Economy: The deteriorating security environment and persisting political uncertainty continue to undermine private sector confidence and affect economic activity in Afghanistan. Economic growth increased only marginally from 1.3 percent in 2014 to an estimated 1.5 percent in 2015. Domestic demand remains weak, with no signs of a pick-up in private consumption and investment. The number of new firm registrations – as a proxy for business activities -- indicate only a small increase in new investment activities in 2015, but it remains significantly below the levels of 2012-2013. Consumer prices dropped to -1.5 percent, down from 4.5 percent in 2014, due to lower private consumption and global commodity prices.
Agriculture, which is the second largest contributor to GDP growth after services, declined by a projected 2 percent in 2015. With population growth estimated at 3 percent per year and 45 percent of the poor relying on agriculture for their livelihood, sluggish GDP growth and a decline in agriculture production put continuous upward pressure on poverty, which is projected to have further increased from the 39.1 percent estimated using the latest data available. Declining job opportunities and growing insecurity have also driven up migration in 2015.
The fiscal position has improved significantly. Domestic revenues rebounded to 10.6 percent in 2015, after a significant decline to 8.7 percent in 2014. The government also continued to exercise prudent expenditure controls in 2015. Total expenditures increased marginally from 26.2 percent in 2014 to 27.7 percent in 2015. Improvement in revenue collection, more realistic budgeting and restraints on expenditures helped to balance the budget.
The exchange rate strongly depreciated by 7 percent against the US dollar in 2015. On the one hand, foreign aid inflows have declined, which makes foreign currency more valuable vis-à-vis the Afghani. On the other hand, growing uncertainty around the political and security environment have caused demand for Afghani to decline; both through consumer’s preference to retain their savings in US dollar, and through lower capital inflows which naturally increase demand for foreign currency. Moreover, increased out-migration might have also been associated with larger capital outflows.
The medium-term outlook points towards a slow recovery over the next three years. Growth is projected at 1.9 percent in 2016, assuming adjustment in domestic consumption and investment. Growth is projected to gradually increase from 1.9 percent in 2016 to 3.6 percent in 2018, predicated on political stabilization and stronger reform efforts. However, further deterioration in the security environment pose significant downside risks and could weaken growth prospects.
Education: In 2001, after the fall of the Taliban, net enrollment was estimated at 43 percent for boys and a dismal 3 percent for girls. Moreover, there were only about 21,000 teachers (largely under-educated) for a school-age population estimated at more than 5 million — or about 240 students for every trained teacher. Since 2002, school enrollment has increased from 1 million to 8.7 million, of which 36 percent are girls and the number of teachers has grown to more than 185,000. The majority of the teacher force has received teacher training either through Teacher Training Centers or In-service Teacher Training. Efforts are ongoing to continuously upgrade teacher qualifications and overall access to equitable and quality education in Afghanistan. Although the number of teachers hired and trained has risen with enrollments, the quality of teachers is a concern. The teaching profession does not attract the best candidates, because teacher pay is low and the profession attracts the least qualified of those progressing to higher education. Half of Afghanistan's 412 districts do not have qualified female teachers. Moreover, the deployment of teachers across provinces is sub-optimal, leading to unemployed teachers in urban areas and teacher vacancies in rural zones.
Health: The Afghan health system has made considerable progress during the past decade thanks to strong government leadership, sound public health policies, innovative service delivery, careful program monitoring and evaluation, and development assistance. Data from household surveys (between 2003 and 2011) show significant declines in maternal and child mortality. The under-5 mortality rate and infant mortality rate dropped from 257 and 165 per 1,000 live births to 97 and 77 respectively. The maternal mortality ratio is 327 per 100,000 live births, compared with 1,600 in 2002. The number of functioning health facilities increased from 496 in 2002 to more than 2,000 in 2012, while at the same time the proportion of facilities with female staff increased.
Despite significant improvements in the coverage and quality of health services, as well as a drop in maternal, infant and under-5 mortality, Afghan health indicators remain below average for low income countries, indicating the need to further lower barriers for women accessing services. Afghanistan has one of the highest levels of child malnutrition in the world, with about 40.9 percent of children under five suffering from chronic malnutrition while both women and children suffer from high levels of vitamin and mineral deficiencies.
Access to Electricity: Afghanistan has one of the lowest rates of electricity usage in the world. It is in the bottom 10 percent globally (around 100 kilowatt hours per year per capita consumption) and only about 38 percent (as of June 2015) of its population is connected to the grid. In 2011, the last year for which reliable data is available, Afghanistan’s estimated 32 million people consumed only about three million megawatts (MW) of grid-supplied electricity. Imported power supplied almost three-quarters of this energy, while domestic hydro supplied about 17 percent and the balance (13 percent) came from diesel thermal plants in Kabul and generators. The reliability of the grid, particularly in Kabul, has improved significantly over the past few years. But load shedding and outages are still a sufficiently common occurrence that few have given up their private generators.
Low connectivity to the grid conceals a vast difference between rural and urban access. While over 75 percent of the population in large urban areas like Kabul, Kandahar, Herat, and Mazar-e-Sharif have electricity, less than 10 percent of the rural population has access to grid-connected power. Large parts of Kabul, Mazar-e-Sharif and Pul-e-Khumri have a 24-hour power supply. These cities are part of the North East Power System (NEPS), which imports up to 300 MW from Uzbekistan throughout the year, and up to 300 MW from Tajikistan during the summer. Currently total installed Transmission Lines Capacity is: 326MW from Uzbekistan, 164 MW from Iran, 433 MW from Tajikistan and 77 MW from Turkmenistan.
Last Updated: Apr 08, 2016