The World Bank says Afghanistan's trade has shifted sharply towards Central Asia and Iran after disruption along the Pakistan route. Central Asian corridors now handle 48 per cent of imports and Iran 46 per cent, while Pakistan's share has fallen to almost zero.
At the same time, India has become Afghanistan's largest export market, taking 33.6 per cent of its exports, while Iran has become its biggest source of imports, supplying 31.4 per cent.
In its July report, the World Bank said Afghanistan's economy continues to face structural challenges despite relatively stable domestic demand, higher domestic revenues and easing food inflation. It said rapid population growth, regional trade disruptions and heavy reliance on domestic revenues continue to weigh on the economy.
The bank said current economic growth has failed to keep pace with Afghanistan's rising population, particularly following the large-scale return of migrants. According to the report, real per capita income is around 5.6 per cent lower than before the Taliban returned to power, placing additional pressure on household living standards.
General Inflation Eases but Living Costs Remain Under Pressure
The World Bank said Afghanistan's annual inflation rate fell to 7.6 per cent in June 2026, down from 8 per cent in May.
It attributed the decline mainly to lower food prices during the agricultural harvest season and continued imports. Prices of vegetables, fresh and dried fruit, sugar and dried bread all fell. Food inflation declined by 1.6 per cent compared with the previous month and by 7.2 per cent compared with the same period last year.
However, core inflation, which excludes food and energy prices, increased to 8.3 per cent. The bank said rising housing, healthcare and transport costs continue to fuel inflationary pressures.
Afghani Weakens Against the US Dollar
According to the report, the Afghan afghani depreciated by 1.6 per cent against the US dollar in June compared with May, with the average exchange rate reaching AFN64.4 per dollar.
Despite the monthly decline, the afghani remained 8.3 per cent stronger than a year earlier.
The World Bank also reported a 4 per cent decline in the Real Effective Exchange Rate (REER), saying the weaker rate had slightly improved the competitiveness of Afghan exports in regional markets.
Trade Deficit Widens as Pakistan Border Closures Hit Exports
Afghanistan's trade deficit widened to 984.3 million US dollars in June, up 11 per cent from the previous month and 19 per cent higher than a year earlier.
Exports totalled 77.7 million US dollars during the month, down 2 per cent from May but up 19 per cent year-on-year.
The World Bank said prolonged border closures with Pakistan were a key reason behind weaker food exports and the complete halt of coal exports.
According to the report, Afghanistan's coal exports fell to almost zero, directly linked to the closure of trade routes through Pakistan.
By contrast, textile exports increased significantly, reaching 21.5 million US dollars in June. This represented a 67 per cent rise compared with the previous month and a 304 per cent increase from a year earlier. Most of these exports were shipped to China via Central Asia.
India remained Afghanistan's largest export destination with a 33.6 per cent share, followed by Iran, Uzbekistan and China.
Central Asia and Iran Become Afghanistan's Main Trade Corridors
Afghanistan's imports rose by 10 per cent in June compared with the previous month, reaching 1.062 billion US dollars.
Central Asian routes became the country's main import corridor, accounting for 48 per cent of imports in June, up from 41 per cent in May.
Iranian routes accounted for 46 per cent of imports, while trade through Pakistan remained at a very low level.
Iran supplied 31.4 per cent of Afghanistan's imports, followed by China, the United Arab Emirates, Uzbekistan and Kazakhstan.
The World Bank warned that Afghanistan's heavy dependence on a small number of trading partners and transit routes leaves its economy vulnerable to political and economic developments across the region.
Monthly Government Revenue Falls but Annual Collections Increase
According to the World Bank, the Taliban administration collected 17.3 billion afghanis in domestic revenue in June, a 37 per cent decline from the previous month.
The decrease was mainly attributed to unusually high revenue collected in May.
Nevertheless, total domestic revenue since the start of the 2026 fiscal year reached 64.5 billion afghanis, an increase of 8.7 per cent compared with the same period last year.
Tax revenue totalled 6.7 billion afghanis, customs revenue 2.8 billion afghanis and non-tax revenue 7.4 billion afghanis.
The World Bank warned that customs revenues remain vulnerable because of regional trade disruptions and ongoing border restrictions.
Security Remains the Taliban Administration's Largest Budget Item
Public spending by the Taliban administration totalled 17.5 billion afghanis in June, down 33.8 per cent from the previous month.
The security sector received 26.8 billion afghanis, accounting for 46.4 per cent of total government expenditure, making it the largest budget allocation.
Education received 10.2 billion afghanis, representing 17.6 per cent of total spending, followed by governance, economic affairs and private sector development, which received 5.9 billion afghanis, or 10.2 per cent.
In its conclusion, the World Bank said the shift of part of Afghanistan's trade towards Central Asian routes has strengthened the country's supply chain resilience. However, dependence on a limited number of transit routes, declining customs revenues and continuing regional tensions continue to leave the economy vulnerable.
The bank added that although some macroeconomic indicators, including lower inflation and higher domestic revenues, show signs of improvement, economic growth remains insufficient to offset population growth and improve living standards.
