Business
Afghanistan’s economy under the spotlight on eve of 1401, the new solar year
On the eve of Afghanistan’s new solar year, Nowruz, the year 1400 has proven to be one of increased economic hardships that ultimately led to a financial crisis in the country.
In August, the former government collapsed which sparked widespread panic among Afghans who rushed to banks to draw their money.
People queued for hours, for days and even weeks but as the Ashraf Ghani government tumbled and foreign troops withdrew, foreign funding that propped up the country came to a sudden halt and the banking system froze.
In order to prevent the complete collapse of the banking system, the Islamic Emirate of Afghanistan (IEA), which had swept to power, stepped in and imposed strict restrictions on the amount of cash people could withdraw.
Global sanctions added to the mix and made life even more difficult for Afghans – so much so that the IEA was unable to pay government employees their salaries for the first few months.
Gradually, the economic situation stopped its freefall and leveled out. Humanitarian aid helped ease hunger and shipments of cash from the United Nations has continued to come in to the country. Although sanctions are still in place, the UN has stepped in to assist with regards to the economy.
On a more positive note, some development projects have been kickstarted by the IEA these past few months – especially transit projects connecting Afghanistan to Central Asia.
However, Afghanistan’s economic situation is still critical.
Key problems are as follows:
• No new investments have been made in 1400 in the country
• With the coming to power of the Islamic Emirate, banking activities were suspended for a significant period of time
• International organizations stopped major projects they had been funding, leaving many projects unfinished
• Global sanctions were imposed on the country’s economic system
• Trade between Afghanistan and its neighbors stalled due to a lack of funding and political uncertainty for some time
• The Afghani (AFN) plummeted to a low of 130 AFN to the US dollar. It has since recovered somewhat
• Food and fuel prices have risen unprecedentedly
• About $9 billion of foreign assets were frozen by the United States
Despite all these challenges, the IEA has stepped up efforts to stabilize the economy and to improve the situation. The IEA came out in support of the private sector and worked hard to save the country’s economy from collapsing altogether.
The Ministry of Finance meanwhile said the economic situation in the country has improved slightly in the past few months and that the Islamic Emirate will take major steps to boost the economy in the new year (1401). The IEA also said it will launch some key development projects.
The Ministry of Finance, however, was unable to finance the budget for the new fiscal year from domestic revenue. This is not however new, as a major part of the budget has been funded by the international community for the past 20 years.
Economic experts believe the Islamic Emirate has taken effective steps to stabilize the economy, but many have said government needs to facilitate new investments.
Afghanistan’s private sector has in addition called on the Islamic Emirate to invest in agriculture and mining; to generate electricity; and develop transit, telecommunications, fiber optics and telecommunication sectors.
Business
Uzbekistan approves feasibility study agreement for Trans-Afghan Railway
The agreement builds on a tripartite document signed on July 17, 2025, which outlined cooperation on preparing a feasibility study for the Termez–Kharlachi railway corridor.
Uzbekistan has ratified an international agreement to prepare a feasibility study for the Naybabad–Kharlachi section of the Trans-Afghan Railway, formalizing its participation in the project.
President Shavkat Mirziyoyev signed a decree on February 4 approving the agreement.
The framework agreement involves the transport ministries of Uzbekistan, Afghanistan and Pakistan and provides for joint work on a feasibility study for the proposed railway line between Naybabad and Kharlachi. The section forms part of the wider Trans-Afghan Railway project aimed at strengthening transport links between Central and South Asia.
Under the decree, Uzbekistan’s Ministry of Transport has been designated as the competent authority responsible for implementing the agreement. The Ministry of Foreign Affairs has been tasked with notifying Kabul and Islamabad that Uzbekistan has completed the internal procedures required for the agreement to enter into force.
The agreement builds on a tripartite document signed on July 17, 2025, which outlined cooperation on preparing a feasibility study for the Termez–Kharlachi railway corridor.
The planned route is expected to run through Termez, Naybabad, Maidanshahr, Logar and Kharlachi, providing a transit corridor through Afghanistan.
The feasibility study will be commissioned by the Tripartite Project Office for the Development Strategy of International Transport Corridors under Uzbekistan Railways.
Established in Tashkent in May 2023, the office also operates branches in Kabul and Islamabad to coordinate the project.
First proposed in 2018, the Trans-Afghan Railway was initially projected to carry up to 20 million tons of cargo annually at a cost of about $5 billion. Cost estimates have since been revised.
In July 2022, Uzbekistan Railways cited an estimate of $4.6 billion with a construction period of up to five years, while Pakistan’s Ministry of Railways put the cost at $8.2 billion in December 2024.
More recent assessments have placed the overall cost at around $7 billion, with a public-private partnership under a Build-Operate-Transfer model among the options under consideration.
Business
Afghanistan seeks expanded ties with Russia in energy, mining and infrastructure
TASS reported that Kabul is also prepared to cooperate with Moscow in the extraction of mineral resources.
Afghanistan has expressed strong interest in broadening trade and economic cooperation with Russia, with a particular focus on energy, mining and infrastructure projects, according to Russia’s TASS news agency.
In an interview with TASS, Afghanistan’s Ambassador to Moscow, Gul Hassan, said Kabul is keen to import oil and gas from Russia as part of efforts to deepen bilateral economic ties.
He noted that trade relations between the two countries are progressing and that, if key obstacles—especially banking restrictions—are addressed, Afghanistan could also import medicines, industrial goods, grain, vegetable oils and other commodities from Russia.
In return, the ambassador said Afghanistan is ready to export fresh and dried fruits, vegetables, medicinal plants, carpets and mineral resources to the Russian market, adding that expanding export-import operations could significantly increase bilateral trade volumes.
He also revealed plans to open an exhibition of Afghan products in Moscow, which he said would help boost trade turnover.
TASS reported that Kabul is also prepared to cooperate with Moscow in the extraction of mineral resources.
Hassan described the economy as a central pillar of Afghanistan’s foreign policy, emphasizing the government’s goal of positioning the country as a key link in regional economic integration and attracting foreign investment.
He noted that Russian companies have long shown interest in Afghanistan’s industrial, mining and infrastructure sectors.
The ambassador further told TASS that Russian firms are already in talks with relevant Afghan authorities on the construction of small hydroelectric power plants.
Representatives of several Russian companies have reportedly visited Afghanistan and held meetings with officials and technical experts.
According to Hassan, practical steps toward cooperation in the energy and power generation sectors are expected in the near future, pointing to a potential new phase in Afghan-Russian economic relations.
Business
Pakistan, China plan to extend CPEC to Afghanistan, revive trilateral framework
The proposed CPEC expansion into Afghanistan is seen as a move to enhance regional economic integration amid shifting geopolitical dynamics.
Pakistan and China are moving forward with plans to extend the China-Pakistan Economic Corridor (CPEC) into Afghanistan, a strategic step aimed at bolstering regional connectivity and economic cooperation. The expansion, along with the revival of the Pakistan-China-Afghanistan trilateral framework, was discussed in a recent briefing to the Pakistani Senate Standing Committee on Foreign Affairs.
According to Pakistan Today, officials from Pakistan’s Ministry of Foreign Affairs outlined the details during a session in Islamabad, where they reviewed key aspects of Pakistan’s foreign relations, regional developments, and economic diplomacy.
Officials emphasized that Pakistan’s relationship with China remains strong, underscoring the “all-weather” strategic partnership between the two nations. Strengthening ties with Beijing, they stated, continues to be a cornerstone of Pakistan’s foreign policy. This includes unwavering support for China’s position on regional and international issues, particularly the One-China policy and matters related to territorial integrity.
The briefing also touched upon China’s consistent backing of Pakistan in various areas, including sovereignty, economic stability, counter-terrorism, and support for Pakistan’s exit from the Financial Action Task Force (FATF) grey list.
The Kashmir issue was also addressed, with officials noting that China considers it an unresolved matter and advocates for a peaceful resolution in line with UN Security Council resolutions.
The proposed CPEC expansion into Afghanistan is seen as a move to enhance regional economic integration amid shifting geopolitical dynamics. Officials stated that reviving the trilateral framework is part of broader efforts to foster greater cooperation and connectivity in the region, with an eye on long-term stability and prosperity.
The move also reflects both countries’ desire to further integrate Afghanistan into the regional economic landscape, a key element in fostering peace and development.
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