Afghan reintegration fund may need $1 bln: minister

LONDON (Reuters) - Afghanistan may need up to $1 billion to help reintegrate Taliban fighters into society, Finance Minister Omar Zakhilwal told Reuters on Thursday. Afghanistan required international funding for the reintegration plan, which aims to provide economic opportunities for rank-and-file Taliban who lay down their arms and return to their villages. The Afghan government did not know exactly how much the plan would cost but it "would be peanuts compared to the costs of the war that we are engaged in Afghanistan," Zakhilwal said on the sidelines of a conference in London on the country's future.

"It definitely will run into hundreds of millions of dollars. Initially ... we would expect it somewhere in the range of about $1 billion in the next three years or so," he said.

The money would be spent on creating job opportunities, rural development, giving a livelihood to the families of former insurgents and providing a secure environment, he said.

British Foreign Secretary David Miliband said $140 million had been pledged toward the reintegration fund, and Japan announced it would provide $50 million toward that sum.

Zakhilwal said the London conference strongly endorsed the fund. "We did not expect any pledges but still we heard from the Japanese, we heard from Germany, we heard from other countries that they will be putting money into it," he said.

STRONG GROWTH

Despite the conflict in Afghanistan, Zakhilwal said the country's economy was projected to grow by about 15 percent this year, compared with about 10 percent in 2009.

"We are doing well. In the past eight years, the average growth rate is in the double digits, over 10 percent," he said.

The government's economic focus was on developing agriculture, improving infrastructure, reform, and creating a more better environment for the private sector, he said.

Afghanistan is highly dependent on foreign aid. British Prime Minister Gordon Brown told the conference that international aid in the last financial year was $6.3 billion, equivalent to 45 percent of Afghanistan's economic output.

Foreign donors have traditionally decided how a large part of the aid money is spent, but Zakhilwal said the Afghan government wanted it delivered through Afghan-led projects.

He said he was pleased Brown had told the conference that, in return for action on corruption, international donors would increase the share of aid delivered through the Afghan government to 50 percent in the next two years.

Between now and a follow-up Kabul conference in the spring, the Afghan government would sit down with the International Monetary Fund to discuss "a new package that is Afghan-led, based on Afghan priorities," Zakhilwal said.

The Afghan government was looking for IMF expertise but was not seeking an IMF loan at the moment. At some point, Afghanistan may seek loans for railway and energy projects, he said.

Afghanistan won $1.6 billion in debt relief from the World Bank, IMF and creditor nations this week.

(Editing by David Stamp)