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ECONOMIC GROWTH AND COUNTERNARCOTICSAgainst this somber background, Afghanistan has experienced an economic recovery.The IMF estimates that real, nondrug GDP has averaged annual growth of nearly 17percent from 2001–2002 through 2005–2006. The government has sought to set itsdevelopment agenda, rather than ceding it to aid organizations. At the London conferenceit presented its I-ANDS, which international financial institutions hailed as one of thebest they have received from any developing country.Nevertheless, the postwar economic boom is coming to an end. The IMF warnsthat the sources of the rebound “will be insufficient over the long term to sustain growthand alleviate poverty.” Additionally, counternarcotics policies, if implemented wrongly,risk reversing the economic recovery that has helped stabilize the country. An as yetunpublished macroeconomic simulation by an international financial institutiondemonstrates that different types of counternarcotics policies have differentmacroeconomic impacts and that a strategy including eradication at early stages can leadto a contraction of total GDP by nearly 6 percent. A change from recent rapid GDPgrowth of nearly 20 percent per year to a significant contraction is likely to provokeinstability and violence. The provision of “alternative livelihoods” to farmers alonewould not fully compensate for the effect of such an economic contraction on poverty,nutrition, health, employment, investment, the balance of payments, the exchange rate,and the price level. Donor countries are threatening to limit their aid if narcoticsproduction is not curbed quickly, regardless of its economic effects. The U.S. Congress“fenced” part of this year’s aid disbursement, pending certification by President Bush thatAfghanistan was cooperating with U.S. counternarcotics policies.Recommendations:• The main counternarcotics goal should be reducing the absolute and relativeeconomic size of the opium economy while maintaining positive growth thatfavors the poor in the overall economy. 2525 The “poor” in Afghanistan are defined as either: (1) those without enough food to meet basic caloricneeds consistently (about 40 percent of the rural population); or (2) those living on less than one U.S. dollar32