Economic and Political Overview

flag Afghanistan Afghanistan: Economic and Political Overview

In this page: Economic Indicators | Foreign Trade in Figures | Sources of General Economic Information | Political Outline | COVID-19 Country Response

 

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Afghanistan's economic recovery came to an halt with the Covid-19 outbreak in 2020, weighing on an already fragile consumer and investor sentiment and slowing trade flows on the country's borders. Furthermore, since the Taliban regained power in August 2021, the situation in the country is widely reported to have worsened: a complete collapse of banking infrastructure alongside an increase in poverty and hunger has meant that the country is in dire need of humanitarian aid. Although the main global financial institutions do not provide official data, Afghanistan’s GDP is estimated to have contracted by 30-35% between 2021 and 2022 and is projected to move to a low growth path between 2-2.4% for 2023 and 2024 (World Bank), but downside risks persist, including increased instability of the banking sector, any potential reduction in aid from the international community, or worsening of the security and political situation.

The sudden halt in the flow of aid in the form of grants, including dollar banknotes (previously 40% of GDP) which followed the takeover of the Taliban has led to the Afghani depreciating against the dollar and an increase in the public deficit. The Taliban’s first national budget was announced in mid-2022: it amounts to AFN 231 billion (around USD 2.65 billion) with a budget deficit of AFN 40 billion. Nevertheless, there were no details as to what the priorities of the public sector are or how resources would be distributed among different sectors. According to the World Bank, the Taliban regime has collected AFN 144 billion (USD 1.64 billion) in revenues between December 22, 2021, and end-October 2022. Afghanistan continues to rely relatively heavily on revenue collected at the border: taxes at borders reached 59% of the total revenue collected up to October 2022, while an increase was recorded in ministries’ revenue due to a rise in coal mining royalties and fees. Overall, the public debt, which has been mainly external and very low, is expected to increase and could lead to a sovereign debt default. The latest data available from the World Bank show that the headline inflation in September 2022 decelerated to 13.6%, down from its peak of 18.3% in July 2022.

Afghanistan is one of the poorest countries in the world, with a GDP per capita (PPP) of around USD 2,456 (IMF – latest data available). The population faces unemployment, poor sanitary conditions, weak basic infrastructures (health, water, electricity) and insecurity. According to the World Bank database, the 2021 unemployment rate was equal to 11.7% of the total labour force; however, it should be noted that the undeclared employment rate is higher. Although an Afghan middle class had begun to emerge - primarily composed of expatriates who grew up in Iran or Pakistan - they tend to be discouraged by the economic and political situation in the country. As such, immigration to Western countries increased significantly in recent years and constitutes a major risk for the country's long-term development. Moreover, the restriction of women's employment imposed by the Taliban may inflict an additional economic loss estimated between 3 and 5% of GDP (Coface). According to the United Nations Office for the Coordination of Humanitarian Affairs (UNOCHA), 20 million people are faced with acute hunger, including 6 million people at emergency levels.

Main Sectors of Industry

Agriculture was traditionally a driving force of the Afghan economy. Prior to Taliban rule and decades of conflict, Afghanistan was not only able to produce enough food for its own population but also exported many agricultural products, such as almonds, pomegranates, pistachios, raisins, and apricots. Nevertheless, agriculture is now on the way to recovery, mainly through international aid, and continues to be the main source of income for many households. Nowadays, agriculture accounts for 33.5% of GDP and employs 43% of the labour force (World Bank, latest data available). Opium cultivation – concentrated in the southwestern parts of the country - is one of the main sectors: in 2022, opium output increased by 32% over the previous year to 233,000 hectares – making the 2022 crop the third-largest area under cultivation since monitoring began.

Industry is still largely at its infant stage, and dependent on small-scale manufacturing (mainly textile) but also mining and energy production. Manufacturing is the only sector that employs predominantly women (prior to the Talibans’ takeover, 65% of all manufacturing workers were female). Industry as a whole accounts for 15.6% of GDP and employs 19% of the total workforce. The manufacturing sector’s share of GDP stands at 9% (World Bank).

After years of expansion, the services sector employs 72% of the workforce and accounts for 46.5% of the GDP. Community, social and personal services take up a considerable share of the tertiary sector, followed by wholesale and retail trade. Financing, insurance, real estate and business services are nearly non-existent and employ 1% of the workforce. It is important to note that official statistics do not take into account illicit activities, such as poppy culture, opium and heroin trafficking as well as cross-border smuggling, which are thought to account for a significant share of the economy. It has also to be noted that, after the Taliban took power, businesses scaled back their operations by laying off employees, cutting down salaries and relying more on cash (57%) and hawala transactions (31%), with the percentage of firms depositing money in banks dropping to just 12% (from 82% before August 2021 – data World Bank).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 46.0 18.5 35.5
Value Added (in % of GDP) 33.5 15.6 46.5
Value Added (Annual % Change) -2.8 -14.2 -32.7

Source: World Bank - Latest available data.

 

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Monetary Indicators 20162017201820192020
Afghanistan Afghani (AFN) - Average Annual Exchange Rate For 1 MUR 1.911.972.122.191.95

Source: World Bank - Latest available data.

 
 

Find out all the exchange rates daily on our service Currency Converter.

 
 

Country Risk

See the country risk analysis provided by Coface.

 

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Foreign Trade in Figures

After the collapse of the Taliban Government in 2001, Afghanistan opened up to international trade. The state had very few commercial barriers for imported products, and customs duties had been kept flat given weak imports. The share of trade peaked at 49.2% of GDP in 2018 before falling to 45.6% in 2019 (World Bank, latest data available), and it dropped further after the takeover of the Taliban in 2021. Afghanistan traditionally exports items with low value, such as dried fruit, carpets, cotton, cereals and non-alcoholic beverages. Its main items of import include wheat, peat, textile and petroleum products. Although not officially recorded, opium remains the main export of the country, estimated to be worth between USD 1.7 to 2.5 billion in 2021 by the United Nations Office on Drugs and Crime (as of 2022, Afghanistan's harvest produced more than 90% of illicit heroin globally and more than 95% of the European supply).
 
Afghanistan usually trades with its neighbours, Pakistan being its major trade partner. Pakistan, along with India, receive around 75% of Afghan exports, followed by the United Arab Emirates, China and Turkey. Iran is the main supplier of goods in Afghanistan, followed by China, Pakistan and Kazakhstan. Pakistan achieved bilateral trade of USD 1.513 billion in 2022, according to the State Bank of Pakistan; while trade with India reached USD 45 million last year, data from the Indian Ministry of Commerce show.
The poor state of its infrastructure, a legal and business framework that is still under development and continued insecurity act as de facto trade barriers. Nonetheless, at the end of 2015, Afghanistan's application to join the WTO was approved by its member states. The development of trade with Central Asia and Iran could increase exports along with the opening of a new railway linking China to Afghanistan via Kazakhstan, Uzbekistan, Kyrgyzstan and Tajikistan. In February 2023, the main border crossing between Afghanistan and Pakistan has been closed.

According to the latest available data from WTO, in 2021 exports edged up to USD 1 billion from USD 732 million a year earlier; whereas imports decreased to USD 5.5 billion (-22.2%). No data is available for 2021 trade in services. As can be seen from the above figures, Afghanistan has a structural trade deficit, which is expected to worsen following the establishment of the Taliban regime. Official statistics show that during the first half of 2022, the country imported merchandise worth USD 2.9 billion (10% lower than the comparable period one year earlier), while exports stood at USD 740 million (+21% - data World Bank).

 
Foreign Trade Indicators 20182019202020212022
Imports of Goods (million USD) 7,4076,7776,5385,5505,762
Exports of Goods (million USD) 8758647771,035992
Imports of Services (million USD) 1,3671,2131,10500
Exports of Services (million USD) 73465270000
Trade Balance (million USD) -5,746-5,294-5,101n/an/a
Trade Balance (Including Service) (million USD) -6,378-5,855-5,507n/an/a

Source: WTO – World Trade Organisation ; World Bank , Latest Available Data

 

Main Partner Countries

Main Customers
(% of Exports)
2019
India 47.1%
Pakistan 34.3%
China 3.6%
Türkiye 2.9%
United Arab Emirates 2.9%
See More Countries 9.3%
Main Suppliers
(% of Imports)
2019
Iran 14.6%
China 13.9%
Pakistan 12.9%
United States 9.1%
Turkmenistan 8.1%
See More Countries 41.5%

Source: Comtrade, Latest Available Data

 
 
 
 

To go further, check out our service Import Export Flows.

 
 

Main Services

Source: United Nations Statistics Division, Latest Available Data

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Sources of General Economic Information

Ministries
Ministry of Economy
Statistical Office
National Statistics and Information Authority
Central Bank
Da Afghanistan Bank (Central Bank of Afghanistan)
Stock Exchange
There is no stock exchange in Afghanistan
Search Engines
Afghana Search Engine
Google Afghanistan
Economic Portals
Economic news from the Central Bank of Afghanistan
Pajhwok Business News Portal
Afghan Online News Portal - Economic News

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Political Outline

Current Political Leaders
Supreme Leader of the Taliban movement: Hibatullah Akhundzada
Prime Minister: Mohammad Hassan Akhund
Next Election Dates
TBD
Main Political Parties
Afghanistan had a multi-party system with numerous political parties before the takeover of the Talibans.
Type of State
Dictatorial regime (since August 2021)
Executive Power
After taking power in August 2021, the Taliban established a regime that severely limited democratic freedom in the country. Most countries (including the G7) do not recognize the Taliban government.
Before the takeover, the president was both chief of state and head of government.
Legislative Power
Before the takeover of the Talibans in 2021, the legislative power was bicameral. The parliament, or the National Assembly, was composed of an upper and lower house. The lower house, Wolesi Jirga, was the more powerful of the two houses, and its members (no more than 250, the 2004 electoral law set the size of the house at 249 members) were elected by the people for a five-year term. The upper house, Meshrano Jirga, used to be composed of 102 seats and its members served 5-year terms.

The National Assembly was effectively dissolved on 15 August 2021 after the fall of Kabul.
 
 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Not Free

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

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COVID-19 Country Response

Travel restrictions
Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.
Import & export restrictions
A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) undertaken by the Afghan government, please consult the section dedicated to Afghanistan in the IMF’s Policy Tracker platform.
Support plan for businesses
For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.

 

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Latest Update: December 2023