Afghanistan's socio-economic conditions and state institutions changed dramatically after 2001. This was realised through both substantial military and economic contribution from the international community and sacrifices made by Afghans. This chapter looks at the pathologies of post-2001 externally aided state building and explores the prospects for fiscal sustainability and policy. Between 1996 and 2000, the Taliban consolidated their theocratic regime in most parts of Afghanistan and waged a war against the local resistance forces led by Commander Ahmad Shah Massoud. Although Afghanistan is categorised as a prospective resource-rich country, the use of such resources as a substitute for aid is not viable in the long run. Bonn Agreement, which was signed by Afghans, emphasised the rights of Afghan people to determine their political future democratically according to the principles of Islam while promoting national reconciliation, stability and respect for human rights. The chapter indicates that sources of state revenue have major impacts upon state building and state-society relations.