World Bank Survey: Afghanistan’s Private Sector Hit Hard by Political Crisis

WASHINGTON, April 7, 2022—The World Bank today released the findings of a Private Sector Rapid Survey assessing the impacts of the August 2021 political crisis on private firms and jobs in Afghanistan. The survey, conducted in October-November 2021, finds that the economic activities were substantially affected, and the private sector was hit hard.

The majority of surveyed businesses reported a drastic decline in consumer demand for their products and services and have been forced to scale back operations, reduce investments, and lay off employees.

Key findings of the survey:

Overall impacts:

• One in three surveyed businesses reported having temporarily ceased operations since August 2021, while those that remained operational expressed the need to adjust their operations to cope with declining demand.
• Small businesses have been hit harder – 38 percent of surveyed small firms had temporarily shut down, as compared to 25 percent of medium firms and 35 percent of large firms.
• Women-owned businesses are more vulnerable to the negative impacts of the political crisis – of the surveyed women-owned firms, 42 percent had temporarily closed compared to 26 percent of firms owned by men.
• 82 percent of firms that participated in the survey reported a decline in demand – this finding aligns with the reduced household incomes and declining purchasing power reported in the recently-published Afghanistan Welfare Monitoring Survey.
• The agribusiness and wholesale and retail trade sectors appear to be more resilient to shocks – more than 80 percent of survey respondents in these sectors have remained either fully or partially open.

Job losses:

• Surveyed businesses of all sizes and sectors have cut jobs, laying off more than half of their employees, on average.
• Women employees in surveyed businesses faced more severe job losses than men employees – overall, three-quarters of women workers were laid off from surveyed firms since August 2021.

Access to inputs:

• Domestic inputs have become more expensive, scarce, and difficult to obtain due to supplier closures, supply chain disruptions, and price inflation.
• Access to imported inputs has become difficult due to border closures, challenges in obtaining foreign currency, and increased cost of inputs.

Business payments and transfers:

• Limited functionality of banks has increased reliance on cash transactions and informal money transfers.
• Domestic transactions are adversely affected by constrained liquidity in the banking sector and by a lack of access to bank accounts and/or payment services.

Security and unofficial payments:

• About three-fifths of surveyed men-owned firms reported that security had improved following the cessation of active fighting in the cities, whereas two-thirds of women-owned firms felt that security had deteriorated.
• Surveyed businesses reported a reduction in unofficial payments for government services compared to pre-August 2021. The majority of survey respondents indicated that unofficial payments had not been requested in the context of filing taxes, customs clearances, or business inspections.

Uncertainty about the future:

• Most firms are adopting a ‘wait and see’ approach to decide on their future operations and investments.
• Some firms expect to be forced to shrink further and may even have to exit the market.

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