Afghanistan’s economy remains precarious due to financial isolation, political instability, and a shortage of skilled labour, the World Bank stated in its latest report.
The report highlights the depreciation of the Afghani currency, which has led to rising prices of essential goods and food items.
The report, published on Monday, acknowledges that while Afghanistan experienced economic growth in 2023-2024, widespread poverty, unemployment, and limited financial resources continue to leave millions in a vulnerable state. Weak purchasing power remains a significant barrier to economic stability.
In December 2024, the afghani depreciated for the third consecutive month, falling 12 percent between November 2024 and January 2025. The exchange rate dropped to 74.8 afghanis per US dollar in January 2025, compared to 67.1 afghanis in October 2024.
In response, Afghanistan’s central bank injected $100 million into the market, but the downward trend of the currency persisted. The depreciation was exacerbated by the suspension of U.S. aid, prompting the Taliban to tighten control over the currency market. Reports suggest that Taliban authorities deployed armed personnel in Kabul’s Sarai Shahzada exchange market to curb further instability.
Despite economic hardships, government revenue collection in 2024 increased by 11.5 percent compared to the previous year. However, declining state revenues in other sectors pose risks to financial stability.
Afghanistan’s imports surged by 40 percent in 2024, driven by increased purchases of food, chemicals, minerals, and transport equipment. Meanwhile, the trade deficit widened by 8 percent in December 2024, reaching $926 million, primarily due to declining exports.
Afghanistan’s exports fell by 19.5 percent in December 2024 to $191 million, with food exports declining by 25 percent and textile exports by 23 percent, largely due to harsh winter conditions affecting production and trade.
The World Bank identified Iran as Afghanistan’s largest trading partner in 2024, accounting for 30 percent of total imports. Other major trade partners included United Arab Emirates, Pakistanand China.
Iranian officials reported that bilateral trade between Iran and Afghanistan exceeded $4 billion, marking the highest trade volume between the two countries in the past two decades.
The World Bank warned that Afghanistan’s economy remains fragile, citing the sharp decline in foreign aid, economic isolation, and uncertain financial policies. A further reduction in international assistance could significantly weaken overall demand and increase economic pressures.
The United States has suspended its humanitarian aid to Afghanistan, raising concerns over a potential humanitarian crisis. Observers caution that if aid remains suspended or stops entirely, Afghanistan could face a severe economic and social catastrophe, with the UN estimating that 22 million Afghans require urgent humanitarian assistance.
The World Bank stressed the need for economic reforms, greater financial transparency, and sustainable policies to reduce Afghanistan’s dependence on foreign aid and imports. Without such measures, the country risks further economic deterioration and instability.
