But in its annual report on drug trafficking around the world, the State Department also said opium accounted for one-third of Afghanistan's economy.
And it urged Kabul to increase its efforts against poppy cultivation, which provides much of the world’s heroin supply.
Christy McCampbell, the head of the department's Bureau for International Narcotics and Law Enforcement. said the Bush administration was aware that Afghan President Hamid Karzai faced great difficulties in ending cultivation of the opium poppy and that Bush applauded Karzai's efforts in the midst of a war with a resurgent Taliban.
"Opium accounts for one-third of their economy, according to UN statistics," McCampbell told reporters. "This contributes of course to the widespread public corruption, to the damages of economic growth -- of licit economic growth, and it definitely strengthens the insurgency problems there."
The report also acknowledges that poppy cultivation in Afghanistan has increased by 17 percent this year over last year. But McCampbell emphasized that this increase was, in her words, "almost exclusively" restricted to the country's southern regions bordering Pakistan, where the Taliban has more influence.
The situation in northern Afghanistan is altogether different, McCampbell said.
"There is one model of success that can be drawn by comparing the marked difference in cultivation between the northern and southern provinces," she said. "Thirteen of the northern provinces are now poppy-free. That's seven more than last year that [were] poppy-free. In the north, sufficient security has allowed for alternative development programs to take effect, and it's helped the farmers to improve their economic livelihood."
McCampbell says Karzai faces huge challenges (epa)
Although Afghanistan doesn't face an immediate threat of a cut in U.S. aid, McCampbell said the Bush administration still wanted it to increase its efforts against poppy cultivation, which provides much of the world’s heroin supply.
"President Bush looks to the government of Afghanistan to take further steps to combat poppy cultivation and corruption," McCampbell said. "Despite the significant gains the country has made since 2001, the country does continue to face tremendous challenges. Not addressing these challenges now could undermine security, compromise democratic legitimacy, and imperil international support for vital assistance to that country."
'Little Change' Elsewhere
Afghanistan is one of 20 major drug-transit and drug-producing countries identified in the report.
McCampbell said those were the same as in 2006. They include countries in Latin America such as Bolivia and Guatemala; Caribbean countries like Haiti and Jamaica; and East Asia nations, including Laos and Myanmar.
The report designated these countries as having "demonstrably failed" to slow the spread of illegal drugs.
In some cases, the consequence for that failure could be a reduction in the amount of U.S. aid they receive.
The report said Washington would not impose penalties on Bolivia, the world's third-leading producer of coca, because it believes the government in La Paz, like Kabul, made a good-faith effort to fight its production last year. The coca leaf is the basis for cocaine.
Also, the United States identified Venezuela and Myanmar as having failed to fight the spread of illegal drugs in 2006. It said Venezuela's government did little to keep its territory from being a transit point for narcotics, and it accused Myanmar of being Asia's largest producer of methamphetamines.