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UNDP warns Afghan economy to contract by 6% due to COVID-19

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United Nations Development Program (UNDP) Afghanistan launched its latest COVID-19 impact assessment report on Wednesday and said the pandemic has set back Afghanistan’s economic growth by several years.

The report, the 4th since the coronavirus outbreak, exposed structural and resource gaps in responding to unforeseen events such as pandemics. The country had to reallocate resources from long-term development priorities to fighting this health crisis.

In a statement issued by the UNDP, the organization said the report, titled “Fiscal Options in Response to Coronavirus Crisis”, focused on the fiscal implications of COVID-19.

The UNDP stated it estimates that due to a combination of external and internal shocks, the Afghan economy will contract by around six percent in 2020.

“Assuming the recovery starts in 2021 and growth performance to be positive between 2021 and 2024, it will be moderate, and well below the pre-pandemic level.

“Without well thought-out recovery-oriented policies, this amounts to a cumulative loss of around 12.5 percent in real GDP by 2024,” read the statement.

UNDP said Afghanistan witnessed a sharp decline in revenues in 2020 due to low economic activity, trade disruption and weaker compliance brought on by the pandemic.

“The government had to adjust the revenue estimates downwards from Afs 209 billion (US$2.71 billion) in 2019 to Afs 144 billion (US$1.87 billion) during the mid-year budget review.”

UNDP stated it estimated an average of 17 percent decline in corporate tax revenue and 18 percent decline in personal income tax revenue.

“Tax on international trade will be the worst hit and revenues may decline to as low as 19 percent due to the decrease in imports, while tax revenue on goods and services might decline by 10 percent,” the statement read.

Meanwhile, UNDP stated the fiscal deficit is expected to increase to around four percent of GDP in 2020.

“The Government of Afghanistan needs to opt for policies and programmes to generate more revenue to address the fiscal deficit.

“Given the economic slowdown, a second wave of the pandemic, continued conflict, and an uncertain peace process and political environment, the country will continue to need grant support from the international community to address the fiscal deficit and maintain its current level of expenditure on basic services,” read the UNDP’s statement.

The organization also stated that additional grants need to be directed at driving and implementing reforms to improve the business regulatory environment, improve governance, encourage investment and strengthen the private sector.

According to the statement, the UNDP and other stated along with other international development partners, it would continue to support Afghanistan in the run up to the donor pledging conference later this month.

However they urged the Afghan government to address the immediate fiscal impact of the pandemic and help reverse its negative effects.

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Afghanistan eyes direct Basmati rice imports from India amid tensions with Pakistan

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Afghanistan is exploring direct imports of Basmati rice from India as it seeks to diversify its supply sources amid ongoing tensions with Pakistan, according to a report by The Hindu.

The report said Indian exporters and Afghan importers are expected to meet next month to discuss expanding direct trade in Basmati rice, following preliminary talks between officials from both countries held last week with the facilitation of the PHD Chamber of Commerce and Industry.

Afghanistan consumes nearly 500,000 tonnes of Basmati rice annually and has traditionally relied on imports from neighboring Pakistan. However, industry sources told The Hindu that recent strains in Afghanistan-Pakistan relations have encouraged Kabul to seek alternative suppliers, including India.

Representatives of Afghanistan’s diplomatic mission in New Delhi reportedly took part in the discussions and expressed interest in increasing purchases of Indian Basmati rice. At present, some Indian rice reaches Afghanistan indirectly through traders in Iran and Dubai, a route that adds to transportation and transaction costs.

One proposal under consideration is to transport rice through Iran’s Bandar Abbas Port, subject to agreements between the two governments. The discussions are also expected to cover logistics, payment mechanisms, and the possibility of barter trade, with Afghanistan’s dried fruit exports to India seen as a potential component of future trade arrangements.

According to The Hindu, a direct trade arrangement could help India expand its share of Afghanistan’s Basmati market, which has historically been dominated by Pakistani suppliers.

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Afghanistan, Kyrgyzstan establish trade council to boost economic cooperation

The two sides signed a memorandum of understanding to establish the Afghanistan-Kyrgyzstan Trade Council.

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The Embassy of the Islamic Emirate of Afghanistan in Kyrgyzstan says the Afghanistan-Kyrgyzstan Business Forum has been held with the participation of officials from both countries.

According to a statement issued by the embassy, Acting Ambassador Abdul Shakoor Haqqani said Afghanistan supports strengthening bilateral trade relations and promoting joint economic initiatives between the two countries.

The statement added that the two sides signed a memorandum of understanding to establish the Afghanistan-Kyrgyzstan Trade Council. The council aims to strengthen ties between business communities, coordinate joint initiatives, and expand and support economic projects.

Meanwhile, Sayed Karim Hashemi, Chairman of the Afghanistan Chamber of Commerce and Investment, arrived in Kyrgyzstan on Saturday at the head of a trade delegation to participate in the forum.

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Afghanistan invites Turkish investors to expand joint investments

Participants stressed the importance of increasing private sector cooperation and creating new opportunities to boost trade and investment between Afghanistan and Türkiye.

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A high-level Afghan business delegation, led by the Chairman of the Balkh Chamber of Commerce and Investment, Mohammad Ibrahim Ghazanfar, participated in the Afghanistan–Türkiye Joint Business Council meeting in Istanbul, calling for expanded joint investment and stronger economic cooperation between the two countries.

According to a statement from the Balkh Chamber of Commerce and Investment, Ghazanfar invited Turkish investors and industrialists to explore investment opportunities across various sectors in Afghanistan, emphasizing the country’s potential for mutually beneficial partnerships.

The meeting brought together business leaders, investors, and private sector representatives from both Afghanistan and Türkiye to discuss ways to strengthen bilateral trade and economic ties.

During the event, several cooperation agreements were signed between Afghan and Turkish economic institutions. The agreements are aimed at expanding commercial relations, promoting joint investment projects, and enhancing economic cooperation between the two countries.

The meeting was chaired by Süleyman Güllü, Chairman of the Türkiye–Afghanistan Joint Business Council, and was attended by Mohammad Akbar Azimi, the Islamic Emirate of Afghanistan’s Consul General in Istanbul, along with a number of businessmen and investors from both countries.

Participants stressed the importance of increasing private sector cooperation and creating new opportunities to boost trade and investment between Afghanistan and Türkiye.

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