Kabul: Afghanistan`s aid-dependent economy is slowing markedly as NATO troops withdraw, the International Monetary Fund (IMF) said Wednesday, warning that violence, political instability and lack of reform threaten future growth.
GDP growth will slide to 3.2 percent in 2014, the IMF projected in its annual forecast for Afghanistan, which has received billions of dollars in funding since the extremist Taliban regime was ousted in 2001.
This is down from 3.6 percent in 2013 and a huge drop from the 14 percent growth recorded in 2012, when bumper harvests gave the economy an unusual boost.
"Over the past two years, economic activity has been affected by political and security uncertainties and the drawdown of international troops," the report said.
"These uncertainties reduced confidence, discouraged private investment and held back economic activity."
Afghanistan is in the middle of a presidential election, and the winner will face major economic challenges as well as having to tackle the Taliban insurgency without the assistance of US-led NATO combat troops.
About 64 percent of the 30 million population is under 24 years old, signalling an urgent need to create more jobs at a time when international support is declining.
"Large security and development expenditure needs and a limited domestic revenue capacity mean that Afghanistan will remain dependent on donor financing for an extended period," the IMF said.
Former foreign minister Abdullah Abdullah and ex-World Bank economist Ashraf Ghani are due to compete in a run-off election on June 14.
Both candidates have vowed to boost investment, push through reforms and improve relations with the United States, Afghanistan`s biggest donor, after years of friction between Washington and outgoing President Hamid Karzai.
Economic development is considered vital to stop the country from sinking back into civil war and to stem Islamist extremism after the remaining 51,000 NATO combat troops pull out this year.