The draft National Development Framework (NDF) was developed and presented in April 2002 by the Afghan Interim Administration (AIA). It provides the basis for the Government’s reconstruction planning , and prioritizes programs for support. The NDF is based on three pillars, under which there are twelve national programs. These programs are being prepared through a consultative process led by key ministries and involving relevant agencies and development partners.

• Pillar One - Humanitarian Assistance and Human and Social Capital with national programs on (1) Refugee Return, (2) Education, (3) Health and Nutrition, (4) Livelihoods and Social Protection, and (5) Cultural Heritage, Media and Sports.
• Pillar Two - Physical Reconstruction and Natural Resources with national programs on (1) Transport, (2) Urban Management, (3) Energy, Mining and Telecoms, and (4) Natural Resource Management.
• Pillar Three - Private Sector Development with national programs on (1) Trade and Private Investment, (2) Public Administration, and (3) Security and Rule of Law.

In addition, the following three cross-cutting themes are to be addressed within each program

• Governance, Financial Management and Administrative Reform
• Human Rights, Security and Rule of Law
• Gender

The National Development Budget (NDB) is the central instrument of policy and resource allocation. The NDB builds on the NDF to outline a series of detailed programs, that form the core of the reconstruction effort. An integrated NDB for Afghanistan’s Solar Year (SY) 1382 (the fiscal year from March 21, 2003 to March 20, 2004) was presented at the first annual meeting of the Afghanistan Development Forum (a national Consultative Group meeting) which was held in Kabul for two days beginning on March 13, 2003.

AIA has established Consultative Groups (CGs) within which the NDB is planned, financed and implemented. There is a CG for each of the twelve national programs. Each group is chaired by a lead Ministry and includes donors, NGOs and a program focal point (secretary). The CG structure aims to encourage a fully transparent and accountable process to guide the collaborative reconstruction efforts.

The Afghanistan High Level Strategic Forum was hosted by the government in Brussels on March 17, 2003. Representatives of over 40 countries and 12 international organizations met to endorse a roadmap the government outlined for reforms in the financial, administrative, judicial, socio-economic and security sectors.

The government’s efforts to take full leadership of the reconstruction process and aid coordination have increasingly paid of, as shown by the following:

• There is only one, government-led aid coordination process.
• Consultative Groups are bringing government line ministries and donors together for substantive interactions on policies, programs, and implementation.
• The national budget process has become the focal point for decision-making on government policy and for allocation of domestic and external resources.
• Donors and other assistance partners (for the most part) have bought into these processes.

The Afghan Interim Administration (and then the Government of Afghanistan (GoA)) took steps to create and /or strengthen government systems. The Assistance Coordination Authority (now the Development Budget and External Relations Unit in MoF) provided a focal point for managing aid. The GoA set some hard conditions for the acceptance of aid, which forced donors to harmonize their activities to some extent. GoA also has a clearly expressed preference for budget support, with trust funds the preferred second choice where aid cannot be routed through the budget.

The Afghanistan Reconstruction Trust Fund (ARTF) was set up in May 2002 to provide support to the country for three main areas of expenditure: recurrent costs (e.g. salaries for teachers, health workers and police); priority investments (including capacity building. feasibility studies and technical assistance) and financing the return of expatriate Afghans. ARTF provides a coordinated financing mechanism to enable the AIA to fund budget and priority sector and investment projects and programs.

The Fund is jointly managed by the Asian Development Bank (AsDB), Islamic Development Bank (IsDB), UNDP and the WB (administrator of the ARTF). Channeling support through this multi-donor Trust Fund as key instrument of support to reconstruction has helped the government avoid addressing the distinct funding specifications of 24 donors and improve aid efficiency and effectiveness. These donors include Bahrain, Canada, Denmark, EC, Finland, Germany, India, Ireland, Italy, Japan, Kuwait, Luxembourg, The Netherlands, Norway, Portugal, Saudi Arabia, South Korea, Sweden, Switzerland, Turkey, United Kingdom and United States.

Despite early success in establishing clear policies and systems for donors to align to, the GoA’s control over aid inflows remains limited by the security situation and the combination of humanitarian, military and development assistance it receives. Approximately 75% of foreign aid to Afghanistan is channelled outside the government’s budget (e.g. in the area of security), presenting a constraint to the country’s long-term planning.

The United Kingdom hosted the London Conference on Afghanistan on January 31 – February 1, 2006 which was co-chaired by Afghanistan and the UN. Aid effectiveness was a key topic at this conference. On the first day, GoA launched its Afghanistan Compact, the successor to the Bonn Agreement (2001) which ended in September 2005 with the completion of the Parliamentary and Provincial elections. The Compact provides the framework for international community engagement in the country for the next five years. GoA also presented its Interim Afghanistan National Development Strategy (IANDS) to the international community. The strategy sets out the Government’s priorities for accelerating development, increasing security, tackling the drug trade, and strengthening governance. Participants showed strong support for increased use of government systems, like the budget, to channel their assistance to Afghanistan’s priorities.

At this conference, USA, Russia and Germany announced their intention to cancel debt owed by Afghanistan through the Paris Club.

In March 2006, Afghanistan officially endorsed the Paris Declaration on Aid Effectiveness. The principles of this declaration are already reflected in the Afghanistan Compact which was agreed between the Government and the international community at the London Conference, and was endorsed by the United Nations Security Council in February 2006.

Common guidelines, including environmental and social safeguards’ framework, for the investment and program component of the ARTF have been agreed to and are being used.

ARTF is financing a feasibility studies' fund to help AIA produce a pipeline of bankable projects in the near future.

Joint sector missions have increased sector knowledge, and considerable work has been done on public administration and other institutional issues. DFID, BMZ, EC and WB conduct joint appraisal and joint funding of activities. Specifically, support to ARTF for recurrent and development budget (approx. 15% of bilateral funds and 50% of DFID allocation).

Donors and NGO members of the twelve CGs are assisting the Government in defining benchmarks and will, in future, focus on monitoring performance against the benchmarks in close collaboration with Government partners.

GoA and the international community are establishing a Joint Coordination and Monitoring Board for the implementation of the Compact.

Afghanistan will participate in the first round of survey work (beginning in May 2006) in order to establish a comprehensive baseline and methodology for tracking implementation progress on the Paris Declaration (and its indicators) through 2010. GoA will seize this opportunity to monitor additional country-specific indicators of aid effectiveness as identified and agreed in the Afghanistan Compact.

In 2005, the World Bank, collaborating on specific issues with AsDB (procurement), DFID (state-owned enterprises), EC (highways), and IMF (revenues), completed a report which was a product of the Public Finance Management (PFM) Review.

In 2004, CIDA, DFID, USAID, UNDP, UNICEF, WB and others jointly produced a report on Subnational Administration in Afghanistan: A Guide to Government.

WB and partner institutions will prepare a Gender Assessment which will explore linkages among health, education, poverty and gender discrimination.

Afghanistan and its civil society organizations were represented at the AsDB and the Government of Japan sponsored East and South Asia, and the Pacific Regional Workshop on Harmonization and Alignment for Development Effectiveness and Managing for Results which was hosted by the Government of Thailand in Bangkok on October 19-20, 2004. The workshop prepared participants for the Second High-Level Forum (HLF-2) on Harmonization and Alignment in Paris, Feb. 28-March 2, 2005.