Economical overview
Afghanistan has an artificial war economy,
developed around the presence of foreign soldiers and
the many international aid and development projects
after the fall of the Taliban violence in 2001. This
economy must be replaced with other industries if the
country is to become independent of the outside world.
Traditionally, agriculture has been the backbone of
the Afghan economy, but its importance has diminished
during the many years of war, when parts of the
countryside have been depopulated and the land damaged.
However, about 60-80 percent of the working population
in agriculture still accounts for more than one fifth of
the country's official GDP.
- Countryaah.com:
Major imports by Afghanistan, covering a full list of top products imported by the country and trade value for each product category.
The foreign presence and migration into the cities
during the 2000s and 2010s has meant that the emphasis
in GDP has shifted from agriculture to trade and
services, as well as construction and civil engineering.
But the official figures do not give the whole
picture. A significant part of Afghanistan's economy is
based on opium cultivation, heroin trafficking and
smuggling. The estimates of how much of the country's
real economy is based on opium shows how deficient all
statistics in Afghanistan are. Numerous sources come
from figures such as 13 percent, 25 percent and 33
percent.
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Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including AFG which represents the country of Afghanistan.
Chaotic war years
Afghanistan has always been poor, but by the end of
the 1970s most people in the countryside still depended
on what they could grow. In the cities, trade, crafts
and industry flourished on a smaller scale. The social
gaps were relatively small.
During the war years in the 1980s, the economy
collapsed. By the time the Soviet troops returned home
in 1989, food production had fallen to less than half
before the war and the livestock population had fallen
by perhaps a third. This was due both to the devastation
of war and to the fact that large parts of the
countryside had been emptied of people. Industry and
crafts showed a corresponding decline.
After the fall of the communist regime, the economy
was chaotic. During most of the 1990s, the country
actually had several regional economies, which in some
cases had their own currencies. The country's outskirts
were financially linked ever closer to their respective
neighboring countries. After the Taliban's takeover of
1996, contacts with Iran and most of Central Asia were
broken without being replaced by new economic
initiatives from Kabul.
Inflation was high during the communist era, but was
still dampened by government price controls and
subsidies. When these safeguards disappeared, the rate
of increase in prices shot up to almost 200 percent per
year. During the 2000s, inflation has been more
manageable, with a peak of almost 30 percent in 2008.
High growth, continued poor
After the fall of the Taliban regime, Afghanistan
experienced over a decade of strong economic growth,
albeit from an absolute bottom level. Until 2012, GDP
increased on average by just over 9 percent per year,
sometimes significantly more, sometimes less. The
fluctuations were mostly due to the outcome of
agriculture, which is sensitive to variations in the
weather. But growth was mainly dependent on
international aid and money pumped into the country
through the foreign soldiers and other foreign
personnel. When the foreign presence of troops began to
shrink a few years into the 2010s, GDP growth dropped
rapidly to a much lower level.
Regardless of its growth, Afghanistan has remained
one of the world's poorest countries. The inflated,
artificial economy has mainly benefited a domestic elite
with good contacts with the international community. For
example, housing demand has driven up rents in major
cities to the Western European level.
Since 2001, multibillion amounts have been spent on
rebuilding the country, primarily money from the United
States, but significant sums have been lost through
corruption or wasted on ill-conceived and poorly
executed projects. And as usual when the rich countries
gathered to pledge support to crisis-hit countries,
large sums have never been paid.
One problem in the reconstruction work has been that
most of the projects were driven by foreign forces,
which made the work much more expensive than if domestic
resources had been utilized. The buoyant wage situation
of the foreign companies has also caused the Afghan
government ministries and domestic companies to lose
trained workers to these companies.
Concern for the future
In line with the declining foreign presence,
investment has declined in the country and consumers
have begun to hold more tightly in their wallets of
concern for the future. In 2014, the finances
deteriorated so much that the state found it difficult
to pay salaries to public employees. Yet in 2018, almost
half of the state budget was financed with aid.
There is also concern that many large-scale projects
financed and built by the United States and other
Western countries are likely to fall into disrepair if
aid falls over the next few years, as the Afghan state
will not be able to afford to pursue them and provide
maintenance.
The collection of taxes and duties has improved since
the beginning of the century, but must be even better if
the country can stand on its own. One problem with
getting companies and individuals to pay taxes is that
they do not feel that they are receiving anything back.
The roads are just as bad and the electricity outages
are equally long regardless of how much they pay to the
state.
Much of Afghanistan is beyond the control of the
state. This is where the Taliban economy usually
prevails. It consists of opium trade, taxation of
private individuals and companies, gifts from
sympathizers, and extortion and protection activities.
In some places, the Taliban levy taxes on farmers'
harvest income and on wealth. Opium production is
generating enough to finance the Taliban's fighting
against the government forces in the most important
opium provinces in the south. There is also information
that some of the aid money comes to the Taliban through
extortion and threats.
Bank Scandal
In the fall of 2010, a scandal was revealed that
caused the outside world to review its financial support
for Afghanistan. When it emerged that the owners of
Kabul Bank, which in many cases had close personal ties
to the government, had granted themselves large loans
virtually without collateral. Close to a billion dollars
was suspected to have been used for private luxury
consumption and daring investments.
Kabul Bank, which handled the salaries of the
country's thousands of public servants, was close to
falling over before the Afghan central bank intervened
and took it over for $ 820 million of its own reserves.
The government and the central bank's handling of the
scandal, and their seeming reluctance to deal with the
ills in the country's financial sector, first got the UK
and later in 2011 the IMF to withhold payments of
several hundred million dollars in promised financial
support.
In March 2013, two of Kabul Bank's former top
executives were sentenced to five years in prison and a
total of more than $ 800 million in fines. The sentence
was sharpened in November 2014 to ten years in prison.
Corona pandemic beats the economy
When the corona pandemic hit most of the world's
countries from the spring of 2020, it soon became clear
that Afghanistan was at risk of becoming one of the
worst affected, both health and economic. GDP shrank
while unemployment and poverty increased. Rescue
packages came in the spring from the World Bank, and the
IMF contributed emergency loans.
Read more about the opium trade in Agriculture and
Fisheries.
FACTS - FINANCE
GDP per person
US $ 521 (2018)
Total GDP
US $ 19,363 million (2018)
GDP growth
1.0 percent (2018)
Agriculture's share of GDP
20.5 percent (2017)
Manufacturing industry's share of GDP
11.1 percent (2017)
The service sector's share of GDP
52.7 percent (2017)
Inflation
2.6 percent (2019)
Government debt's share of GDP
6.9 percent (2018)
External debt
US $ 2,552 million (2017)
Currency
afghani
Merchandise exports
US $ 784 million (2017)
Imports
US $ 7 024 million (2017)
Current account
- US $ 4 227 million (2017)
Commodity trade's share of GDP
43 percent (2018)
Main export goods
opium (unofficial), fruits and nuts, carpets, wool,
cotton, leather goods, precious stones
Largest trading partner
Pakistan, India, Iran, China (2017)
2006
October
Isaf's responsibilities are expanded
Isaf's responsibilities are extended to the entire country, while 12,000
American soldiers are transferred to Isaf.
August
New government approved
Nearly a year after the parliamentary elections, the new government is ready,
after Parliament rejected several of the presidential nominations.
July
Fighting is increasing in the south
Isaf commands all military operations in the southern provinces. New tough
battles are being fought in strong Taliban strongholds.
March
Increased mission for the Swedish soldiers
Sweden's Isaf force takes responsibility for four northern provinces.
February
$ 10 billion pledge
At an international donor meeting in London, more than $ 10 billion is
promised in reconstruction support for five years.
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