The lucrative opium business threatens economic stability in Afghanistan, the International Monetary Fund (IMF) warned today.
In its first full review of Afghanistan's economy in 12 years, the IMF said opium, made from poppies grown on fertile lands in the south, made up 40 per cent to 50 per cent of the Afghan economy.
Violence in poppy-growing areas has surged recently, a trend police blame on ousted Taliban rulers keen to keep a grip on a $2.5 billion export business.
Afghanistan's opium business boomed in the early 1980s after Turkey, Pakistan and Iran banned its production and pushed up street prices, the IMF said. From 1994 to 2000, Afghanistan's production of the drug averaged around 3,000 tonnes a year and covered less than 1 per cent of the country's arable land.
The report said opium was by far the most labour-intensive crop in Afghanistan, although Afghans generally do not participate in lucrative international trafficking of the drug.
The IMF also said major progress had been made on achieving financial stability and fiscal discipline to support reconstruction and economic recovery following the overthrow of the Taliban by US-led forces in 2001. It forecast growth this year of some 20 per cent.
The country's budget was mostly financed by donor grants but domestic revenues were increasing, the IMF said.
The IMF said it was still too early for any significant inflows of foreign investment but, as institutions took root and security improved, investors would start looking for opportunities in Afghanistan.