Outlook for Afghan economy ‘dire’ as household incomes shrink: World Bank

The outlook for Afghanistan’s economy is dire with per capita income having fallen by over a third in the last four months of 2021 after the Islamic Emirate of Afghanistan (IEA) seized power and foreign forces withdrew, the World Bank said on Wednesday.

“One of the poorest countries in the world has become much poorer,” said Tobias Haque, World Bank Senior Country Economist for Afghanistan.

“The isolation of the Afghan economy following last August’s political crisis risks…leading to grave poverty, displacement, fragility, and extremism threats,” he told a briefing for the release of the World Bank’s first development update on the country since August Reuters reported.

The IEA takeover prompted foreign governments, led by the United States, to cut development and security aid, and the strict enforcement of sanctions has debilitated the country’s banking sector.

The World Bank update said that incomes had dropped so starkly that around 37% of Afghan households did not have enough money to cover food while 33% could afford food but nothing more, Reuters reported.

An IEA failure to meet Western conditions, in particular access to education for all girls, has led the international community to withhold international assistance and keep financial sanctions in place, with exceptions for humanitarian aid.

“Under current conditions, the outlook for Afghanistan’s economy is dire,” the World Bank said in a statement accompanying the update.

If current conditions continued, the World Bank predicted, Afghanistan’s real gross domestic produce (GDP) per capita would decline by around 34% between the end of 2020 and the end of 2022, reversing all progress since 2007.

The United States cancelled planned meetings in March, some of which would have included the World Bank, to discuss key economic issues after the IEA sent all high school-aged girls home after they had arrived ready for classes.

The U-turn angered donors, foreign governments and many Afghans as IEA officials had previously said they were opening all schools.