Afghan economy shows ‘modest signs of growth’

Afghanistan’s economy is showing modest signs of growth after two years of severe contraction, the World Bank (WB) said.

The economy’s challenges include “fiscal constraints, trade imbalances, and a limited capacity for public investment,” the bank said in its Afghanistan Development Update. Critical factors for long-term recovery include enabling women’s participation in the economy, maintaining price stability and dealing with key deficits in human capital — such as education and healthcare, the multilateral development lender said.

In its latest development, the financial institution said modest GDP growth of 2.7% was driven by private consumption. The partial recovery, coupled with falling food prices, helped to gradually improve household welfare.

Before the Taliban returned to power in August 2021, Afghanistan’s economy relied heavily on foreign aid and corruption was rife. Their takeover three years ago sent the economy into a tailspin, as billions in international funds were frozen, and tens of thousands of highly skilled Afghans fled the country and took their money with them.

Afghan’s exports remained stable in 2023-24 but imports surged, creating a widening trade deficit, according to the World Bank. This deficit, exacerbated by dependence on imports for essential goods like fuel, food and machinery, could pose a risk to the country’s economic stability.

Faris Hadad-Zervos, the World Bank’s country director for Afghanistan, said long-term growth prospects required 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,” said Hadad-Zervos. “Without this, the country risks prolonged stagnation with limited prospects for sustainable development.”

The update comes days after media reports that the Taliban have ordered educational institutions to stop providing medical training to women and girls. The Taliban have neither confirmed the order nor responded to the reports.

On Thursday, the head of the UN children’s agency UNICEF said she was deeply alarmed by the reported restrictions. UNICEF was determining the veracity of these differing accounts and welcomed efforts to address the issue, said the agency’s executive director Catherine Russell.

Agencies