Paper short abstract:

Post-2001 aid dependency largely shaped the characteristics of the Afghan state. Aid dependency and the nature of such dependency, however, reinforced the building of a transitional, yet fragmented, aid-based rentier state.

Paper long abstract:

Post-2001 aid dependency largely shaped the characteristics of the Afghan state. Between 2002 and 2009, foreign aid on average comprised about 71 percent of gross domestic product (GDP) and financed more than 90 per cent of public expenditure through the government budget (on-budget) and outside the government budget and national systems (off-budget). Four-fifths of the expenditure, however, bypassed the Afghan state through off-budget mechanisms.

The absence of a balance between short and long-term objectives and the flow of more than four-fifths of the total aid off-budget undermined the development of an effective state. Aid thus produced paradoxical institutional outcomes, with the state remaining weak and fiscally unsustainable.

The unintended consequences of post-2001 developments and aid dependency included duplication in the government institutions, the reinforcement of the politics of patronage, creation of an off-budget aid-induced parallel public sector, and deficit in aid coordination. This situation prompted the government to concentrate its political and administrative efforts on improving government-donor relationships. While this approach by the government was necessary to attract aid to sustain its activities, it along with the politics of patronage made it unable to overcome domestic problems and to foster government accountability to its citizens.