OPIUM 'THREATENS AFGHAN GROWTH'

A huge surge in opium production and stubborn insecurity are threatening
the Afghan economy, the International Monetary Fund has warned.

In its first annual review of the war-ravaged country for 12 years, the IMF
saw some progress in putting back together the country's institutions.

But it warned that donors would have to keep on contributing for years to come.

And it said opium farming, now worth half the official national output -
could become entrenched in the economy.

Growing season

Afghanistan is thought to supply as much as three-quarters of the world's
supply of opium, the key raw material for heroin.

The country has long been a major source, and production exploded in the
1980s after the Soviet invasion as anti-Soviet guerrillas, or mujahideen,
used the trade - with the connivance of foreign intelligence agencies - to
fund their war.

The Taleban banned opium during their rule

Under the hardline Islamic government of the Taleban, which ruled from the
mid-1990s till deposed by the US-led coalition in late 2001, opium
production declined sharply.

But now it is fast increasing, fed in part by regional warlords who were US
allies in ousting the Taleban as well as by Taleban insurgents themselves.

And many farmers impoverished by the destruction of their poppies under the
Taleban are deep in debt, and cannot now afford to stop cultivating the
lucrative crop.

Security

Besides the 3,600 tonnes of opium the United Nations believes Afghanistan
produced this year - 6% up on 2002 - the IMF also warned that the delicate
security situation could threaten continued economic growth.

The writ of the government of President Hamid Karzai barely runs outside
Kabul, the capital.

"Restoring adequate security throughout the country remains a key priority
to facilitate the implementation of reforms and projects as well as the
resumption of private economic activity and the provision of basic public
services beyond Kabul," the report said.

But the IMF was keen to stress the advances made in the past two years.

From admittedly a woefully low level, the economy has expanded 29% in
2002-2003 not counting drug money to an output of about $4.05bn.

If donors continue to offer support, the Fund said, health, education and
security could continue to be rebuilt, underpinning the recovery.