Afghanistan’s Economy Remains Fragile: World Bank Report

The World Bank reported on Monday that Afghanistan’s economic recovery under Taliban rule remains uncertain due to political instability, financial isolation, reduced foreign aid, and weak trade ties with Pakistan.

The World Bank’s latest report highlights that high poverty, unemployment, limited resources, and weak purchasing power continue to leave millions of Afghans vulnerable in a country struggling with years of conflict and natural disasters.

Despite some economic growth in 2023-2024, widespread poverty and high unemployment continue to impact millions of Afghans. Limited resources and inflation have further weakened economic stability, making recovery increasingly difficult.

In December 2024, the Afghani suffered its third consecutive month of decline, losing 12% of its value between November 2024 and January 2025. By January 2025, the exchange rate had fallen to 74.8 Afghanis per US dollar, compared to 67.1 Afghanis in October 2024.

The Taliban attempted to stabilize the currency by injecting $100 million into the market. However, the depreciation persisted as U.S. aid remained suspended. In response, the Taliban imposed strict currency controls, using force to regulate exchange markets in Kabul.

Government revenue collection in 2024 increased by 11.5% compared to the previous year, surpassing financial targets. However, a decline in other sources of income has raised concerns about the sustainability of public finances.

Afghanistan’s imports surged by 40% in 2024, primarily driven by increased purchases of food, chemicals, minerals, and transportation equipment. Meanwhile, the trade deficit widened by 8% in December, reaching $926 million due to declining exports.

The country’s exports fell by 19.5% in December 2024, totaling $191 million. Food exports dropped by 25%, and textile exports fell by 23%, largely due to severe winter conditions affecting production and trade.

Iran remained Afghanistan’s largest trade partner in 2024, accounting for 30% of total imports, followed by the UAE (19%), Pakistan (16%), and China (7%). Bilateral trade between Iran and Afghanistan surpassed $4 billion, marking the highest level in two decades.

This report comes amid concerns about Afghanistan’s economic survival. The United Nations reports that 22 million Afghans rely on humanitarian aid, showing the country’s deep economic struggles. Poverty, unemployment, and inflation continue to worsen due to financial isolation and reduced foreign assistance.

The World Bank urges economic reforms, financial transparency, and sustainable policies to reduce Afghanistan’s dependence on imports and aid. Without reforms, economic instability may grow, increasing the risk of a worsening humanitarian crisis.

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