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SIGAR issues pessimistic economic forecast for Afghanistan
Afghanistan’s economy suffered severe contraction in 2021, with the UN Development Programme (UNDP) and IMF estimating up to a 20–30 percent drop, the US Special Inspector General for Afghanistan Reconstruction (SIGAR) reported.
According to SIGAR’s latest report, annual per capita income is estimated to have fallen from $650 in 2012, to $500 in 2020, and is expected to drop to $350 by 2022.
SIGAR stated that male unemployment in Afghanistan may nearly double from 15.2 percent in 2019 to 29 percent by 2022.
“In the worst-case scenario modeled by the Asian Development Bank, unemployment could increase by more than 40 percent in the short run and household consumption could contract by 44 percent,” read the report.
The devaluation of the afghani has also impacted the Afghan economy and further diminished Afghan households’ ability to purchase food and
other necessary items, because much foreign trade was settled in US dollars.
Since August last year, the afghani has depreciated against the US dollar, from approximately 77 afghani to the dollar to around 105 as of January
2, 2022.
SIGAR also reported that adding to the pressure on the country’s limited cash reserves, Afghanistan lacks the technical capabilities to print its own currency.
According to SIGAR, the IEA has not yet secured or developed a domestic printing source for afghani banknotes.
SIGAR reported that Afghanistan’s largely cash-based economy has continued to struggle with an acute cash shortage since November, which has limited day-to-day economic activities.
“Banks are at the center of a liquidity crisis, with lost access to international financing and depositors attempting to recover their funds,” read the report.
According to a UNDP report, Afghanistan’s banking system is in “existential crisis.” Total deposits had fallen to the equivalent of $2 billion as of
September 2021 from $2.8 billion the month.
As the Afghan economy has struggled to find areas of sustainable economic growth in recent years, the country has increasingly relied on remittances from Afghans working abroad, especially in neighboring Iran.
By 2019, remittances accounted for the equivalent of 4.3 percent of Afghanistan’s annual GDP, an increase from 1.2 percent in 2014, according to World Bank data.
However, officials from the UN’s International Organization for Migration estimate this figure could have been as high as 15–20 percent, given that many remittances are sent through the informal hawala money-transfer system.
According to officials at Médecins Sans Frontières, with the absence of a functioning banking sector, many NGOs have also been forced to rely on
hawalas to pay expenses within Afghanistan.
In November 2021, the IEA announced a complete ban on the use of foreign currency in Afghanistan, interfering with remittance activities and
worsening the country’s liquidity crisis.
However, SIGAR reported that indicators suggest that the currency ban is not being actively enforced against the US dollar, which continues to be widely used in Afghan markets.
Turkmenistan has made “significant progress” on the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project, said TAPI Pipeline Company Limited CEO Muhammetmyrat Amanov.
“Turkmenistan is making significant progress on the TAPI natural gas pipeline, which will supply 33 billion cubic meters to South Asia annually,” he said.
Speaking at the Turkmen Energy Investment Forum (TEIF 2024) currently being held in Paris, Amanov highlighted that Turkmenistan’s section of the pipeline had been completed and ongoing discussions to advance the project beyond Turkmenistan were in strict alignment with the international standards.
He said the project envisaged environmental sustainability by leveraging natural gas to reduce emissions significantly compared to coal and oil, thereby tackling indoor pollution and enhancing regional air quality.
“In light of the ongoing project developments, Turkmenistan remains committed to upholding the international law, fulfilling its obligations and adhering to international norms and regulations,” he said.
This approach reaffirms Turkmenistan’s dedication to global cooperation and legal integrity in executing the TAPI project.
Looking ahead, the project’s focus is shifting to the Herat Offtake Strategy in Afghanistan, which will play a critical role in environmental protection by reducing air pollution, while also contributing to maintaining public safety, he said.
Nooruddin Azizi, Acting Minister of Commerce and Industry, met with representatives from the ministries of foreign affairs, defense and interior of Malaysia, along with other senior officials, on Wednesday and called on Malaysians to invest in Afghanistan.
The visiting delegation is being led by senior diplomat Dr. Shazelina Zainul Abidin.
According to the IEA’s foreign ministry, the two sides discussed bilateral trade, holding a business communication conference to strengthen trade relations between the two countries, the trade balance between Afghanistan and Malaysia, and creating a market for Afghan products, including carpets, cotton, and minerals.
According to the ministry, at the end of the meeting, the Acting Minister emphasized the increase of investment from regional countries in Afghanistan and called on Malaysian investors to also invest in Afghanistan.
The Ministry of Interior says that Afghanistan has started exporting goods to Turkey via the Herat-Khaf railway line.
In a post on X, the ministry said: “Afghanistan’s exports to Turkey started in a calm atmosphere through the Herat-Khaf railway line.”
The ministry added that one train will run daily for a month and then two trains will run daily.
According to the ministry, the security of Khaf-Herat railway line is provided by the guards of the National Public Protection Agency.
Khaf-Herat railway project not only connects Iran and Afghanistan by rail, but also completes a 2,000-kilometer route along the east-west rail corridor from China, through Uzbekistan, to Afghanistan, to Iran, and on to Turkey and Europe.
As a landlocked country, this railway network will provide a safe route to connect with Europe via Iran’s railway network and Iran’s southern ports.
This railway line is strategic for trade between Iran and Afghanistan and will allow six million tons of goods to be sent between the two countries.
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