Economic Outline

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.

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