Business
Afghanistan faces economic strains following a ‘series of shocks’ last year
These pressures have driven an estimated 11 percent population increase in the fiscal year 2025, largely due to returning migrants, the World Bank stated.
Afghanistan’s fragile economy is grappling with a series of shocks that intensified in 2025, according to a World Bank economic update report released on Wednesday.
The report noted that Afghanistan has been hit by reduced foreign aid, prolonged crossing closures along the disputed Durand Line with Pakistan, natural disasters, and a significant return of refugees from Iran and Pakistan.
These pressures have driven an estimated 11 percent population increase in the fiscal year 2025, largely due to returning migrants, the World Bank stated.
While Afghanistan’s aggregate GDP grew by around 4.8 percent last year, reflecting a rebound in nonagricultural activity and private consumption, the growth has not kept pace with population expansion. As such, per capita GDP contracted by 5.6 percent, as rising inflation and higher trade and transport costs eroded living standards.
“The influx of returnees has temporarily boosted domestic demand, but also places additional strain on labor markets, housing, and social services,” the report noted.
Looking ahead, Afghanistan’s economy is projected to grow by 4.0 percent in 2026, driven by strengthening domestic demand, higher private investment, and improved absorption of returnees into the workforce. However, the report warns that ongoing conflict in the Middle East and disruptions to trade routes, particularly the 60 percent of Afghan trade that passes through Iran, pose significant risks.
“Border closures or sudden surges in returnees could further depress per capita incomes and fuel inflation,” the World Bank said. Trade rerouting may mitigate some effects, but the country remains vulnerable to regional instability.
Despite these challenges, analysts highlight that modest growth and ongoing private-sector activity offer some hope for recovery. The World Bank emphasizes that sustained economic resilience will depend on peace, stable trade corridors, and the ability to productively integrate returning populations into the labor market.
Afghanistan’s experience underscores the broader regional pressures in the Middle East, North Africa, Afghanistan, and Pakistan (MENAAP), where conflict and humanitarian crises continue to ripple through economies, affecting inflation, trade, and social stability.
Several major international pharmaceutical companies could invest in medicine production in Afghanistan as part of growing cooperation between UN agencies and Afghan authorities, who hope to strengthen the country’s healthcare system.
The development was highlighted during a meeting between Afghanistan’s Minister of Economy, Din Mohammad Hanif, and UNICEF Representative Tajudeen Oyewale, where discussions focused heavily on improving healthcare access and expanding pharmaceutical capacity.
UNICEF officials indicated that several global drug manufacturers are preparing to coordinate with Afghanistan’s Ministry of Public Health on establishing or supporting local medicine production.
The aim is to improve the availability of essential medicines for humanitarian operations while also strengthening supply in domestic markets.
The proposed investments are expected to reduce Afghanistan’s reliance on imported pharmaceuticals and improve access to essential treatments, particularly in areas affected by economic hardship and ongoing humanitarian needs.
Alongside the pharmaceutical plans, UNICEF reaffirmed its continued commitment to humanitarian assistance in Afghanistan, including programmes addressing food insecurity, climate-related pressures, and support for returning migrants.
According to figures discussed in the meeting, $520 million has been requested from international donors to support returnees. Of this, $100 million is allocated for emergency assistance, while $420 million is intended for longer-term resettlement and reintegration support.
Afghan authorities welcomed the prospect of expanded pharmaceutical investment, with Din Mohammad Hanif stressing the importance of development cooperation, job creation, and increased international engagement to support economic stability.
Officials said strengthening the pharmaceutical sector could become a key pillar in Afghanistan’s broader efforts to improve healthcare resilience and move toward greater self-sufficiency in essential medical supplies.
Afghanistan has sharply increased imports of grain from Kazakhstan, with deliveries rising 2.3-fold between September 2025 and May 20, 2026, according to Kazakhstan’s Agriculture Ministry.
During that period, Kazakhstan exported around 3 million tons of grain to Afghanistan, compared to 1.3 million tons in the same period a year earlier.
The increase comes as Afghanistan’s Finance Ministry said this week that wheat imports into the country have risen by 345% following changes in customs tariffs aimed at supporting domestic production. According to the ministry, tariffs on imported wheat flour were gradually increased from 5% to 8%, while duties on wheat imports were reduced to encourage local flour processing.
Officials said nearly 198,000 tons of wheat were imported during the first two months of the 1405 fiscal year, compared to 44,000 tons during the same period last year. The ministry added that the policy has helped expand operations at domestic flour factories, increase local production, and create more job opportunities.
Mullah Abdul Ghani Baradar, the Deputy Prime Minister for Economic Affairs, on Thursday officially reopened the fifth section of the Hairatan–Mazar-e-Sharif railway line in northern Balkh province, marking another step in Afghanistan’s efforts to expand its rail infrastructure and regional trade connectivity.
Speaking at the reopening ceremony, Baradar praised the Ministry of Public Works for its efforts in developing Afghanistan’s railway network and expressed appreciation for Uzbekistan’s cooperation in the project.
He said economic and commercial ties between Afghanistan and Uzbekistan have strengthened significantly in recent years, adding that a joint committee led by the governor of Balkh and involving relevant institutions has been established to further enhance bilateral cooperation.
Officials said the newly reopened section of the railway is 70 kilometers long and includes 30 kilometers of branch lines, five railway stations, and the capacity to unload up to 50 wagons simultaneously.
The government said the reopening of the railway section is expected to improve the transportation of commercial goods, increase trade volume, and facilitate regional economic connectivity between Afghanistan and neighboring countries.
The Hairatan–Mazar-e-Sharif railway is considered one of Afghanistan’s most important trade corridors, linking the country to Central Asia through Uzbekistan.
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