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SIGAR issues pessimistic economic forecast for Afghanistan

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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.

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Ariana Afghan Airlines increases Kabul-Delhi cargo flights

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Ariana Afghan Airlines has increased cargo flights between Kabul and Delhi to facilitate the transportation of commercial goods and support Afghan traders.

In a statement issued Saturday, the airline said it will now operate two scheduled cargo flights daily on the Kabul-Delhi route, up from one flight per day previously.

The airline said Afghan traders and commercial companies can use the daily cargo services to transport their goods quickly, safely and reliably between Afghanistan and India.

Ariana Afghan Airlines said it is working to further expand and improve its air cargo services to support trade, meet the needs of Afghan traders and facilitate Afghanistan’s exports and imports.

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Afghanistan, Turkmenistan agree to establish joint road transport commission

The sides also agreed to establish a joint commission to address road transport issues and improve coordination.

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Afghanistan and Turkmenistan have agreed to establish a joint commission on road transport and facilitate transit between the two countries following two days of talks in Herat.

Afghanistan’s Ministry of Transport and Civil Aviation said the meeting brought together technical delegations from both countries to strengthen bilateral transport and transit cooperation.

The talks focused on easing visa procedures for Afghan and Turkmen drivers and traders, operationalising the Lapis Lazuli transit corridor and increasing the movement of transit vehicles between the two countries.

The sides also agreed to establish a joint commission to address road transport issues and improve coordination.

Representatives from Afghanistan’s ministries of foreign affairs, industry and commerce and the railway authority attended the talks, alongside the Ministry of Transport and Civil Aviation. Railway links, bilateral trade and wider transit cooperation were also discussed, with private-sector representatives expected to participate in future discussions.

The agreement comes as Turkmenistan works to strengthen its role as a regional transport and logistics hub, using its road, rail and Caspian Sea infrastructure to connect Central Asia with markets to the west and south.

A key part of that network is the International Seaport of Turkmenbashi, which links Turkmenistan with Azerbaijan and onward routes towards the South Caucasus and Europe.

Turkmenistan’s transport infrastructure also forms part of the wider Middle Corridor, or Trans-Caspian International Transport Route, connecting China and Central Asia with Azerbaijan, Georgia and Türkiye before reaching European markets.

For Afghanistan, the Lapis Lazuli Corridor is particularly important. It connects Afghanistan through Turkmenistan and across the Caspian Sea to Azerbaijan, Georgia and Türkiye, providing a potential route towards European markets.

Rail links such as the Herat-Torghundi line could further connect Afghanistan’s markets with Turkmenistan’s wider transport network.

The latest agreement puts road transport and transit facilitation at the centre of efforts by the two neighbours to expand trade and strengthen regional connectivity.

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TAPI gas deliveries to Afghanistan and Pakistan expected to begin in 2027

Turkmenistan regards TAPI as a key project for diversifying its gas exports and strengthening regional economic cooperation.

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Turkmenistan expects natural gas supplies to Afghanistan and Pakistan through the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline to begin in 2027, according to the Turkmen Embassy in Islamabad.

Turkmen Ambassador Atajan Movlamov said construction of the strategically important Serhetabat-Herat section of the pipeline is expected to be completed by the end of this year.

Movlamov made the remarks during an Ambassadors’ Dinner hosted by the Lahore Chamber of Commerce and Industry in Islamabad.

He said the implementation of TAPI and other regional energy projects could strengthen Pakistan’s energy security while creating new opportunities for industrial development and economic growth.

The planned 1,800-kilometre pipeline is designed to transport up to 33 billion cubic metres of natural gas annually from Turkmenistan’s giant Galkynysh gas field through Afghanistan to Pakistan and India.

Turkmenistan regards TAPI as a key project for diversifying its gas exports and strengthening regional economic cooperation.

The Galkynysh field, which is the main resource base for TAPI, is among the world’s largest gas fields, with estimated reserves of more than 27 trillion cubic metres.

The project has faced years of delays, but recent construction and developments in the regional energy sector have renewed attention to TAPI as a potential link between Central Asian gas resources and South Asian energy markets.

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