Business
Afghan economy posts second year of growth despite deep structural challenges
The recent uptick has been driven in part by increased demand linked to the return of more than two million Afghans from Iran and Pakistan, boosting activity in the services and industrial sectors.
Afghanistan’s economy is set to record a second consecutive year of growth, supported by low inflation and stronger domestic revenues, but deep structural challenges continue to weigh heavily on the country’s long-term outlook.
According to the World Bank’s latest Afghanistan Development Update, cited by Himalaya Diary, gross domestic product is projected to expand by 4.3 percent in 2025, following an estimated 2.5 percent growth in 2024.
The recent uptick has been driven in part by increased demand linked to the return of more than two million Afghans from Iran and Pakistan, boosting activity in the services and industrial sectors.
Agriculture has shown relative resilience, with a record irrigated wheat harvest achieved despite severe drought conditions. Mining and construction have also contributed to overall output growth, helping sustain economic momentum.
However, the recovery has not translated into improved living standards. Rapid population growth, estimated at 8.6 percent in 2025, is expected to push GDP per capita down by around 4 percent. Inflation remains low at about 2 percent — among the lowest in the region — reflecting stable food prices and a stronger currency, but also highlighting Afghanistan’s reliance on imports and exposure to external shocks.
On the fiscal front, domestic revenues have improved, with tax collection projected to reach 17.1 percent of GDP in 2025 as enforcement measures tighten. At the same time, declining foreign grants are shrinking the overall fiscal space, increasing reliance on trade taxes and continued donor support.
The financial sector remains under strain. Banks face regulatory uncertainty, rising non-performing loans and weak credit growth, while liquidity pressures persist as more cash circulates outside the formal system. Limited access to banking services and the transition to Islamic finance have further constrained financial inclusion.
Labour market pressures are also mounting. Nearly one in four young Afghans is unemployed, and restrictions on women’s education and economic participation are undermining human capital and long-term growth prospects. These challenges are compounded by one of the largest return migration waves in recent years, with an estimated 4 to 4.7 million people returning between late 2023 and mid-2025, intensifying pressure on jobs and public services, particularly in urban and border areas.
The World Bank warns that sustaining the recovery will require reforms to attract private investment, strengthen the financial system and diversify exports. Improved governance, a more supportive business environment and stronger engagement with international partners will be critical if Afghanistan is to reduce its reliance on humanitarian aid and move toward more resilient and inclusive growth.
Business
Afghanistan, Uzbekistan discuss expanding economic, trade and investment cooperation
For his part, Khojayev said Uzbekistan is prepared to invest in Afghanistan’s mining sector and increase imports of Afghan meat and cotton.
Afghanistan’s Deputy Prime Minister for Economic Affairs, Mullah Abdul Ghani Baradar, met on Sunday with Uzbekistan’s Deputy Prime Minister, Jamshid Khojayev, and his accompanying delegation at the Chahar Chinar Palace in the Arg to discuss expanding bilateral economic cooperation.
The two sides held talks on strengthening economic, trade, investment, and transit cooperation between Afghanistan and Uzbekistan.
Baradar said stronger and more stable relations between Kabul and Tashkent would not only serve the economic interests of both countries but also contribute to regional stability. He added that the Islamic Emirate is ready to use all available capacities to further strengthen and expand bilateral ties.
He emphasized the effective implementation of the joint action plan between the two countries, describing it as an important step toward boosting economic growth.
Baradar also identified several priority areas for cooperation, including removing obstacles to the movement of Afghan export vehicles to Uzbekistan, granting exemptions for Afghan transit goods arriving from China, Central Asia, and Russia, facilitating exports of Afghanistan’s agricultural products, fresh and dried fruits, food products, and valuable minerals to the markets of Central Asia, Russia, and China, increasing the capacity of transit infrastructure, expanding customs facilities, easing the issuance of visas for Afghan citizens, and enhancing cooperation in the energy sector and joint infrastructure projects.
He said broader cooperation between Afghanistan and Uzbekistan would not only elevate bilateral economic relations but could also serve as a model of good neighborly relations for other countries in the region.
For his part, Khojayev said Uzbekistan is prepared to invest in Afghanistan’s mining sector and increase imports of Afghan meat and cotton.
He also announced Uzbekistan’s readiness to build a $50 million zinc processing plant in Hairatan.
Khojayev added that the Uzbek delegation would work with relevant institutions of the Islamic Emirate in the areas of transport, energy, agricultural development, banking, trade, economic cooperation, and capacity-building for Afghan citizens.
Business
Over 205,000 Afghans visit Uzbekistan for trade and business in six months
Business
Pakistan’s trade deficit with neighbours surges to nearly $16 billion as exports to Afghanistan plunge
The decline in exports was largely attributed to reduced shipments to Afghanistan, Bangladesh and Sri Lanka.
Pakistan’s trade deficit with nine neighbouring countries widened by 30 percent in the 2025–26 fiscal year, reaching $15.93 billion, driven by declining exports to regional markets and rising imports, particularly from China.
According to the latest data released by the State Bank of Pakistan, the country’s trade gap with Afghanistan, China, Bangladesh, Sri Lanka, India, Iran, Nepal, Bhutan and the Maldives increased from $12.26 billion in the previous fiscal year to $15.93 billion.
Pakistan’s total exports to the nine neighbouring countries fell by 11 percent to $3.95 billion, while imports from the region rose by 19.1 percent to $19.89 billion, highlighting a growing trade imbalance.
The decline in exports was largely attributed to reduced shipments to Afghanistan, Bangladesh and Sri Lanka. Trade with Afghanistan, including exports, has remained suspended since October 10, 2025, significantly affecting Pakistan’s regional export performance.
Exports to Afghanistan dropped by 68.9 percent to $243.69 million, down from $783.95 million in the previous fiscal year. Imports from Afghanistan also declined sharply by 74.9 percent, falling to $6.5 million.
China remained Pakistan’s largest regional trading partner. Exports to China increased by 8.4 percent to $2.68 billion, accounting for 68 percent of Pakistan’s exports to neighbouring countries. However, imports from China climbed 19.8 percent to $19.54 billion, representing 98 percent of Pakistan’s regional imports.
Trade with India remained limited despite a percentage increase in exports. Pakistan’s exports to India rose to $2.93 million, while imports from India declined 7.6 percent to $168.73 million.
Exports to Bangladesh fell 9.3 percent to $715.59 million, while exports to Sri Lanka declined 22.8 percent to $293.38 million during the fiscal year.
The latest figures underscore Pakistan’s growing dependence on imports, particularly from China, while declining exports to regional markets continue to widen the country’s trade deficit.
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