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

 

Economic Indicators

Afghanistan's economic recovery came to a 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, Afghanistan has faced a range of socio-economic challenges, including a significant drop in international aid, frozen foreign reserves, ongoing deflation, a widening trade deficit, and restrictive laws—especially those impacting women’s rights. Human capital remains low, private consumption is limited, and nearly half the population lives in poverty. Employment opportunities have declined, with youth and women particularly affected by rising unemployment and a lack of quality jobs. Nevertheless, in FY2023–24, Afghanistan’s GDP grew by 2.7%, marking a partial recovery from the 27% contraction that followed the Taliban’s return to power. However, overall growth remained limited due to reduced investment and declining exports, which constrained aggregate demand. According to the World Bank, economic activity in Afghanistan is expected to grow modestly over the medium term, with an average annual growth rate of 2.75% from 2024 to 2026. Agriculture is projected to grow at a faster pace than the rest of the economy during this period.

Afghanistan's current account deficit rose to 13.5% of GDP in FY2023-24, driven by a growing trade deficit and declining foreign aid. Despite an increase in remittance inflows, total income from abroad decreased by approximately two percentage points of GDP, dropping to 33.7%. Financing the current account deficit has been challenging due to limited foreign direct investment and borrowing capacity. While domestic revenue mobilization improved, the fiscal deficit (on a cash basis) widened to 1.4% of GDP in FY2023-24. Operating expenditures rose by 0.3 percentage points to 15.6% of GDP, while development expenditures increased from 0.8% of GDP in FY2022-23 to 1.3% in FY2023-24. The fiscal deficit was likely financed through a reduction in deposits at the central bank. The fiscal deficit is expected to narrow to 0.7% of GDP in FY2024-25, with a balanced budget projected for FY2025-26 and FY2026-27. Revenue collection improved in the first four months of FY2024-25, reaching AFN 69.7 billion—an 11% increase from the previous year, mainly driven by higher non-tax revenues. Given borrowing constraints, the revenue increase is expected to be offset by a corresponding rise in expenditure (data World Bank). Headline inflation decreased in April 2023 and remained negative throughout FY2023-24, with domestic prices falling by an average of 7.7%. Core inflation, excluding volatile food and energy prices, was also negative, declining by about 3% by the end of the fiscal year in March 2024. A high current account deficit puts pressure on foreign reserves, and with limited financial options, the central bank faces challenges in maintaining currency stability, which could potentially lead to inflation.

Afghanistan is one of the poorest countries in the world, with a GDP per capita (PPP) of around USD 1,992 (World Bank – 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 2023 unemployment rate was equal to 14% 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 on women's employment imposed by the Taliban may inflict an additional economic loss. According to the latest estimates from the World Bank, monetary poverty stands at 48.3%, marking a 4-percentage point decrease compared to 2020. Poverty in urban areas continues to rise, driven by a lack of quality job opportunities. In contrast, improvements in security, better access to markets, and a strong agriculture season have contributed to a reduction in poverty in rural areas.

Main Sectors of Industry

Agriculture has traditionally been 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 34.5% of GDP and employs 45.5% of the labour force (World Bank, latest data available). Afghanistan’s arable land makes up nearly 58% of its total land area, amounting to approximately 37,910 hectares. Opium cultivation – concentrated in the southwestern parts of the country - is one of the main sectors; however, following the announcement of the ban on "Poppy Cultivation and All types of Narcotics" by the de-facto authorities in April 2022, there was a significant decrease in opium poppy cultivation and opium production in 2023 and 2024. According to FAO data, in 2024, total cereal production was estimated at 6 million tonnes, 10% above average. Wheat led with 5 million tonnes, up 13% due to favourable weather and strong yields, while rice output reached 640,000 tonnes, also above average, driven by increased area and yields.

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 Taliban’s takeover, 65% of all manufacturing workers were female). Industry as a whole accounts for 13.5% of GDP and employs 18.4% of the total workforce. The manufacturing sector’s share of GDP currently stands at 8%, a sharp decline from the 20% of 2002. According to the Asian Development Bank, the industrial sector contracted by 5.6% in 2023, as activity shifted toward resource-intensive primary industries like mining and quarrying, which grew by 4.1%. This shift away from more diversified, skill-intensive activities was driven by brain drain, weak governance, policy uncertainty, macroeconomic instability, chronic liquidity shortages, and high-risk premiums in formal finance.

After years of expansion, the services sector employs 36.1% 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 (according to the Ministry of Commerce and Industries, 80% of small and medium enterprises in Afghanistan are involved in trade and retail services). 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 and hawala transactions. According to the latest data available from the Asian Development Bank, in 2023, the services sector in Afghanistan contracted by a further 6.5%, following a 30.1% decline in 2022, due to sharp reductions across all major service industries. Wholesale and retail trade shrank by 8.6%, finance and insurance by 6.6%, health and social services by 5.9%, real estate by 5.2%, restaurants and hotels by 4.9%, and post and telecommunications by 4.7%. Education was the only sub-sector to record growth, with a modest increase of 0.7%.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 45.5 18.4 36.1
Value Added (in % of GDP) 34.5 13.5 46.5
Value Added (Annual % Change) 2.1 2.6 2.3

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.

 
 

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Country Risk

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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 was estimated at 67% of GDP in 2023 (World Bank, latest data available). Afghanistan traditionally exports items with low value, such as dried fruit, carpets, cotton, cereals, and non-alcoholic beverages. Its main imports include wheat, peat, textiles, and petroleum products. Although not officially recorded, opium remains the main export of the country, but its production was drastically reduced in 2023.

According to the World Bank, in 2024, Afghanistan’s trade deficit widened by 59% year-on-year to USD 8.9 billion, equivalent to 44% of GDP, up from USD 5.6 billion (32% of GDP) in 2023. The expansion was driven by a stronger Afghani, increased foreign currency inflows, ongoing trade disruptions with Pakistan, and a likely gradual rise in aggregate demand. Exports declined by 12% to USD 1.9 billion, largely due to a 64% drop in coal exports to USD 92 million, as Pakistan resumed sourcing from traditional suppliers. Textile exports also fell by 14% to USD 242 million, reflecting currency appreciation, softer global demand, and higher Pakistani tariffs. In contrast, food exports rose by 4% to USD 1.31 billion, supported by China’s tariff exemptions and improved trade flows with Pakistan in late 2024. Imports surged by 40% to USD 10.8 billion in 2024, compared to USD 7.8 billion in 2023. The growth was fuelled by higher demand for transportation goods, mineral products (notably petroleum and cement), and chemicals. Transportation imports saw the sharpest increase, up 86% year-on-year, followed by mineral products (up 56%), chemicals (up 51%), and food products (up 28%). As a share of total imports, transportation goods rose from 7% in 2023 to 10% in 2024 (USD 1.04 billion), mineral products from 20% to 22% (USD 2.41 billion), and chemicals and related products from 7% to 8% (USD 0.84 billion).

Pakistan remained Afghanistan’s largest export destination, though its share fell from 54% in 2023 to 45% in 2024. India’s share rose to 34%, driven mainly by food exports. Meanwhile, trade diversification efforts saw Iran, Kazakhstan, and Uzbekistan each contribute about 3% of exports. Overall, food and textiles accounted for 82% of total exports, up from 71% the previous year. On the other hand, Iran remained Afghanistan’s top import source, accounting for 30% of total imports—a rise of 84% year-on-year—as trade increasingly shifted away from Pakistan amid restrictions and higher tariffs. The UAE followed with a 19% share, while Pakistan and China accounted for 16% and 7%, respectively, reflecting Afghanistan’s shifting trade dynamics within the region.

 
Foreign Trade Indicators 20192020202120222023
Imports of Goods (million USD) 6,7776,5385,3085,5296,064
Exports of Goods (million USD) 864777850819903
Imports of Services (million USD) 1,2131,105000
Exports of Services (million USD) 652700000
Imports of Goods and Services (Annual % Change) n/an/a-21.336.70.7
Exports of Goods and Services (Annual % Change) n/an/a7.218.6-9.0
Imports of Goods and Services (in % of GDP) n/a36.337.154.550.5
Exports of Goods and Services (in % of GDP) n/a10.414.318.416.8
Trade Balance (million USD) -5,294-5,101n/an/an/a
Trade Balance (Including Service) (million USD) -5,855-5,507n/an/an/a
Foreign Trade (in % of GDP) n/a46.751.472.967.3

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

 
 
 
 

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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: HAYBATULLAH Akhundzada (since 15 August 2021)
Next Election Dates
TBD
Main Political Parties
Before the Taliban takeover, Afghanistan had a multi-party system with numerous political parties participating in the democratic process. Since coming to power in August 2021, the Taliban have established an authoritarian regime and banned all political parties, effectively eliminating political pluralism in the country.
Type of State
Dictatorial theocratic 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 Taliban takeover in August 2021, Afghanistan had a bicameral legislature known as the National Assembly, composed of two houses: the Wolesi Jirga (House of the People) and the Meshrano Jirga (House of Elders). The Wolesi Jirga was the more powerful chamber, consisting of 249 members elected by the people for five-year terms, with seats reserved for women and minority groups. The Meshrano Jirga had 102 members: one-third elected by district councils for three-year terms, one-third by provincial councils for four-year terms, and one-third appointed by the president for five-year terms, including representatives for women, the disabled, and nomadic groups. The National Assembly ceased functioning following the fall of Kabul on 15 August 2021 and was officially dissolved by the Taliban in May 2022.
 
 

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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Latest Update: May 2025