Afghanistan’s economy is set to record a second consecutive year of growth, supported by low inflation and stronger domestic revenues, but deep structural challenges continue to weigh heavily on the country’s long-term outlook.

According to the World Bank’s latest Afghanistan Development Update, cited by Himalaya Diary, gross domestic product is projected to expand by 4.3 percent in 2025, following an estimated 2.5 percent growth in 2024.

The recent uptick has been driven in part by increased demand linked to the return of more than two million Afghans from Iran and Pakistan, boosting activity in the services and industrial sectors.

Agriculture has shown relative resilience, with a record irrigated wheat harvest achieved despite severe drought conditions. Mining and construction have also contributed to overall output growth, helping sustain economic momentum.

However, the recovery has not translated into improved living standards. Rapid population growth, estimated at 8.6 percent in 2025, is expected to push GDP per capita down by around 4 percent. Inflation remains low at about 2 percent — among the lowest in the region — reflecting stable food prices and a stronger currency, but also highlighting Afghanistan’s reliance on imports and exposure to external shocks.

On the fiscal front, domestic revenues have improved, with tax collection projected to reach 17.1 percent of GDP in 2025 as enforcement measures tighten. At the same time, declining foreign grants are shrinking the overall fiscal space, increasing reliance on trade taxes and continued donor support.

The financial sector remains under strain. Banks face regulatory uncertainty, rising non-performing loans and weak credit growth, while liquidity pressures persist as more cash circulates outside the formal system. Limited access to banking services and the transition to Islamic finance have further constrained financial inclusion.

Labour market pressures are also mounting. Nearly one in four young Afghans is unemployed, and restrictions on women’s education and economic participation are undermining human capital and long-term growth prospects. These challenges are compounded by one of the largest return migration waves in recent years, with an estimated 4 to 4.7 million people returning between late 2023 and mid-2025, intensifying pressure on jobs and public services, particularly in urban and border areas.

The World Bank warns that sustaining the recovery will require reforms to attract private investment, strengthen the financial system and diversify exports. Improved governance, a more supportive business environment and stronger engagement with international partners will be critical if Afghanistan is to reduce its reliance on humanitarian aid and move toward more resilient and inclusive growth.

A delegation of Tajikistani investors has expressed interest in establishing a cement production factory in Afghanistan, signaling renewed economic engagement between the two neighbors after four years of limited activity.

The delegation met with Hedayatullah Badri, Afghanistan’s Minister of Mines and Petroleum, to discuss potential investment opportunities in the country’s mining and industrial sectors. Officials said the visit reflects Tajikistan’s increasing willingness to expand economic cooperation with Afghanistan.

During the meeting, the Tajik investors praised the Islamic Emirate for what they described as improved security and a more conducive investment environment across Afghanistan.

Minister Badri welcomed the investors’ proposal and assured them of the government’s full support, emphasizing that Afghanistan is ready to facilitate investment through streamlined procedures and favorable conditions.

Representatives of Afghanistan’s private sector also view the development as a positive step toward strengthening bilateral economic ties.

Abdul Jabbar Safi, head of the Afghanistan Industries Association, said:
“After four years, Tajikistan is looking to take part in Afghanistan’s economic sector. This is encouraging news for the governments and the people of both countries.”

Economic experts believe that deeper economic engagement between Afghanistan and Tajikistan could unlock significant mutual benefits.

Nazir Ahmad Khalil, an economic analyst, said: “Tajikistan and Afghanistan share language, culture and geography. Expanding trade and investment between the two countries can meaningfully improve their economic situations. Building trust will be essential for long-term cooperation, and such investment can play a major role in poverty reduction and confidence-building.”

This new chapter of economic cooperation between Afghanistan and Tajikistan comes at a time when, since the return of the Islamic Emirate to power, several major projects have been launched between Afghanistan and Central Asian states.

The leadership of the Islamic Emirate has repeatedly emphasized that it seeks to strengthen economic relations with neighboring countries, the region, and the wider world on the basis of mutual respect.

Trade bodies report that nearly 11,000 Afghan transit trade containers are stranded at Karachi port, while thousands more— including shipments of perishable goods—remain stuck at the Ghulam Khan, Spin Boldak, Kharlachi, and Torkham crossings between Afghanistan and Pakistan.

Traders involved in Pakistan–Afghanistan bilateral and transit commerce say they have suffered billions of Pakistani rupees in losses as the prolonged border shutdown continues to stall the movement of goods. Perishable food items have already begun to spoil, compounding financial losses.

They also report a sharp drop in bilateral trade volumes. Exporters who were already issued Form-E certificates have been unable to dispatch consignments, with the closure now nearing two months.

Sarhad Chamber of Commerce and Industry (SCCI) President Junaid Altaf said trade—already limited—has deteriorated further due to the closure of crossings. He estimated losses of roughly $45 million since the Torkham closure began, adding that the halt is damaging for both economies and directly affecting families whose livelihoods depend on trade.

SCCI officials urged authorities to separate trade from political tensions and immediately launch dialogue to restore commercial traffic between the two countries.

In recent weeks, repeated closures of the Pakistan–Afghanistan crossing have also brought pharmaceutical exports to a halt, putting nearly $200 million worth of medicines at risk. Hundreds of trucks carrying antibiotics, insulin, vaccines, and cardiovascular drugs remain stuck at Torkham and Chaman, with temperature-sensitive supplies facing potential spoilage.

The Pakistan Pharmaceutical Manufacturers Association (PPMA) warned that the disruption extends far beyond Afghanistan’s medicine supply. Afghanistan is Pakistan’s main overland route to Uzbekistan, Tajikistan, Turkmenistan, and Kazakhstan, and ongoing shutdowns are undermining key regional connectivity projects, including the Pakistan–Uzbekistan–Afghanistan railway.

Stakeholders are calling for urgent steps to reopen the crossings, warning that prolonged closures threaten not only pharmaceutical exports but Pakistan’s broader economic engagement across the region.