Global Facilitation Network for Security Sector Reform (GFN-SSR)

Improving Public Financial Management in the Afghan Security Sector

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Security is not only a central issue for Afghanistan’s reconstruction and development, it has critical implications for the country’s management of its public finances. This paper by Peter Middlebrook, Nicole Ball, William Byrd and Christopher Ward, reviews Afghanistan’s security sector from the perspective of public finance management (PFM) and development. The Afghan security sector must be integrated into all aspects of the country’s PFM system and subject to all budgetary and fiduciary processes.

Security impacts the gamut of development issues faced by Afghanistan, ranging from state building and capacity development to revenue collection, security delivery and encouraging private sector-led growth. Both the Afghanistan government and external partners highlight security as a key enabling factor for the country’s growth and development. There is a critical need for reliable security to allow the Afghan people to conduct their daily lives in relative safety.

The Afghan security sector accounted for 40% of the country’s national budget as well as external assistance during the years under review, and raises major public finance management issues. In view of these issues, the Government of Afghanistan requested that the World Bank (WB) include the security sector in its PFM Review. This paper is one of five volumes comprising the WB Review titled “Afghanistan: Managing Public Finances for Development”.

Salient features of Afghanistan’s security sector at present include:

• Decades of conflict caused fragmentation into regional and local militias, capture of policing and military functions by non-legitimate actors and erosion of formal justice systems.
• Immediate security threats faced by Afghanistan are variegated and disputed by different stakeholders.
• The overall size of the security sector does not seem unreasonably large by international standards.
• The security sector is costly and may be unaffordable.
• Progress in developing different parts of the security sector has been uneven.
• Security and fiscal issues are closely interlinked.

From a PFM perspective, key challenges facing the security sector include:

• The need for an integrated security sector strategy and policy framework;
• Very high donor-executed spending through the external budget;
• Difficulties coordinating and prioritising security sector expenditures and actions;
• Concerns about the costs of security sector wages, pressures for fiscally unaffordable salary increases and fiscal sustainability of staffing levels;
• Slow implementation of public administration reforms and capacity building in security sector management and oversight institutions; and
• The need to develop good governance and sound, sustainable financial management practices.

Implementation of the following recommendations would improve PFM in Afghanistan’s security sector:

• Integration of the security sector into all aspects of Afghanistan’s PFM system;
• Review of the fiscal implications of on-going security sector reform;
• Development of policy making capacity in the National Security Council and finalisation of the national security strategy;
• Inclusion of security as an integral part of the national development strategy;
• Implementation of priority administrative reforms and development of security sector management and oversight capacity; and
• Rigorous enforcement of staffing levels and salary policies based on fiscal absorption capacity.

In particular, there is a need for donors to, inter alia:

1. Promote improved policy making and financial management capacities of security agencies and ministries;
2. Reassess their views about Afghan security force size vis-à-vis fiscal restraints; and
3. Channel more of their security assistance through the country’s core budget.

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