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.

Donald Trump's Middle East envoy has traveled to Qatar and Israel to kickstart the U.S. president-elect's diplomatic push to help reach a Gaza ceasefire and hostage release deal before he takes office on Jan. 20, a source briefed on the talks told Reuters.

Steve Witkoff, who will officially take up the position under Trump's administration, met separately in late November with Israeli Prime Minister Benjamin Netanyahu and Qatar's Prime Minister Sheikh Mohammed bin Abdulrahman Al Thani, the source said.

Witkoff’s conversations appear aimed at building on nearly 14 months of unsuccessful diplomacy by the Biden administration, Qatar and Egypt aimed at a lasting ceasefire between Israel and militant group Hamas in Gaza and the release of dozens of Israeli hostages held in the enclave.

The meetings also signal that the Gulf state of Qatar has resumed as a key mediator after suspending its role last month, the source said.

The source added that Hamas negotiators would likely return to the Qatari capital Doha for more talks soon.

Biden's aides have been aware of Witkoff's contacts with Israeli, Qatari and other Middle East officials and understand that Trump's envoy supports a Gaza deal along the lines the administration has been pursuing, a U.S. official said.

The Biden administration, rather than Witkoff, retains the U.S. lead in efforts to revive negotiations towards a ceasefire in Gaza. Hamas leaders held talks with Egyptian security officials in Cairo on Sunday.

President Joe Biden's team has kept the Trump camp updated, but the two sides have not worked together directly, the U.S. official told Reuters, speaking on condition of anonymity.

The Biden administration does not see a need to coordinate with Witkoff because it regards his discussions with regional players as largely an effort to learn the issues rather than negotiations, the official said.

Trump's transition team and representatives for Witkoff did not immediately respond to a request for comment about the meetings.

Trump warned on Monday there would be "hell to pay" in the Middle East if hostages held in the Gaza Strip were not released prior to his Jan. 20 inauguration.

Witkoff is a real estate investor and Trump campaign donor with business ties to Qatar and other Gulf states, but he has no prior diplomatic experience.

He met Sheikh Mohammed, who also serves as foreign minister, in Doha on Nov 22.

"Both agreed a Gaza ceasefire is needed before Trump's inauguration so that once the Trump administration takes office it can move onto other issues, like stabilizing Gaza and the region," said the source, who was briefed on Witkoff's meetings and spoke on the condition of anonymity.

Witkoff met Netanyahu in Israel on Nov 23.

Qatar's foreign ministry and the Israeli prime minister's office did not respond to Reuters' request for comment.

Witkoff also met families of Israeli hostages, an Israeli official told Reuters.

He "spoke with them about Team Trump's efforts to try and broker the deal before inauguration," the official said.

Sheikh Mohammed traveled to Vienna on Nov. 24 to meet the director of Israel's Mossad spy agency David Barnea, who has led Israel's talks with Qatar over the last 14 months.

"There are plans for a subsequent round of indirect talks between Israel and Hamas to take place potentially in Doha soon, but no specific date has been set," the source said.

Hamas' negotiating team left Doha in recent weeks, Qatari officials said, after Washington objected to their presence. That followed Hamas' rejection of a short-term ceasefire proposal after talks in mid-October.

The source said the Hamas' negotiators were likely to return to Doha for new talks.

Speaking about Trump's warning on Monday there would be "hell to pay" if hostages in Gaza were not released by his inauguration, U.S. Secretary of State Antony Blinken told Reuters on Wednesday his comment was a "powerful reflection" of the urgency for a ceasefire and hostage deal among both Trump's Republicans and Biden's Democrats.

"We're going to pursue every avenue we can in the time that we have left to try to get the hostages back and to get a ceasefire. And I think the president-elect's statement reinforces that," Blinken said.

An Il-76 plane from the Russian emergencies ministry delivered another batch of humanitarian aid for the people of Afghanistan this week, the ministry’s press service told TASS.

"The ministry’s special flight delivered the fifth batch of humanitarian aid for the population of the Islamic Republic of Afghanistan. Russian rescuers handed over a total of 28 metric tons of humanitarian cargo, namely food," the ministry said.

The humanitarian delivery was carried out in accordance with Russian President Vladimir Putin’s decree and instructions issued by Emergency Situations Minister Alexander Kurenkov.

Russia has sent 1,200 tons of humanitarian aid to Afghanistan in the past 12 months.