Afghan government struggles to spend donated funds

May 27, 2011 - 6:28 AM

KABUL, Afghanistan (AP) — For Afghanistan's government, getting foreign money to build desperately needed roads, schools, wells and clinics isn't the hard part. Spending it is.

Hundreds of millions in donor funds have not been paid out for things like jobs programs, health clinics and drinking water systems in the past five years. Afghan officials say much of the money comes with too many strings attached, or arrives later than promised, but they are also working within a bureaucracy that is both inefficient and rife with corruption.

In the last fiscal year, which ended March 20, the Afghan government was able to disburse about $937 million, or just 40 percent of its original development budget of about $2.3 billion. The government got much of that money in previous years and has simply been rolling it over, budget after budget.

This fiscal year, the government responded — by slashing its development budget 40 percent, said Ahmad Jalali, director of the budget department of the Afghan Finance Ministry.

"If it was me, I would have cut it by about 80 percent," he said. "Because I know: What they can spend is what they can spend. They can't spend more than this."

Making the system more efficient is especially important as the U.S. and its allies begin drawing down their troop levels, leaving the Afghan government with greater responsibility in providing services and overseeing security.

The Afghan government says the Finance Ministry is getting better at identifying things like duplicate awards for the same project, unrealistic timetables and inaccurate accounting. Excluding such items, along with undisbursed donor funds and the cash deficit, the Afghan budget for the last fiscal year shrinks to about $1.5 billion and disbursement jumps to 66 percent of the adjusted budget, according to ministry figures.

But the government's development spending has still remained flat — about $900 million to $1 billion for each of the last four years — while donations have increased.

Jalali said much of the foreign aid is difficult to spend because of the conditions it comes with.

He said education and rural development programs get lots of money, but other programs, such as countrywide hospital upgrades and a highway to the western city of Herat, have gone wanting. And when a road project can't be built because of security problems, the money budgeted for it often can't be transferred to other areas.

Right now about two-thirds of international development money coming into Afghanistan simply bypasses the Afghan government, with donors running aid programs themselves or contracting the work to private organizations, according to the World Bank.

Afghan President Hamid Karzai has lashed out at donors for that approach, accusing them of creating "parallel governments" with their money.

He sought — and got — a pledge from major donors to channel 50 percent of their aid through the Afghan government by January 2012. In exchange, Karzai's administration pledged to increase transparency and accountability and to tackle corruption, an issue of great concern to donors.

Countries who give aid to the Afghan government say they can't ease their reporting requirements or the earmarks as long as there's a risk of funds disappearing into the notoriously corrupt Afghan bureaucracy. Numerous ministries are hounded by accusations of officials using government money for fancy cars, luxurious furniture for their homes or payouts to the people who helped them get their positions.

The U.S. Agency for International Development, or USAID, spent more than $1.6 billion in Afghanistan in U.S. fiscal year 2009, the last full year for which figures are available, but funneled only about 20 percent of the money through the Afghan government.

U.S. officials say they're committed to reaching the 50 percent goal, but also suggest that delays would not be surprising.

"Moving everything overnight is not going to happen, but we are aggressively pursuing some of these goals," said Craig Hart, a USAID official working on Afghan budget aid. The U.S. is the largest single donor to the Afghan government.

Hart said there were "capacity issues" within the ministries but that USAID was working with the Afghan government to try to increase the skill level of staffers and the procedures used.

"Do the overall budget execution rates concern me? I think they concern everybody," Hart said.

A U.S. Embassy official working on budget issues said it's difficult to give the Afghan government more money directly because it's spending so little of it. The official spoke anonymously because officials in Washington would not give clearance for an on-the-record statement.

The British government was able to place 37 percent of its funding, or about $126 million (77 million pounds), directly into the Afghan development budget in the British fiscal year that ended earlier this month.

"The aid we give to Afghanistan is strictly monitored to ensure it achieves maximum value for money, and gets to where it is intended," the British aid agency said in a statement.

Afghanistan says spending the foreign aid it does receive can be difficult because of donors' varied accounting and reporting schedules — and that sometimes promised money arrives later than expected — or not at all.

Over the past seven years, the Afghan government has received less than 80 percent of the money that was promised, said Hamid Jalil, director of aid management for the Finance Ministry's budget office. He said some money has arrived well after a program was to have been finished.

There was $15 million pledged by the Japanese government for a road project that remains delayed because the Japanese legislature didn't approve it in time, said Ahmad Shah Wahid, Afghan deputy public works minister.

He also said $34 million promised by Saudi Arabia for another stretch of road couldn't be paid out because the Saudis refused to work with Iranian construction firms.

Neither Saudi nor Japanese officials in Kabul responded to requests for comment.