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Country Context:

The political crisis of August 15, 2021, morphed into an economic confidence crisis. The cessation of aid caused a collapse in aggregate demand. Job losses and economic deprivation remained widespread as the gross domestic product (GDP) contracted by 20.7 percent in 2021.

As the aid was partially resumed (off-budget and smaller scale at about US$3.5 billion compared to US$9 billion in 2020), signs emerged by mid-2022 that the Afghan economy was settling around a fragile low-level equilibrium. Yet these signs of stabilization could not override the substantial pressures Afghan families faced in sustaining their livelihoods, as the contraction of the aid-driven service and security sectors had widespread spillovers into other sectors of the economy, affecting the entire welfare distribution.

While headline inflation has eased from its peak of year-on-year (y-o-y) 18.3 percent in July 2022 to 3.5 percent in February 2023, the price level remains elevated. This deceleration in inflation reflects: (i) the continued downward trend in fuel and food prices in the international market; (ii) a stable exchange rate; and (iii) a winter-induced slowdown in economic activity. Extreme winters resulted in declining agriculture, construction, and related activities. As a result, employment for skilled and unskilled labor has declined in the winter, pointing to the substantial pressures that Afghan families continue to face in sustaining their livelihoods, given the loss of jobs and business opportunities.

The Afghani (AFN) preserved its value against major currencies. The United Nations (UN) cash shipments for humanitarian and basic service support remained significant. They continued to underlie currency stability: in February 2023 alone, USD 240 million were shipped to Afghanistan, for a total of USD 440 million in January–February 2023 (against a cumulative USD 1.85 billion in 2022, amounting to about USD 154 million monthly).

Revenue collection during the first eleven months of the fiscal year 2022–23 was substantial at AFN 173.9 billion (USD 1.95 billion), around 87 percent of the fiscal year’s revised budget target of AFN 198.7 billion. However, revenue collection continues to rely on regressive indirect taxes collected at borders: border taxes accounted for 57 percent of overall revenue, driven by solid imports.

Based on unofficial Afghanistan customs data, the country’s merchandise imports in 2022 (USD 6.3 billion) remained broadly in line with trends during 2019–21. This figure does not include in-kind humanitarian imports. In the first two months of 2023, imports stood at USD 1.16 billion, reflecting 40 percent growth vis-à-vis 2022. Similarly, exports have been substantial in 2022, at USD 1.9 billion in 2022, against an average of about USD 0.8 billion during 2019–21. Export performance remained strong in the first two months of 2023, reaching USD 0.3 billion—16 percent higher than in the same period in 2022.

Some key challenges persist. The financial system remains constricted; trade and other payments flowing into and out of Afghanistan are carried out to a large extent through informal channels. Moreover, the low demand remains a critical constraint to the rebound of the private sector. Poverty was already high at 47 percent in 2019-2020. Recent data shows that by mid-2022, two-thirds of Afghan households reportedly could not afford food and other basic non-food items, forcing many adults to engage in low-productivity activities to generate income. In addition, living conditions during the harsh winter months appear to have worsened partly because of significant electricity shortages in cities.

Last Updated: Apr 04, 2023


internally displaced people within Afghanistan as of March 2011


Afghanistan: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments

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