a core military mission in Afghanistan.

"The key to success there is not turning this into a military mission for the Americans," Douglas J. Feith, the Pentagon's chief policy official, said in an interview. "It's the Afghan government trying to enforce its own laws, and what we're interested in doing is building up their capacity so they could do it."

At the same time, Feith said, U.S. troops, who number about 15,000 in Afghanistan, will "be substantially more involved" in countering the drug trade. "There certainly is a sense this is a problem that we need to address because it could get to the point where it could endanger key goals of ours in Afghanistan," he said.
Lt. Gen. David Barno, the senior military commander in Afghanistan, has proposed expanding U.S. military counternarcotics assistance in three ways: by focusing more intelligence-gathering assets on suspected drug operations; by ferrying Afghan counternarcotics police in U.S. military aircraft; and by providing emergency support.

Two other broader security initiatives put forward by Barno would also enhance the country's ability to go after traffickers, defense officials said. One is a plan to strengthen key border checkpoints with more forces and equipment. The other would enlist U.S. troops in extended and specialized training of Afghan police.
After the U.S. invasion of Afghanistan in late 2001 and the fall of the Taliban government, Britain agreed to take the lead on counternarcotics -- part of an international nation-building plan that also gave the Germans the lead on police and the Italians the lead on courts. But some British strategies have faltered badly.
A plan in 2002 to compensate farmers who destroyed their poppy crops ended up spurring poppy cultivation. A 2003 effort to rely on local governors to eradicate poppy fields was misused for political purposes.

Reflecting concern in Washington about Britain's leadership on the issue, Souder's House subcommittee held a hearing in April with the unusually pointed title: "Are the British Counternarcotics Efforts Going Wobbly?"

The new U.S. approach, administration officials said, has been developed in coordination with the British and with Afghan President Hamid Karzai, who made clear publicly this month that going after traffickers would be a top priority of his newly elected government.

The U.S. plan calls for eradicating an area five to seven times larger than the nearly 10,000 acres of poppy fields destroyed this year. The destruction is to be offset by more than $100 million in aid to Afghan farmers to plant wheat, barley, corn and other crops and for other rural economic development projects.

A special Afghan interdiction force, trained by the British, and other Afghan counternarcotics police units will be expanded. Additionally, a special task force of prosecutors and judges to handle drug cases is being set up and will be housed in a secure facility -- a refurbished wing of the Pol-e-Charki prison on the outskirts of Kabul.

Another element of the plan includes the launching of a public awareness campaign to stress to farmers and other Afghans that the drug business poses a serious menace to the country and will not be tolerated.

Although Pentagon officials do not foresee any increase in U.S. troop levels in Afghanistan to support the new strategy, the U.S. Drug Enforcement Administration plans to increase its ranks in the country from eight agents and analysts to as many as 30, according to Doug Wankel, a former DEA agent who now serves as the counternarcotics coordinator at the U.S. Embassy in Kabul.

"We have to make an impact in the next year," Wankel said in a phone interview last week. "And I would say, in the next two years, we have to show this pendulum swinging back in the other direction or we run a real risk of losing Afghanistan."

Others warn, however, against expecting a quick solution or taking precipitous action that fails to cushion stronger eradication and interdiction measures with a substantial infusion of rural economic aid.

"Given the scope of the problem, it is not one that will get solved in one year," Lamm said in a phone interview. "We need to take a very deliberate, systematic and long-range approach to the problem or else we run the risk in many provinces of destabilizing the country."

CIA in turmoil under new director
WASHINGTON: Several senior Central Intelligence Agency officers are threatening to leave the US spy agency, the Washington Post reported on Saturday. Sources told the paper that potential resignations were due to internal conflict under new director Porter Goss.

Several senior CIA officials have clashed with Goss’s chief of staff Patrick Murray, and criticised the director for giving him too much authority over day-to-day operations, the paper said.

One former senior official familiar with the events told the Post that there was confusion throughout the ranks and an extraordinary loss of morale and incentive. On Friday, the official who oversees foreign operations tendered his resignation after a confrontation with Murray, but agreed to reconsider until Monday, the paper reported, adding that several other senior clandestine service officers were also threatening to leave.

A wave of resignations could hurt the CIA as it struggles to combat Al Qaeda and track insurgents in Iraq, amid Congressional moves to reform the agency, which has come under fire for intelligence failures in Iraq and for failing to pre-empt the 9/11 attacks.

CIA deputy director John McLaughlin announced his “purely personal decision” to retire on Friday after more than 30 years at the spy agency. According to the Post, he had also warned Goss that Murray “was treating senior officials disrespectfully and risked widespread resignations”.

Murray formerly served under Goss as chief of staff on the House intelligence committee, which Goss chaired. The panel harshly criticised the CIA in a report issued in June. Goss, a former spy turned lawmaker who led Congressional efforts to reform intelligence-gathering, took the helm of the CIA in September. afp

Speculation Around Karzai's New Cabinet
IWPR 11/13/2004
Analysts and observers say the newly elected president needs to ensure all ethnic groups are represented in his next government
Kabul - With interim president Hamed Karzai's election victory confirmed, speculation now centres on whom he will appoint to his new cabinet.

A possible list, allegedly leaked to the media by a source close to Ahmad Zia Massoud, one of the two vice presidents elected with Karzai last month, suggests the president plans to clean up his cabinet. But if the list is accurate, it indicates that there will be more people from the Pashtun ethnic group – like the president himself – in the new government.

Karzai has offered few clues as to who he is going to have in his cabinet. Speaking to reporters at the presidential palace on November 4, he said, "those who have the same ideas as me can join me in the government".

And in an interview with CNN on November 8, Karzai said members of his cabinet would have to be "educated", "qualified", "productive" "honest" and "looking to the future".

Although the appointments won't be announced until December, three members of Karzai's current cabinet are expected to be part of his new government, according to a list published in the local Arman-e-Milli daily newspaper on November 2, based on a list that originally ran on the Pashtu web site, Benawa.com.

They include current finance minister Ashraf Ghani, expected to be named minister of economics; planning minister Ramazan Bashar Dost, who would become minister of education; and interior minister Ali Ahmad Jalali who would take over the national intelligence ministry.

Hedayat Amin Arsala, who served as one of Karzai's vice presidents in the interim administration, is named as foreign minister, replacing Dr Abdullah Abdullah.
According to the list, the head of Afghanistan's central bank, Anwar ul-Haq Ahadi, who also heads the Pashtun-based Afghan Millat Party, would replace Ghani at the finance ministry.

Two of Karzai's 17 opponents in the presidential race are also expected to get ministerial posts. They are Sayed Ishaq Gailani, an ex-mujahedin and political moderate, and Abdul Hasib Aryan, an independent candidate and former policeman. Both withdrew from the presidential race two days before the elections and declared their support for Karzai.

Gailani was listed for minister of public works, and Aryan for minister of refugees and returnees.

Gailani's daughter Fatima – who is married to likely finance minister Ahadi – is named on the list as minister for women's affairs.

Mohammed Qasim Akhgar, an independent political analyst in Kabul, said he believed the widely circulated list was actually a trial balloon put up by the government.
"With the release of this list, the government was trying to test people's reactions," he said. "If it is a real cabinet list, then it would prove the existence of an ethnic divide. The majority of names mentioned in this list are Pashtun."

Sebghatullah Sanjar, head of the Republican Party, is critical of the way Karzai's previous interim cabinets were forged out of the wheeling and dealing between factions at the Bonn conference in December 2001.

The Republican Party, a recently established pro-democratic party with a small membership, announced its support for Karzai in the presidential contest before the elections.

"According to the Bonn agreement, the government was required to have members of all ethnicities and factions represented in the cabinet, but each of them preferred his own personal and party interest over everything else," said Sanjar. "As an example, one minister assigned all his team - from his deputy down to the lowest ranks - from his own ethnicity or his faction."

Shukria Barakzai, a political analyst based in Kabul who sat on the country's constitution commission, told IWPR that she believes the upcoming cabinet should involve all groups.

However, she said individuals who have won the support of their ethnic groups only by force should be excluded. Every ethnic group contains are enough patriotic and qualified people with unsullied backgrounds to go into the cabinet she said, adding, "There is no need to hire individuals who have the shadow of the gun on their back."

She advised the president not to choose cabinet members based on promises that they will ensure security, "The government tried that approach last time."

Akhgar agreed, noting that, "The transitional administration was created at the Bonn conference based on how many guns everyone had, and their guns determined their positions.

"If someone is in power because of the gun he holds, then of course he will strive to remain."

Meanwhile, none of Karzai's three main challengers in the presidential race appear on the Arman-e-Milli list of likely cabinet members.

Mohammad Younis Qanuni, the presidential candidate who came in second with over 16 per cent of the vote and who has close ties to defence minister Mohammad Qasim Fahim, hadn't closed the door to a cabinet position when questioned by IWPR recently.

"I was invited a few times unofficially, but my involvement with the cabinet depends on the opinion of those who voted for me, " he said.

General Abdul Rashid Dostum, a powerful Uzbek commander who came fourth in the presidential contest and garnered more than 10 per cent of the vote, said in the closing days of his campaign that he would consider any cabinet that excluded him "illegal."

Dostum resigned as deputy defence minister to run for president, but is said to still have control over militias in the north.

Haji Muhammad Muhaqiq, a former Northern Alliance commander who was dismissed as planning minister in March and who came in third place with more than 11 per cent of the vote, said, "If I'm invited, I will strive to ensure security and stability in addition to fixing other deficiencies in the administration." But, he added, "I have not yet been invited. I will see whether they invite me or not."

Qanuni told IWPR he believes maintaining ethnic balance is important.

"We can appoint experts and good administrators from different tribes, so that every tribe feels that they are involved in the government," he said. "If a cabinet is not established in which ethnic balance is valued, then that will create a crisis.

"The best way for Afghanistan's future is to bear in mind the realities on the ground and the ethnic pluralism of Afghan society," he said.

Muhaqiq expressed his views on what the president's priority should be in selecting cabinet members, "First, we need stability – and stability can only be ensured with the help of individuals who have community support."

Barakzai said the presidential also-rans would do better to run for seats in parliament instead of looking for positions in the new cabinet. "Once they were out of the transitional government, they always criticised the government, so how can they all now sit together around one table?" she asked.

Sanjar said he believes that Karzai will announce a cabinet that will resolve people's concerns about the presence of warlords and those with questionable backgrounds.

Mohammad Nasim Faqiri, spokesman for the Jamiat-e-Islami party, a long-established mujahedin party, agreed with Barakzai that in order to achieve ethnic pluralism, well-qualified, intelligent and educated people from different ethnic groups need to be brought into the cabinet.

"If people want to work specifically for one tribe or ethnic group, it will move the country backwards, and we would not be able to call it pluralism," he said.
Karzai's appointments will have to be approved by the new national assembly that is formed by the spring election.

DESPITE NEW REGIME, AFGHAN COURTS STILL STRONGLY FAVOR MEN
By Sudarsan Raghavan KNIGHT RIDDER NEWS SERVICE
KABUL, Afghanistan - Dusk crosses into night, and still Pekay isn't free. After a long day walking from office to office, pleading with stubborn judges, her quest has failed: She's still married to her abusive husband.

Once again, her memories take control. Her father selling her in marriage to a man five times her age to pay the rent; the beatings and sodomy that followed. She was 9 years old.

Her mind drifts toward suicide. She's tried twice -- first with a knife, then with kerosene and a match.

Pekay is 13 now, one of thousands of girls and women who are trapped in forced marriages, caught between the rural, tribal and Islamic customs that ruled the country for centuries and the promise of a new Afghanistan ruled by laws that apply equally to everyone.

Domestic violence is widespread, but most cases never go to court. The laws are weak, and women stay silent out of fear or shame: Divorce disgraces the family and the tribe.

The fundamentalist Taliban regime collapsed three years ago, and Hamid Karzai has won the country's first presidential elections. Women, who couldn't freely leave their houses in the old Afghanistan, voted in droves.

Yet none of this momentous change had helped Pekay. Under Afghanistan's civil law, it's illegal for girls younger than 16 to marry. But the Supreme Court, led by conservative clerics and Islamic law, ruled that she can't get divorced, even from a violent child molester.

Pekay is less than 5 feet tall and slight. Her nose is puffy and crooked from a thrashing. Her left cheekbone is higher than her right, as if a bone is out of place. She was smaller when she met Malik Muhammad four years ago. At 48, he was old enough to be her grandfather. He offered to rent a room in his house to Pekay's family.

Four months passed, and Muhammad never asked for the rent. Pekay's father, Muhammad Omar, was too poor to remind him. One day, Muhammad demanded the rent money: $80, a princely sum.

When Omar asked if he could pay in installments, Muhammad said, "You must pay me now or give me your daughter," Omar recalled. Four days later, Muhammad started planning a wedding.

"We had no choice," Omar said. "He was a Taliban intelligence agent. He was very powerful. He said if I didn't allow the marriage, he would take us to the Taliban central office and do the wedding there."

On her wedding night, Pekay was confused. Why was the man she called "uncle" taking her to his bedroom? Why was her mother so sad?

"I'll be back soon," she recalled telling her mother.

"I started to hear screams," recalled her mother, Qudbi. "I thought he was going to kill her."

The next morning, Muhammad refused to let Qudbi see Pekay. He'd chained her to his bed, said Pekay. Four days later, he evicted her parents.

Pekay lived as a slave for the next 21/2 years. Muhammad locked her in a room, releasing her only to cook, clean and do the washing. He pounded her with sticks and rubber tubing. When he stopped beating her, he started raping her.

"I can't tell you what happened," Pekay said. "It's the type of thing that happens only with animals."

Muhammad, now 52, denies he abused Pekay, but his next-door neighbor, Zalmay Quasimi, remembers her screams.

Fifteen months ago, Pekay's parents finally went to the police. Officers raided Muhammad's house and found Pekay and his first wife, Samar. Dried blood stained the floor and chains dangled from a bedpost, according to court documents. The police took Muhammad into custody.

But Afghanistan's legal system, a mix of civil and sharia, Islamic law, still favors men. Once he proved that he was Samar's and Pekay's husband, Muhammad was released. Samar was told to go with him. Because of her age, Pekay was returned to her parents pending a court decision.

Pekay and her parents went to Kabul's family court to get a divorce. In front of two female judges, Pekay undressed and showed the marks from the chain that Muhammad used to bind her, said one of the judges.

The court, filled with progressive young judges, granted her a divorce. Pekay was ecstatic. But her joy, and her freedom, soon evaporated.

Muhammad appealed the decision. The appeals court ruled in his favor. The Supreme Court did the same. Pekay was ordered to return to her husband or go to jail.
Shortly after that decision, with the help of a neighbor, Pekay got an appointment with Chief Justice Fazal Hadi Shinwari. Shinwari also dispensed justice according to strict sharia. But he looked at Pekay's face and body, and listened to the neighbor. Then he approved Pekay's divorce.

Muhammad, however, is determined to get Pekay back.

Islamic State of Afghanistan--Second Quarterly Review

Afghan girl, given as bride at 9, fights for divorce
Arizona Daily Star 11/14/2004 By Sudarsan Raghavan
KABUL - Dusk crosses into night, and still Pekay isn't free. After a long day of walking from office to office, pleading with stubborn judges, her quest has failed: She's still married to her abusive husband.

Once again, her memories take control. Her father's selling her in marriage to a man five times her age to pay the rent; the beatings and sodomy that followed. She was 9 years old.

Her mind drifts toward suicide. She's tried twice - first with a knife, then with kerosene and a match.

Pekay is 13 now, one of thousands of girls and women who are trapped in forced marriages, caught between the rural, tribal and Islamic customs that ruled the country for centuries and the promise of a new Afghanistan ruled by laws that apply equally to everyone.

Domestic violence is widespread, but most cases never go to court. The laws are weak, and women stay silent out of fear or shame: Divorce disgraces the family and the tribe. Each year, scores of Afghan women escape bad marriages by setting themselves on fire or other forms of suicide.

The Muslim fundamentalist Taliban regime collapsed three years ago. Hamid Karzai has won the country's first presidential elections. Women, who couldn't leave their homes freely in the old Afghanistan, voted in droves.

Yet none of this momentous change has helped Pekay. Under Afghanistan's civil law, it's illegal for girls younger than 16 to marry. But the Supreme Court, led by conservative clerics and Islamic law, ruled that she can't get divorced, even from a violent child molester.

Her last hope is that Fazal Hadi Shinwari, the ultra-conservative chief justice of the Supreme Court, will reverse the decision.

"If he doesn't, I'll kill myself," said Pekay, who like many Afghans uses one name. "And I'll leave it up to God to punish the judges in the next world."

"Pay or give me your daughter"

Pekay is less than 5 feet tall and slight. Her nose is puffy and crooked from a thrashing. Her left cheekbone is higher than her right, as if a bone is out of place. Her lower lip is split.

She was smaller when she met Malik Muhammad four years ago. At 48, he was old enough to be her grandfather. He offered to rent a room in his house to Pekay's family.

Four months passed, and Muhammad never asked for the rent. Pekay's father, Muhammad Omar, was too poor to remind him. One day, Muhammad demanded the rent money: $80, a princely sum.

When Omar asked if he could pay in installments, Muhammad said, "You must pay me now or give me your daughter," Omar recalled. Four days later, Muhammad started planning a wedding.

"We had no choice," said Omar. "He was a Taliban intelligence agent. He was very powerful. He said if I didn't allow the marriage, he would take us to the Taliban central office and do the wedding there."

On her wedding night, Pekay was confused. Why was the man she called "uncle" taking her to his bedroom? Why was her mother so sad?

"I'll be back soon," she recalled telling her mother.

Smiling, she stepped in. Her new husband shut the door.

"I started to hear screams," recalled her mother, Qudbi. "I thought he was going to kill her."

The next morning, Muhammad refused to let Qudbi see Pekay. He'd chained her hands and legs to his bed, said Pekay. Four days later, he evicted her parents.

Pekay lived as a slave for the next 2 1/2 years. Muhammad locked her in a room, releasing her only to cook, clean and do the washing. He pounded her with sticks and rubber tubing. When he stopped beating her, he started raping her.

"I can't tell you what happened," Pekay said. "It's the type of thing that happens only with animals."

Muhammad, now 52, denies he abused Pekay, but his next-door neighbor, Zalmay Quasimi, remembers her screams.

A short man with chipped yellow teeth and a thick beard dyed black, Muhammad claims that Pekay is "15 or 16," not 13. Pekay's identity card proves otherwise.

"Physically her body is small, but she's older," said Muhammad, who wore a silver ring topped with a turquoise stone and a white skullcap. "She was fine in my bed. She never complained or told me she was very small.

"If she comes back, I'll get her pregnant."

Blood stained the floor

Fifteen months ago, Pekay's parents finally went to the police. Officers raided Muhammad's house and found Pekay and his first wife, Samar. Dried blood stained the floor and chains dangled from a bedpost, according to court documents. The police took Muhammad into custody.

But Afghanistan's legal system, a mix of civil and sharia, Islamic law, still favors men. Once Muhammad proved he was Samar's and Pekay's husband, he was released. Samar was told to go with him. Because of her age, Pekay was returned to her parents pending a court decision.

Pekay and her parents went to Kabul's family court to get a divorce. Muhammad, in court documents, called the allegations "a massive lie."

But in front of two female judges, Pekay undressed and showed the marks around her waist from the chain that Muhammed used to bind her.

The court, filled with progressive young judges, granted her a divorce. Pekay was ecstatic.

Her joy, and her freedom, soon vanished.

Muhammad appealed the decision. The appeals court ruled in his favor, as did the Supreme Court.

Pekay was ordered to return to her husband or go to jail.

Supreme Court Justice Sayeed Omar Munib explained that sharia allows a father to marry off his daughter even if she's under 16. And Pekay hadn't met the standard of evidence - two witnesses who saw the abuse or a confession from her husband.

When asked why he didn't rule according to Afghanistan's civil law, Munib replied: "In Islam and sharia, it's not like that. Women are very smooth operators. If we let her get a divorce, then women will be encouraged to divorce their husbands if they see another man they like. We'll have a lot of divorces in our society."

When asked if he believed that women and men have equal rights, as Afghanistan's constitution states, Munib replied: "It's impossible. We are Muslims, and God has given a place for men and a place for women. We can't change that. Women don't have the same brains like men. They are very forgetful. They can't make big decisions. You should ask your own Western doctors about this. It has been proven that women are not like men."

Chief justice intervenes

Friends of the family got Pekay an appointment with Chief Justice Shinwari. They were educated women and now had a voice, if a faint one, in the new Afghanistan. It took them weeks, but they finally got a meeting for Pekay.

Shinwari, also a cleric, dispensed justice according to strict sharia. But he looked at Pekay's face and body, and listened to Pekay's witnesses. After considering the evidence, he approved Pekay's divorce.

Muhammad, however, is determined to get Pekay back.

"I'll die before divorcing her," he said. "I can't force her to come back to my house, but I can make sure she won't marry again. One day she'll come back. She has to."

Pakistan Mulls Free Trade Deal With Afghanistan
Monday November 15, 12:52 PM Asia Pulse
ISLAMABAD, Nov 15 Asia Pulse - Pakistan is considering a proposal to make a formal request to Afghanistan for initiating a dialogue on free trade agreement (FTA) aimed at increasing bilateral cooperation and trade volume.

Informed sources that in this connection the government would send a high-level official delegation to Afghanistan for discussing the proposal with the Afghan authorities.

It is expected that under the proposed FTA, Pakistan's exports to Afghanistan will rise to US$1.5 billion - that means it would become the second largest country for Pakistani exports after the United States.

The sources said the delegation would discuss with the Afghan authorities issues and items to be considered under the proposed FTA. The commerce ministry is already working on the items to be considered for duty reduction under the proposed FTA.

The statistics showed that Pakistan's exports of five major products to Afghanistan declined by 44 per cent during the year 2003-04 over the previous year. The decline was registered in exports of wheat/flour, rice, grains and pulses, paints and varnishes and sanitary wares.

'Luxury' cell in Afghan jail for bounty hunter
THE SCOTSMAN (UK) / NOVEMBER 14, 2004 COLIN FREEMAN IN KABUL
FOR a man whose life already resembles an airport spy thriller it was shaping up to be the most frightening chapter yet.

Convicted of illegal bounty-hunting in Afghanistan, flamboyant ex-US soldier Jonathan ‘Jack’ Idema faced his toughest-ever mission after being sentenced to 10 years in the country’s grimmest jail.

Even for the former Green Beret, arrested in July for running his own private jail, the prospect of a decade in Pol-i-Charki, a filthy Soviet-era fortress, was likely to put his skills of survival to the test.

But as with all good thriller plots, there has now been an unexpected twist. To the astonishment of other prisoners, Idema and his two American co-defendants have been given their own private set of rooms where they live in relative luxury.

Behind Pol-i-Charki’s forbidding bullet-scarred and bomb-blackened walls, which bristle with machine-guns, their apartment-style suite is complete with satellite TV, Persian carpets, private bathroom and kitchen.

Ready-meals, chocolate and other snacks are brought in from shops supplying Westerners in Kabul, while the three have exercise periods in private to avoid attacks from al-Qaeda-linked inmates.

Idema’s escape from what might otherwise have been a decade-long Midnight Express ordeal is just the latest turn in his bizarre and controversial exploits in Afghanistan.

The 48-year-old New Yorker was arrested amid worldwide publicity in July after police raided a compound in Kabul and found eight Afghan men who said they had been tortured by his private security outfit.

The case caused huge embarrassment for the US government when Idema, who joined the Green Berets after watching a John Wayne film, then claimed he was on a clandestine Pentagon-approved mission to hunt down al-Qaeda terrorists and Osama bin Laden.

Sentenced alongside him to 10 years and eight years respectively were Brent Bennett, a fellow ex-soldier from California, and Edward Caraballo, from New York, an award-winning film maker who claimed he was making a documentary.

Following a spell on the jail’s main wing, all three were moved into segregated accommodation some weeks ago after an inmate threatened to attack Caraballo.

Yet comfortable or not, the real debate now is just how much longer the trio’s confinement will last.

After a highly publicised and chaotic trial, in which Idema claims he was prevented from conducting a proper defence, an appeal on his conviction is due at the end of this month.

While a jailbreak might be more Idema’s style, rumours are now circulating that all three will be freed in a deal between Washington and the Afghan government.

"This was apparently agreed between Washington and Afghanistan before the trial went ahead," said one insider. "The idea was that he would at least do a bit of time to show that justice had been done, but would then be let out on appeal shortly afterwards to bring the thing to a close."

Whatever the outcome, the appeal will once again focus attention on what Idema, a macho figure with his ever-present sunglasses, Afghan headscarf and sidearms, was doing in Afghanistan in the first place.

Was he simply an illicit fantasist running amok in a lawless land, as the prosecution alleged? Or, as he claims, was he a Pentagon-sanctioned "black ops" commando doing the US military’s dirty work for them?

From the outset, the Pentagon, still reeling from the Abu Ghraib torture scandal in Iraq, insisted he had never worked for them in any capacity.

Choice revelations about his past - including his jail term for fraud, undistinguished military assessments from commanding officers, and his legendary temper - somewhat bolstered that theory.

Supporters, though, see him as a maverick but highly effective operator in the fight against al-Qaeda.

Driven by a mixture of American patriotism and greed, he hoped his methods would eventually net him the al-Qaeda leader and a $25m reward.

Either way, the truth had little chance of emerging at the trial, a shambolic affair highlighting the dire state of the Afghan judicial system. Idema’s lawyers were prevented from producing tape recordings of alleged talks with senior US military officials, or questioning witnesses who testified against them.

At this month’s appeal, though, lawyers for Idema and Caraballo are planning to protest in absentia.

Caraballo’s attorney Robert Fogelnest told Scotland on Sunday: "An appeal has been filed, but from my previous experience with the trial I have no belief that the Afghan system is capable of dealing with the issues. This whole issue is a political situation, and will be resolved politically."

If a political deal is under way, neither Fogelnest, nor Idema’s lawyer John Tiffany, claim to be aware of it.

Both have been calling for a full Congressional inquiry into the whole issue of private soldiering in Afghanistan and what US officials knew about it.

In the meantime, says Fogelnest, the three deserve all the privileges they can get. "When they first went there they were in conditions that weren’t fit for an animal, let alone a human being.

"Everybody is talking about them getting good treatment, but the bottom line is that they are still in Pol-i-Charki prison. If their condition has improved, then God bless."

He now believes their release will only come through appeals to newly elected Afghan President Hamid Karzai, who is currently picking his Cabinet after sweeping to power last month.

Whether a deal will indeed go ahead only time will tell. Only one thing is certain - if the next chapter in Idema’s life is anything like the last few, it would never be wise to rule out the unexpected.

International Monetary Fund
Second Quarterly Review 11/12/2004
Islamic State of Afghanistan—Second Quarterly Review Under the Staff-Monitored Program and the 2004 Article IV Consultation
Concluding Statement - An IMF mission visited Kabul from October 20 to November 3, 2004 to review performance under the staff-monitored program (SMP) and conduct the 2004 Article IV consultation. The mission received excellent cooperation from the authorities and benefited from constructive discussions and exchange of views with the Vice President, the Minister of Finance, the Minister of Reconstruction, the Minister of Foreign Affairs, the Governor of Da Afghanistan Bank, other senior government officials, as well as representatives of the donor and business communities. In addition, the IMF mission organized a roundtable discussion on the potential sources of economic growth with representatives from the government, the donor community, and the private sector.

I. Performance Under the SMP
As was the case for the first review, the government of Afghanistan has again largely met the quantitative indicators and structural benchmarks that were established for the second review under the SMP. The staff view this as a notable achievement especially in light of the volatile security situation and the resources the government had to devote to its first direct election. However, there is no room for complacency. Afghanistan faces a large reform agenda in the remainder of the program, and there are a few areas where progress has lagged. Bottlenecks in the legal system also continue to prove problematic.

Notwithstanding a fall in agricultural production, the Afghan economy continued to perform strongly. While lingering drought conditions led to a 25 percent fall in cereal production during the first half of 2004/05, growth remained strong in other sectors, particularly construction, power, and transportation. After a sharp rise in inflation in the first quarter, the rate of inflation abated during the second quarter. While slowing down somewhat, rents and petroleum prices continued to increase sharply in the second quarter. Excluding these two items, consumer prices declined, primarily reflecting a fall in food prices. Year-on-year inflation amounted to 14.1 percent at end-September (8.3 percent, excluding rents and petroleum products). Indications are that, despite a decline in yields resulting from crop diseases and adverse climatic conditions, poppy production has continued to increase, with poppy farming spreading to new areas of the country.

Fiscal revenue for the first half of 2004/05 was Afs 5.9 billion, exceeding the SMP indicative target of Afs 5.5 billion. Based on current projections, and with full implementation of the tax and customs reform plans, the staff anticipate that the government should achieve the SMP targets for the remainder of 2004/05. After a very slow start, the rate of spending for operating expenditures increased during the second quarter of the year, reaching a total of Afs 12 billion by the end of the first semester, compared with an annual budgeted amount of Afs 30.3 billion. The government continued to abide by its "no-overdraft rule" for financing the operating budget deficit. However, delays in securing sufficient grant resources from the Afghanistan Reconstruction Trust Fund (ARTF) and the Law and Order Trust Fund (LOTFA) meant that to fully finance its operations the authorities had to draw down domestic deposits and temporarily transfer funds provided through a concessional loan. Core budget development spending, which includes donor-funded projects that run through government accounts, was very low during the first half of the year, at Afs 3.4 billion, compared to an annual budget estimate of Afs 38 billion. The underspending was attributed to a delay in the development component of the core budget which was not approved until the end of the first quarter, the poor security environment, and the limited capacity of line ministries and other agencies to implement programs.

On the monetary side, in consultation with Fund staff, Da Afghanistan Bank (DAB) exceeded the SMP target for currency in circulation target during the second quarter. This was necessary to accommodate the perceived increase in money demand and to limit the strong appreciation of the Afghani. DAB's decision was instrumental in stabilizing the exchange rate in the Afs 45-46 per dollar range. Reflecting DAB's foreign exchange activity, its international reserves increased sharply during the second quarter, to over four months of imports—a level sufficient to help the central bank avoid major exchange rate disruptions in the event of an adverse external shock. The external current account deficit (before grants) narrowed to 12 percent of GDP in the first half of 2004/05, down from 22 percent during the first half of 2003/04, and was primarily financed by donor inflows, predominantly in the form of grants. The decline in the deficit appears to have stemmed largely from an improvement in the trade balance, including a substantial increase in domestic exports, but also a slowdown in imports likely attributable to the delay in the implementation of development projects.

All the structural benchmarks were met, except the presidential decree enacting Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) legislation, which was delayed by a few weeks. Other reforms include the implementation of the tax reform package, the extension of the CPI to five additional cities, the more timely transfer of provincial revenue to the central government accounts, the preliminary classification of the state-owned enterprises by envisaged restructuring method, and the drafting of a private investment law and the legal framework for extractive industries. In the financial sector, progress has been mixed. On the one hand, a preliminary license was granted to the Export Promotion Bank, DAB successfully introduced a short-term capital note, and reserve requirements were adopted. On the other hand, the restructuring of the state-owned commercial banks and the resolution of those that did not receive licenses appears stalled, and while commercial banks were allowed to participate in foreign exchange auctions, there is considerable scope for making the process more market-oriented.
Discussions with the authorities on the program for the remainder of the year focused on: (i) maintaining macroeconomic stability in a period of political transition and persistent insecurity; (ii) strengthening capacity building; and (iii) stepping up structural reforms necessary to spur private investment and improve government delivery of services. On the macroeconomic side, understandings were reached on a revised macroeconomic framework and a revised monetary program. In the structural area, the discussions focused on the need to step up revenue collection, strengthen expenditure management, and make improvements to the business environment and regulatory framework. One issue related to the transfer of assets and liabilities between the Ministry of Finance (MoF) and the DAB (an end-March 2005 structural benchmark) has yet to be resolved.

The macroeconomic framework has been revised to reflect weaker growth in the agricultural sector. Adverse climatic conditions are expected to adversely affect the fall harvest, resulting in a 20 percent fall in cereal production in 2004/05. However, fueled by strong activity in the construction, transportation, and service sectors, economic growth is expected to reach 7.5 percent in 2004/05—albeit somewhat lower than initially projected. This would contribute to a rise in per capita income to $228, up from $199 in 2003/04. The inflation target of 10 percent, which is consistent with a further slowdown in consumer prices, was left unchanged.
In view of the perceived higher-than-expected increase in money demand, the authorities and the staff agreed on a revised monetary program. It was also agreed that, in view of the vulnerability of the Afghan economy to external and domestic shocks, a flexible exchange rate remained appropriate and that monetary policy should remain anchored on targets for currency in circulation. In this context, and on account of the faster-than-expected pace of monetization, the monetary targets for the remainder of the year were revised upward. Notably, the revised targets represent a tightening, by end-year, of monetary policy relative to the current stance. This should accommodate the anticipated further increase in demand for Afghanis without feeding inflation. As future money demand still remains surrounded by uncertainty, it was agreed that the program would remain flexible and would be carefully monitored. The authorities reiterated their commitment to closely follow price and exchange rate developments and to tighten the monetary stance should prices accelerate. Finally, in light of the foreign exchange accumulation during the first half of the year, the authorities agreed to raise the indicative target for international reserve growth.

While the increase in the rate of revenue collection over the first half of the year is encouraging, a significant improvement is still required to meet the government's budget target—which is more ambitious than the SMP target. The authorities emphasized their determination to fully implement a wide range of planned customs and tax reforms, which should enhance collection. The rate of spending for operating expenditures is expected to pick up during the remainder of the year as more ministries participate in the administrative restructuring process, and financial management capacity continues to improve. The mission cautioned that salary increases (and proposed bonus payments) should be constrained within existing budget appropriations and considered as part of an affordable medium-term public administration reform program. Core budget development spending is likely to remain constrained over the near-term by the security situation and the lack of capacity to implement large development programs.

The immediate priorities for fiscal management include measures to further: (1) integrate the operating and development components of the core budget; and (2) upgrade core public expenditure management systems. Budget management has been enhanced considerably with the introduction of the "core" budget, with increasing amounts of development spending executed through the Treasury, and the consolidation of government accounts into the Treasury Single Account. The mission continues to support the strict enforcement of expenditure controls, which is gradually improving the government's ability to utilize essential foreign assistance. Nonetheless, these reforms need to be deepened with additional measures, including: (i) the further integration of operating and development operations; (ii) the gradual introduction of a verified payroll; (iii) the strengthening of cash management; (iv) the gradual development of an internal audit function within government; and (v) enhanced quarterly fiscal reporting. A Public Expenditure Review, which is being supported by the World Bank in collaboration with other donors, should assist with the preparation of the 2005/06 budget and a medium-term budget framework.

The mission stressed the need for further progress in modernizing the legal framework and in addressing deficiencies in the investment climate. In this respect, the mission welcomed the intention to create a more attractive business environment and the authorities' commitment to publish in the Official Gazette before the end of December 2004 several revenue measures that have been adopted by a Presidential decree. There are a number of new laws that also need to be enacted quickly. These include laws and regulations pertaining to public financial management (budget law), audit, procurement, and customs.

A fuller and more timely understanding of developments in the external sector is necessary to facilitate the formulation of sound monetary and exchange rate policies. In this context, the authorities must build on the progress already made in developing a statistical database for the balance of payments. In this regard, the provision of sufficient technical assistance—to facilitate the development of data sources and surveys—to guide the work of DAB staff is critical.

A speedy reconciliation of bilateral external claims and, if possible, a resolution of these claims is needed. Substantial progress has been made in this area by the MoF, but cooperation by counterpart agencies in identifying and resolving pre-war claims is necessary. A number of countries have already stepped forward in this regard and several have provided generous debt relief on old claims. This process needs to be accelerated in order to meet the end-March 2005 benchmark for completion of a survey and reconciliation of external claims. In order to achieve fiscal and external sustainability, generous debt relief is needed.

The modernization of the central bank will continue. The transfer of its commercial activities and of its non-core assets will allow the central bank to focus on its primary functions. Of critical importance in this regard, there are a range of potential liabilities housed in the DAB which will need to be investigated and either accepted or rejected by the government before a transfer off the central bank balance sheet can be effected. The resolution of this issue is proceeding slower than originally envisaged in the program. In the meantime, however, the commercial banking regulatory framework will be strengthened through the adoption of regulations related to enforcement activities, open foreign exchange positions, and financial reporting. Measures will be taken to enable the banking sector to play a more prominent role in the foreign exchange market.

The mission encouraged the authorities to intensify efforts to rationalize the public enterprise sector. Substantial progress has been made since the last review toward restructuring nonfinancial state-owned enterprises. The restructuring of the state-owned banks, however, appears to be lagging. While these banks may not represent a systemic risk, measures should be taken promptly to restore the profitability of the three which were relicensed and to resolve the three that were not relicensed.
The main risks to the program, and in particular to the fiscal objectives, arise from: (i) the political transition, which could negatively affect the pace of the reform process; (ii) the poppy eradication program, which if not done properly, could cause major macroeconomic disruption; and (iii) the security situation, which could deteriorate in the run-up to the parliamentary and general elections tentatively scheduled for April 2005.

The third review is scheduled to take place in mid-January 2005, based on performance at end-2004.

II. Medium-Term Outlook
Afghanistan's current economic and institutional environment presents a number of positive features. The institutional and political frameworks are increasingly becoming stable and economic reforms are making headway in tackling obstacles to economic management and higher long-term growth. The enactment of important tax policy measures, together with an ambitious program of tax and customs administration reforms, are helping the central government to regain control over national revenue. A financial management law, soon to be adopted, will set up an adequate legal framework for fiscal policy. After introducing a new currency and adopting central bank and commercial bank laws, modernization of the central bank and reform of the financial system is on track. The regulatory framework for private investment is expected to receive a boost from the upcoming new private investment law and the establishment of a legal framework for extractive industries—an area of potential for new investment and growth. Private investment should also benefit from the privatization program underway.

Initial successes should not breed complacency and postpone difficult decisions. Afghanistan still faces major challenges in a rapidly changing global and domestic environment, including a volatile security situation, a fragmented political environment, a growing drug economy, the continued strength of warlords who still threaten the government's reform agenda, an ineffective legal system, a bureaucracy that continues to be riddled by poor governance at many levels, and widespread poverty. These challenges call for fundamental policy measures and strong political will to make Afghanistan attractive for investment and ensure durable economic growth over the long term. Collaboration and partnership between the government and donors will be a key pillar in this regard.

Political stability, national solidarity, and social cohesion are the foundations for economic progress. In this regard, the mission was encouraged by the positive outcome of Afghanistan's first direct presidential election, which represents an important milestone in rebuilding the nation's institutional framework and in broadening ownership of the government's reform agenda. The mission looks forward to further progress on the reform program with the new government.

Wide-ranging, long-term policy initiatives will be instrumental to address Afghanistan's many challenges. The staff welcome the authorities' broad-based reform strategy, which is consistent with the 2015 Millennium Development Goals and articulated around (i) a return of security; (ii) private sector-led growth; (iii) strong revenue efforts to allow funding of recurrent costs within a medium-term horizon; (iv) eradication of the drug sector; and (v) strong institution-building efforts. In the process of implementing this strategy, the public's attitude toward the central government and the need to rebuild trust in key institutions are central challenges. Deepening confidence is critical for future development. Many of the reforms are well defined, but successful implementation will prove challenging.

The drug economy threatens the very fabric of Afghan society. The authorities need to forcefully address this issue. The mission supports recent efforts by the government to work closely with international partners to develop a broad strategy to deal with the opium issue that focuses on education, alternative livelihoods, interdiction, eradication, and legal reform. At the same time, the staff recognize that eradication of opium production cannot be accomplished in isolation, and that it could have a significant economic impact—particularly on some of the most vulnerable segments of the population. An assessment of these effects will be made over the next few months.

As regards the thrust of macroeconomic policies, the authorities and staff must remain vigilant with regard to potential risks, but flexible to ensure that policies are tailored to support growth during a time of transition. Fiscal policy will continue to play a central role. In this context, a move toward developing a comprehensive medium-term budget framework that maintains fiscal discipline is desirable. The authorities should continue in their efforts to enhance revenue and strengthen expenditure control.

Monetary policy will continue to be geared toward maintaining low inflation and currency stability. To that purpose, the central bank will continue to extend its arsenal of market-based instruments and, as the banking sector develops and more reliable monetary data become available, will base its monetary policy decisions on a broader set of monetary indicators, including reserve money and broad money. The authorities will work with the banking sector toward strengthening the legal framework—currently viewed as the main impediment to bank financing of the private sector.

Over the medium term, expenditure policy needs to gradually shift from security and reconstruction toward more broad-based sustainable development. The operating budget remains heavily skewed toward wages and security—which is probably appropriate at this juncture. There are endemic delays in the implementation of the development budget. While there has been steady progress, especially in light of the post-conflict setting, improvement is needed in the face of widespread frustration related to the tangible delivery of services and poverty reduction. Given the limited scope for increasing domestic revenue, the government appropriately envisages its medium-term role as restricted to providing only the most essential services in the most cost-efficient manner. Entrenching a politically viable, stable, efficient, and responsive center-provincial fiscal system will also be a priority over the medium term (e.g., addressing issues of taxing powers, revenue-sharing, and expenditure assignment).

While the collection of domestic revenue has increased at a relatively fast rate, there are clear constraints, and donor support is key to ensure the success of the government's reform strategy. To enhance ownership and coordination of the reform program and to strengthen the government, donor funding should be integrated into one consolidated medium-term budget framework (moving away from a collection of donor-implemented programs). A move toward more direct donor grant support to the budget would represent a simplification of fiscal management and of the coordination of donor funds. This will require continued improvement in fiduciary standards and the mechanisms for promoting accountability, such as independent audit and transparency.

Growth, employment, and export prospects hinge critically on creating an environment conducive to investment—both foreign and domestic. The new investment law is laudable in this regard, and a valuable step forward. However, a number of critical elements—such as property rights, bankruptcy laws, contract enforcement, and a transparent and effective judicial system—will need to be addressed if the government's strategy of creating private sector-led growth is to have any chance of success. The cooperation of all government ministries and agencies will be key, along with a political commitment at the highest levels to creating a clear and level playing field for business.

Strengthening legal capacity is essential to promote economic reforms. The drafting, passage, and publication in the Official Gazette of key economic legislation has been constrained by low levels of capacity at the Ministry of Justice. Mindful that the success of the reform process is predicated on the establishment of solid legal foundations, the staff urges the government to mobilize donor aid and technical support to the benefit of the Ministry of Justice.

Afghanistan's statistical framework is improving but substantial weaknesses remain. The mission welcomed the progress made in compiling basic real sector data, extending the coverage of the consumer price inflation to five major additional cities, and producing reliable core fiscal and monetary data. Nevertheless, the statistical system falls short of international standards in terms of quality, frequency, and dissemination. External sector data are particularly weak, although the authorities have demonstrated a laudable commitment to making improvements. These deficiencies hamper policy analysis and monitoring. A first positive step in this direction is the recent adoption of a statistical master plan. The mobilization of the needed resources and the determination of a clear work program to implement this master plan should be undertaken soon.

Much remains to be done in the governance area. The authorities are keenly aware of this problem and they are determined to address it forcefully. At the same time, they consider that this issue is not exclusive to the public sector and that there are problems of accountability throughout society.
In sum, the authorities must continue to meet the challenges of a fast transforming society. A broad-ranging policy agenda of structural reforms, and external support should enable Afghanistan to build upon its strengths and progress made so far.

The mission supports the government's intention to publish the updated Letter of Intent and Memorandum of Economic and Financial Policies, as well as the staff report for the second review under the SMP and the 2004 Article IV consultation.

We wish the authorities every success in their efforts - Kabul, November 3, 2004 - IMF EXTERNAL RELATIONS DEPARTMENT