President Hamid Karzai's cabinet has decided to shift the bulk of its funds from police, the military and intelligence to shattered education and health systems.
Mr Karzai said: "All ministry budgets will be cut, especially from defence, interior and intelligence. And most of those funds will be allocated to education and health."
Afghanistan has no formal annual budget. The United Nations says $400 million (pound;255m) a year is needed to run the country. International donors have pledged $4.5 billion (pound;2.9bn) over five years to rebuild the country, but hardly any cash has materialised so far.
President Karzai said rich warlords and businessman had bankrolled a new domestic aid fund. He said that some of his ministers had also promised to provide funds for education and health, adding that warlord Abdul Rasul Sayyaf had contributed $200,000 (pound;127,000) for education.
"When we came to power, the coffers were empty," Mr Karzai said. "When I talk to people, first they say 'get rid of guns'. Then they want improved education."
Afghanistan's education system has been shattered during 23 years of warfare. Classes for girls resumed after the defeat of the Taliban in November, but pupils have had to persevere without adequate heat, power, desks or textbooks. Most schools do not have adequate toilet facilities and about half the pupils are being taught in the open air or in tents.
Teachers earn about pound;20 a month, and many of them cannot afford the bus fare to school.
UNICEF this week appealed for an additional $10m on top of its original appeal for $47m for education. The TES-UNICEF Children Helping Children appeal has so far raised pound;134,000 to help rebuild education.