KABUL - Afghanistan is in danger of becoming an opium-fuelled "narco-state," the International Monetary Fund warned in a report received here Monday.

The report, which was also released at the annual IMF and World Bank meetings in Dubai, found that production of opium, the raw ingredient for heroin, accounted for between 40 and 60 percent of Afghanistan's GDP.

"A dangerous potential exists for Afghanistan to progressively slide into a 'narco-state' where all legitimate institutions become penetrated by the power and wealth of (drug) traffickers," the IMF said.

The report showed a 30 percent growth rate for Afghanistan's economy in the financial year 2002-03, excluding opium production, and predicted 20 percent growth over the coming year.

Gross domestic product was around four billion dollars for 2002-2003 but that swells to nearly 6.6 billion dollars when opium exports are included.

The report hailed progress in economic management and achieving macro-economic stability "under very difficult circumstances" in the past 18 months.

But reversing the skyrocketing growth of the opium economy will require "a substantial and prolonged commitment by the authorities and the international community," the IMF said.

It urged Afghanistan to provide alternative livelihoods for opium farmers by developing the economy.

Since the United States-led ouster of the Taliban government in late 2001, Afghanistan has regained its position as the world's top narcotics producer, accounting for around 75 percent of global opium production.

Opium poppy crops are extremely lucrative for Afghanistan's poor farmers, who can earn 38 times the return on traditional wheat crops.

Afghan opium-derived exports are valued at around 2.5 billion dollars but the drugs would likely fetch more than 10 times that on the international drug market, the IMF said.

Finance Minister Ashraf Ghani has repeatedly warned that Afghanistan needed 30 billion dollars in aid and investment over five years to avoid becoming a "narco-mafia" state.

Ghani met international donors in Dubai at the World Bank and IMF meetings on Sunday and urged them to provide his government with more money to fight drugs and rebuild the country's war-torn economy.

U.S. Treasury Secretary John Snow said the chances looked "pretty good" that other countries would match Washington's recent 1.2 billion dollar pledge.

The IMF also underscored the need to deal with rife insecurity, which is hampering reconstruction outside Kabul.

Without the resumption of private sector economic activity, health care and education, "much of the country may become dominated by poppy cultivation and the production of opium, (pushing) Afghanistan into a downward spiral of violence and corruption," it warned.

Adam Bennett, the IMF's mission chief to Afghanistan, said on the sidelines of the Dubai meetings that the Afghan government was making "significant progress" in the thorny area of revenue collection from provincial governors. He said the revenues could reach 200 million US dollars.

Provincial governors have been accused by the government of withholding hundreds of millions of dollars in customs duty and other revenue from Kabul.

The IMF has not provided loans to the Afghan government but helped it to launch a new currency at the start of 2003 and implement central and commercial banking laws.