World Bank: Afghanistan’s economic growth too weak to improve living standards

Afghanistan’s economy continued to grow modestly in June 2026, supported by resilient domestic demand, stable prices and stronger revenue collection, but the pace of growth remains insufficient to improve living standards, according to the World Bank’s latest Afghanistan Economic Monitor.

The report said economic growth has failed to keep pace with rapid population growth, driven in part by the return of millions of Afghans, resulting in a 5.6% decline in per capita income and mounting pressure on household welfare.

Headline inflation eased to 7.6% in June from 8.0% in May, as food prices fell with the start of the domestic harvest season and continued imports. However, core inflation rose to 8.3%, reflecting persistent pressures from housing and healthcare costs.

The World Bank said the Afghan currency depreciated modestly to AFN 64.4 per U.S. dollar in June, although it remained stronger than a year earlier. It noted that improved inflation differentials with neighboring countries enhanced Afghanistan’s external price competitiveness.

The report also highlighted continued disruptions to regional trade caused by the closure of key Durand Line crossings with Pakistan and geopolitical tensions in the Middle East. While businesses increasingly relied on Central Asian transit routes, Afghanistan’s trade deficit widened 11% from the previous month and 19% year-on-year to $984.3 million in June.

Exports totaled $77.7 million in June, down 2% from May but up 19% compared with a year earlier. Textile exports surged 304% year-on-year, while food exports declined month-on-month and coal exports remained negligible. India remained Afghanistan’s largest export destination, accounting for 33.6% of total exports.

Imports rose to $1.06 billion, up 10% from May and 19% from a year earlier, driven by stronger demand and a shift toward Central Asian transit corridors, which accounted for 48% of imports. Iran remained Afghanistan’s largest import source, supplying 31% of total imports.

On public finances, domestic revenue reached AFN 17.3 billion in June, down from the previous month but 8.7% higher for the fiscal year to date, supported by improved tax administration and higher non-tax revenues. Public expenditure declined to AFN 17.5 billion, while the fiscal position remained in surplus as spending continued to be limited by available domestic revenues.