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Afghan economy faces serious revenue shortfall

KABUL, Afghanistan - When the next president of Afghanistan takes office later this year, he will inherit a growing budget shortfall that could leave tens of thousands of civil servants unpaid and force key public programs to shutter.

KABUL, Afghanistan - When the next president of Afghanistan takes office later this year, he will inherit a growing budget shortfall that could leave tens of thousands of civil servants unpaid and force key public programs to shutter.

After more than a decade of Western aid projects designed to make the Afghan economy self-sustaining, government revenue continues to fall short of projections, leaving the country in dire economic straits just as foreign funding begins to dry up.

The current budget shortfall - roughly 20 percent of overall Afghan expenditures - has worsened as the country navigates a tenuous political transition, sending a shockwave through Afghanistan's nascent economy.

Afghan officials plan to request additional funds from foreign donors to make up for the shortfall. But as the United States and NATO draw down financial and military assistance this year, those emergency funds are far from guaranteed.

"If we do not receive extra funds in the next two months, we will face a problem with the operating budget, which is mostly salaries," said Alhaj Muhammad Aqa, director general of the treasury at the Finance Ministry.

Aqa said the government has roughly $400 million less than the $2.5 billion it was projected to spend this year, leaving officials to weigh potential cuts. That hole is expected to deepen in the coming months as the country prepares for a divisive second-round election and an active fighting season in the war against Taliban insurgents.

Afghanistan will need more than $7 billion annually for the next decade to sustain a functional government, maintain infrastructure, and fund the Afghan army and police, according to the World Bank. But there are already signs that foreign donors might not have an appetite for such a commitment. The Obama administration requested $2.1 billion in financial assistance for Afghanistan this year, but Congress approved only half that amount.

While U.S. officials acknowledge the gravity of Afghanistan's economic problems, they argue that the country should be able to steady the budget without halting government salaries. They also suggest that revenue could increase if key reforms are implemented.