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
IMF forecasts 1.3 percent regional economic contraction in 2026
However, it said the region’s economies could recover in 2027 if the conflict eases in early 2027 and regional trade gradually returns to normal.
The International Monetary Fund (IMF) has projected a 1.3 percent economic contraction across the Middle East, North Africa, Afghanistan and Pakistan in 2026, citing the economic impact of the U.S.-Israeli conflict with Iran.
In its Regional Economic Outlook report released Thursday in Dubai, the United Arab Emirates, the IMF revised its forecast downward by about three percentage points compared with its April projection.
The fund said disruptions to energy production, shipping, trade and tourism caused by the conflict are expected to weigh on regional economic activity.
According to the report, all Gulf Cooperation Council member states, except Oman, are projected to experience economic contractions this year. Bahrain, Kuwait and Qatar are expected to record double-digit declines in economic output.
The IMF warned that the regional economic outlook remains highly uncertain. However, it said the region’s economies could recover in 2027 if the conflict eases in early 2027 and regional trade gradually returns to normal.
Business
Pakistan exporters suffer billions in losses as Afghanistan trade halt continues
Pakistan’s pharmaceutical sector is among the industries affected by the trade suspension, with Afghanistan serving as one of its major export destinations.
Pakistani exporters are facing mounting financial losses, stranded shipments and sharply rising transportation costs as the suspension of trade with Afghanistan continues to disrupt access to key regional markets.
Trade between the two countries was halted in October 2025 following deadly clashes along their shared crossing. According to business groups cited in a report by CNA, more than $2.5 billion in trade has been lost since the suspension began.
Islamabad has accused militants based in Afghanistan of carrying out attacks inside Pakistan, allegations rejected by the Islamic Emirate of Afghanistan (IEA).
The prolonged disruption has affected pharmaceutical manufacturers, agricultural exporters, transport companies and businesses that depend on Afghanistan as a gateway to Central Asian markets.
Pharmaceutical Industry Faces Mounting Losses
Pakistan’s pharmaceutical sector is among the industries affected by the trade suspension, with Afghanistan serving as one of its major export destinations.
Junaid Altaf, chief executive of Fedro Pharmaceuticals in Peshawar, told CNA that approximately 70 percent of the medicines packaged at his factory were intended for Afghanistan and Central Asia.
He said the border closure left the company with pending orders, unfinished production and packaging materials that could no longer be used in their intended markets.
Packaging prepared in Persian and other region-specific languages became redundant, adding to the company’s financial losses.
Fedro is now attempting to expand domestic sales to compensate for the decline in exports.
Food and agricultural exporters have also reported substantial setbacks.
Manzoor Ellahi, chief executive and managing partner of MM Ellahi Traders, which exports rice, meat, citrus fruits and potatoes, said Afghanistan and Central Asia previously accounted for 80 percent of his company’s revenue. That share has since fallen to around five percent.
Alternative Routes Drive Up Shipping Costs
With trade through major crossings disrupted, Pakistani exporters have increasingly explored alternative routes to reach Central Asian markets, including transportation through Iran.
However, these alternatives involve longer transit times, higher costs and additional logistical challenges.
Muhammad Naeem, a Pakistani exporter, told CNA that shipments previously travelled from Pakistan through the Torkham crossing to Uzbekistan in approximately one week, costing between $2,000 and $3,000.
Transporting goods through Iran now takes nearly six weeks and costs an estimated $10,000 to $13,000, he said.
The longer journeys also increase the risk of perishable goods spoiling or products reaching their destinations after their expiration dates, potentially forcing exporters to discard entire shipments.
The disruption has also affected transport infrastructure and related businesses. A truck depot in Peshawar that previously handled 40 to 50 trucks a day transporting goods to Afghanistan has reportedly seen operations grind to a halt.
Security Disputes Continue to Block Trade
Pakistan has maintained that trade will not resume unless the IEA administration takes action against militants Islamabad accuses of operating from Afghan territory.
The Islamic Emirate denies the allegations, while continuing tensions have complicated efforts to restore normal commercial relations between the neighbouring countries.
Analysts warn that prolonged trade restrictions could further weaken Pakistan’s export performance at a time when the country is seeking to strengthen its foreign exchange reserves under an International Monetary Fund programme.
Vaqar Ahmed, research director at the international economic research network Partnership for Economic Policy, cautioned against allowing political disputes to undermine commercial activity.
He also highlighted concerns about Pakistan’s export performance and the need to strengthen its foreign exchange position.
Business Groups Call for Dialogue
Pakistani business groups have urged Islamabad and Kabul to resolve their differences through negotiations and restore trade.
The continuing suspension has affected not only exporters but also workers, customs clearance agents, transport operators and other businesses linked to regional commerce.
For Afghanistan, the disruption has further complicated access to established trade and transit routes through Pakistan. For Pakistani exporters, it has meant losing access to an important neighbouring market while facing higher costs to reach destinations farther into Central Asia.
Despite calls from business representatives for a negotiated solution, there are few clear signs that the trade impasse will end soon.
Business
Transit of Afghan goods through Sheikh Abu Nasr Farahi border crossing doubles
The transit of Afghan traders’ goods through the Sheikh Abu Nasr Farahi border crossing doubled in the first six months of the solar year 1405, reaching 805,000 tonnes, according to Iranian media.
Iran’s IRNA news agency quoted Mohammad Kuhgard, Director General of Customs in Iran’s South Khorasan Province, as saying transit volumes increased by 100 percent compared with the same period last year, strengthening the crossing’s role in regional trade.
Kuhgard also reported a sharp rise in goods handled under the “transit from origin” procedure at Mahirud Customs. Some 85,000 tonnes of goods passed through the facility during the period, an increase of more than 1,300 percent year-on-year.
Under this procedure, customs formalities for Afghan traders’ goods are completed at Mahirud before the shipments are transported to their intended destination countries.
Kuhgard said more than 65 kilometres of the road connecting Mahirud in Iran to Farah Province in Afghanistan have been asphalted. Completion of the route could help reduce transit times and transportation costs between the two countries.
The head of Iran’s Birjand Chamber of Commerce described Afghanistan as South Khorasan’s main export market and trading partner, saying stronger commercial ties, easier imports and the removal of customs barriers could further expand bilateral trade.
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