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Afghanistan’s economy shows modest growth but recovery remains fragile
The Afghan economy is showing signs of moderate growth, but still faces significant challenges, including fiscal constraints, trade imbalances, and a limited capacity for public investment, the World Bank (WB) said Wednesday.
According to the organization’s latest Afghanistan Development Update, issued on Wednesday, “Afghanistan’s economic recovery remains uncertain”.
Modest GDP growth of 2.7%, driven by private consumption, has recouped only about 10% of past economic losses, indicative of the slow and fragile nature of the recovery, the WB said.
According to the organization, this level of growth has done little to address deeper structural issues and significant vulnerabilities within Afghanistan’s economy.
“Enabling women’s participation in the economy, strengthening domestic resource mobilization, maintaining price stability, and addressing critical deficits in human capital – particularly in education and healthcare, and especially for women – will be essential for long-term recovery and reducing vulnerability to future shocks,” the WB said in a statement.
Faris Hadad-Zervos, World Bank Country Director for Afghanistan said: “Afghanistan’s long-term growth prospects depend on tapping into the substantial potential of the domestic private sector and improving the overall business environment.
“Key to this is increased investment, providing access to finance to small businesses, and supporting educated and skilled women entrepreneurs so their businesses can thrive. Without this, the country risks prolonged stagnation with limited prospects for sustainable development,” he said.
Meanwhile, the partial recovery, coupled with falling food prices, has contributed to a gradual improvement in household welfare.
But most Afghan households continue to struggle to meet basic needs and poverty remains widespread.
“Vulnerable groups, including women, children, and displaced populations, continue to bear the brunt of the economic hardship, due to the lack of social protection mechanisms,” the WB stated.
In addition, Afghanistan’s trade dynamics remain a significant challenge.
In 2023-24, the country’s exports remained stable, but imports surged, leading to a widening trade deficit, the WB reported.
The appreciation of the afghani (AFN) made imports cheaper, fueling demand for foreign goods, while domestic industrial activity revived, increasing the need for imported inputs.
However, the trade deficit, exacerbated by Afghanistan’s reliance on imports for essential goods like fuel, food, and machinery, might pose a risk to the country’s economic stability, the organization stated.
Meanwhile, Deputy Minister of Economy Abdul Latif Nazari said that Afghanistan’s economy has a clear outlook and the current problems are caused by sanctions and the freezing of the country’s foreign exchange reserves.
“Afghanistan’s economic outlook is bright and hopeful. Some of the economic problems that exist are due to sanctions, banking restrictions and the freezing of assets of the Afghan people,” Nazari added.
“Our effort is to free the property of the people of Afghanistan as soon as possible and use it in line with the economic growth and development of the country.”
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IEA ambassador meets top Chinese diplomat for Asia
Bilal Karimi, the Ambassador of the Islamic Emirate in Beijing, met on Thursday with Liu Jinsong, head of the Asian Department of China’s Ministry of Foreign Affairs, and Yue Xiaoyong, China’s Special Representative for Afghanistan. The officials discussed political, economic, and commercial relations between the two countries, the activation of the Wakhan corridor, consular affairs, and other related issues.
According to a statement from the Embassy of Afghanistan in China, Karimi praised China’s positive stance toward Afghanistan and considered cooperation between the two countries necessary.
The statement added that Liu and Yue, while respecting Afghanistan’s independence, territorial integrity, and sovereignty, also emphasized the continuation of cooperation.
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Afghanistan facing deepening hunger crisis after US Aid Cuts: NYT reports
Afghanistan has plunged deeper into a humanitarian crisis following sharp cuts to U.S. aid, with child hunger at its worst level in 25 years and nearly 450 health centers forced to close, the New York Times reported.
According to the report, U.S. funding — which averaged nearly $1 billion a year after the Islamic Emirate takeover in 2021 — has largely evaporated following the dismantling of the U.S. Agency for International Development (USAID) under President Donald Trump.
The World Food Program (WFP) estimates that four million Afghan children are now at risk of dying from malnutrition.
The aid cuts have hit rural areas particularly hard, leaving families without access to basic health care. In Daikundi province, the closure of local clinics has been linked to preventable deaths during childbirth and rising child mortality.
Nationwide, more than 17 million Afghans — about 40 percent of the population — face acute food insecurity, with seven provinces nearing famine conditions, the report said.
The crisis has been compounded by mass deportations of Afghan refugees from Iran and Pakistan, deadly earthquakes, and ongoing drought. While other donors and Afghan authorities have tried to fill the gap, their efforts fall far short of previous U.S. assistance, the NYT reported.
Humanitarian groups warn the impact will be long-lasting. Researchers cited by the New York Times say sustained malnutrition could damage an entire generation, with consequences that cannot be reversed even if aid resumes in the future.
However, the spokesperson of the Islamic Emirate, Zabihullah Mujahid, considers the findings of this report to be inaccurate and said that the situation in Afghanistan is not as dire as it is portrayed, and that the country’s situation is moving toward improvement.
“In our view, this report is not correct. We have gone through difficult times and experienced problems such as a humanitarian crisis. At one point, we suffered very heavy casualties and our people faced many difficulties, but now the situation of most people is improving. The country’s economy is moving in a positive direction, to some extent job opportunities have been created for unemployed people, efforts are still ongoing, and Afghanistan’s economic resources have been revived,” said Mujahid.
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Uzbekistan, Kazakhstan discuss cooperation on Afghanistan
Ismatulla Irgashev, Special Representative of the President of Uzbekistan for Afghanistan, met on Tuesday with Beibut Atamkulov, Kazakhstan’s Ambassador to Uzbekistan, to discuss bilateral cooperation on Afghanistan.
The two sides highlighted their commitment to maintaining regular dialogue aimed at addressing the Afghan issue, according to a statement issued by Uzbekistan foreign ministry.
Atamkulov praised Uzbekistan’s efforts to help shape a unified regional position on Afghanistan.
The meeting also included discussions on involving Afghanistan in regional connectivity initiatives, particularly the implementation of the Trans-Afghan railway project.
Officials described the meeting as constructive and reaffirmed mutual interest in further developing practical cooperation between Tashkent and Astana.
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