Economy of Afghanistan

Economy of Afghanistan
The headquarter to the Minister of Finance
Rank	91st
Currency	Afghani (AFN)
Fiscal year	21 March - 20 March
Trade organizations	SAARC, ECO, negotiating WTO accession
Statistics
GDP	$13 billion (2009 est.)[1]
GDP growth	15.1% (2009 est.), 7.6% (2010 forecast)[1]
GDP per capita	$531 (2010 est.)[2]
GDP by sector	agriculture: 31% industry: 26% services: 43% (2008)
Inflation (CPI)	-10% (2009 Period average), 6% (2009 End of period)
Population below poverty line	36% (2008/2009)
Labor force	15 million (2004)
Labor force by occupation	agriculture 80%, industry 10%, services 10% (2004)[1]
Unemployment	40% (2008)
Main industries	small-scale production of textiles, soap, furniture, shoes, fertilizer, and cement; handwoven rugs; natural gas, petroleum, coal, copper
Ease of Doing Business Rank	160th[3]
External
Exports	$2.128 billion (2009)
Export goods	opium, wheat, fruits and nuts, handwoven rugs, wool, cotton, hides and pelts, precious and semi-precious stones
Main export partners	India 23.7%, Pakistan 22.7%, United States 21.3%, Russia 4.1% (2007)
Imports	$8.550 billion (2009)
Import goods	capital goods, food, textiles and petroleum products; most consumer goods
Main import partners	Pakistan 23.9%, United States 11.8%, Germany 6.8%, India 6.5%, Turkey 5.1%, Turkmenistan 5%, Russia 4.7%, Kenya 4.4% (2005)
Public finances
Public debt	external: $1.23 billion to Russia and Multilateral Development Banks (2007)[4]
Revenues	$2.587 billion (2009 including grants)
Expenses	$2.86 billion (2009 total exp.)
Economic aid	recipient: multi-billion dollars as non-returnable grants to cover 2002 to 2010, most of it from the United States and European Union (2007)[5][6]
Main data source: CIA World Fact Book All values, unless otherwise stated, are in US dollars

The economy of Afghanistan has improved significantly since 2002 due to the infusion of billions of US dollars in international assistance and investments^[2], as well as remittances from expats.^[7] It is also due to dramatic improvements in agricultural production and the end of a four-year drought in most of the country. However, Afghanistan still remains one of the poorest and least developed countries in the world that is highly dependent on foreign aid.

About half the population suffer from shortages of housing, clean drinking water, electricity and employment. The Government of Afghanistan and international donors have remained committed to improving access to these basic necessities by prioritizing infrastructure development, education, housing development, jobs programs, medical care, and economic reform over the recent years. The replacement of the opium trade, which probably makes up about one-third of the country's GDP, is one of several potential spoilers for the economy over the long term.

Economic history

Historically, there has been a dearth of information and reliable statistics about Afghanistan's economy.

The Soviet invasion of 1979 and ensuing civil war destroyed much of the country's limited infrastructure and disrupted normal patterns of economic activity, and eventually Afghanistan went from a traditional economy to a centrally planned economy up until 2001 when it was replaced by a free market economy. Gross domestic product has fallen substantially since the 1980s due to disruption of trade and transport as well as loss of labor and capital. Continuing internal strife severely hampered domestic efforts to rebuild the nation or provide ways for the international community to help.

According to the International Monetary Fund, the Afghan economy grew 20% in the fiscal year ending in March 2004, after expanding 30% in the previous 12 months. The growth is attributed to international aid and to the end of droughts. An estimated $4.4 billion US dollars of aid entered the nation from 2002 to 2004, about equal to its GDP. A GDP of US $4 billion in fiscal year 2003 was recalculated by the IMF to $6.1 billion, after adding proceeds from opium products.

Agriculture

The Afghan economy continues to be overwhelmingly agricultural, despite the fact that only 12% of its total land area is arable and less than 6% currently is cultivated. Agricultural production is constrained by an almost total dependence on erratic winter snows and spring rains for water; irrigation is primitive. Relatively little use is made of machines, chemical fertilizer, or pesticides. The country's fruit and nut exports are at $113 million per year and could grow to more than $800 million per year in 10 years given the proper investment.^[8] Badghis and Samangan Province in the north of the country are famous for pistachio cultivation but the area lacks proper marketing and processing plants. It is claimed that some Indian companies buy Afghan pistachios for a very low price, process it in India and sell to western countries as Indian products. However, the Afghan government is planning to build storage facilities for pistachios since receiving bumper crops in 2010.^[9]

Pomegranates from eastern Afghanistan

Wheat and cereal production is Afghanistan's traditional agricultural mainstay. The overall agricultural production dramatically declined following four years of drought as well as the sustained fighting and instability in rural areas. Soviet efforts to disrupt production in resistance-dominated areas also contributed to this decline, as did the disruption to trince 2002, more than 4 million refugees returned back to Afghanistan. Many of these former refugees are now involved in the farming industry. Some studies indicate that agricultural production and livestock numbers may only be sufficient to feed about half of the country's population. Shortages are exacerbated by the country's limited transportation network, which is currently being rebuilt. A report by the Food and Agriculture Organization (FAO) states that Afghanistan was nearing self-sufficiency in grain production.^[10]

o the attractiveness of the greater capital it generates. In turn, a lot of these men involved in the poppy cultivation invest the money they generate into small businesses and shops, as seen in the village of Deh Dehi.^[11] Most villagers have very limited economic options. There are money lenders prepared to provide loans on relatively good terms for opium production and the estimated annual profit from poppy cultivation for a single farmer is 1,000 to 2,000 Lakhs, as opposed to the 20 lakhs from cultivating wheat.^[12] Hence there are an abundance of farmers willing to risk dealing with organized crime and criminals to have a chance at prosperity and why many farmers refuse to switch back to growing wheat.^[12]

Livestock

The availability of land suitable for grazing has traditionally made animal husbandry an important part of the economy. There are two main types of animal husbandry: sedentary, practiced by farmers who raise both animals and crops; and nomadic, practiced by animal herders known as Kuchis. Natural pastures cover some 7.5 million acres but are being overgrazed. The northern regions around Mazār-e Sharif and Maymanah were the home range for about six million karakul sheep in the late 1990s. Most flocks move to the highlands in the summer to pastures in the north. Oxen are the primary draft power and farmers often share animals for plowing. Poultry are traditionally kept in most households.

Much of Afghanistan’s livestock was removed from the country by early waves of refugees who fled to Pakistan and Iran. In 2001, the livestock population in Afghanistan had declined by about 40% since 1998. In 2002, this figure was estimated to have declined further to 60%. An FAO survey done in the northern regions in spring 2002 showed that in four provinces (Balkh, Juzjan, Sar-e Pol, and Faryab), there was a loss of about 84% of cattle from 1997 to 2002 and around 80% of sheep and goats. In recent years, USAID has been helping to improve once again the animal husbandary in Afghanistan. This is done by providing to Afghan villagers training and the first animals to start with.^[13]

Fishing

The nation has plenty of water reserves and suitable climate for fish farming. Fishing takes place in the lakes and rivers, such as in Sarobi and Mahipar area. Fish constitute a smaller part of the Afghan diet today because fish farmers are unable to produce enough fish to keep up with the demands of customers. Using explosives for fishing, called dynamite fishing, became popular in the 1980s and is still practiced by some even though it is illegal today.^[14] The annual catch was about 900 tons in 2003. Most fish and seafood is imported from neighboring Pakistan, Iran, the United Arab Emirates and other countries.^[15] In recent years, USAID has helped many Afghans in establishing fish farms across the country.^[16] There are about 300 fish farms throughout the country and the largest one is at the Qargha, which supplies fih eggs to the other ones.^[14]

Forestry

Afghanistan’s timber has been greatly depleted, and since the mid-1980s, only about 3% of the land area has been forested, mainly in the east. Significant stands of trees have been destroyed by the ravages of the war. Exploitation has been hampered by lack of power and access roads. Moreover, the distribution of the forest is uneven, and most of the remaining woodland is presently found only in mountainous regions in the southeast and south. The natural forests in Afghanistan are mainly of two types: dense forests of oak, walnut, and other species of nuts that grow in the southeast, and on the northern and northeastern slopes of the Sulaiman ranges; and sparsely distributed short trees and shrubs on all other slopes of the Hindu Kush. The dense forests of the southeast cover only 2.7% of the country. Roundwood production in 2003 was 3,148,000 cubic metres, with 44% used for fuel. The destruction of the forests to create agricultural land, logging, forest fires, plant diseases, and insect pests are all causes of the reduction in forest coverage. Illegal logging and clear-cutting by timber smugglers have exacerbated this destructive process.

Trade and industry

Afghan rug weavers in Herat province

Afghanistan-Tajikistan bridge after completion in 2007 is one of several bridges used for trade between Afghanistan and Central Asia.

The current trade between Afghanistan and other countries is at US$5 billion a year. In 1996, legal exports (excluding opium) were estimated at $80 million and imports estimated at $150 million per year. Since the collapse of the Taliban government in 2001, new trade relations are emerging with the United States, Pakistan, Iran, Turkmenistan, the EU, Japan, Uzbekistan, India and other countries. Trade between Afghanistan and the U.S. is beginning to grow at a fast pace, reaching up to approximately $500 million per year.^[17] The Afghan handwooven rugs are one of the most popular products exported from the country. Other products include hand crafted antique replicas, precious and semi-precious stones as well as leather and furs.

Afghanistan is endowed with a wealth of natural resources, including extensive deposits of natural gas, petroleum, coal, marble, gold, copper, chromite, talc, barites, sulfur, lead, zinc, iron ore^[18], salt, precious and semi-precious stones, and many other materials. In 2006, a U.S. Geological Survey estimated that Afghanistan has as much as 36 trillion cubic feet (1.0×10^¹² m³) of natural gas, 3.6 billion barrels (570×10^⁶ m³) of oil and condensate reserves.^[19] According to a 2007 assessment, Afghanistan has significant amounts of undiscovered non-fuel mineral resources.^[20] Scientists also found indications of abundant deposits of colored stones and gemstones, including emerald, ruby, sapphire, garnet, lapis, kunzite, spinel, tourmaline and peridot.^[21] In 2010, U.S. Pentagon officials along with American geologists have revealed the discovery of nearly $1 trillion in untapped mineral deposits in Afghanistan.^[22] Plans are being made by the Afghan government to begin extracting these but with the Taliban insurgency and the corruption there is no telling what will happen.

We know that the extraction efforts are challenged by remote locations, some of which are in areas controlled or at least threatened by the insurgency. There's weak infrastructure. This is obviously something that we are trying to expand for the benefit of Afghanistan's economy... So it is a potentially important development. We're not underestimating the challenges involved here. But obviously, if these things can be developed over time, that offers the ability for Afghanistan to have the resources necessary to develop a modern economy, a legal economy, as opposed to the economy they currently have now, which is heavily dependent on narcotics...^[23]

—U. S. State Department spokesman P. J. Crowley, June 2010

A memo from the Pentagon stated that Afghanistan could become the "Saudi Arabia of lithium".^[24] Some believe, including Afghan President Hamid Karzai, that the untapped minerals are worth at least $3 trillion.^[25][26][27] Afghanistan had sign a copper deal with China (Metallurgical Corp. of China Ltd.) in 2008, which to is a project that involves the investment of $2.8 billion dollars by China and an annual income of $400 million dollars to the Afghan government.^[28] The country's Ainak copper mine, located in Logar province, is one of the biggest in the world and is expected to provide jobs to 20,000 Afghans. It is estimated to hold at least 11 million tonnes or 33 billion US dollars worth of copper.^[29][30] Experts believe that the production of copper could begin within two to three years and the iron ore in five to seven years as of 2010.^[31]

Afghan exports in 2006

The nation's other most important resource has been natural gas, which was first tapped in 1967. During the 1980s, natural gas sales accounted for $300 million a year in export revenues (56% of the total). Ninety percent of these exports went to the Soviet Union to pay for imports and debts. However, during the withdrawal of Soviet troops in 1989, Afghanistan's natural gas fields were capped to prevent sabotage by the Mujahideen. Restoration of gas production has been hampered by internal strife and the disruption of traditional trading relationships following the collapse of the Soviet Union. Gas production has dropped from a high of 8.2 million cubic metres (2.9 × 10⁸ cu ft) per day in the 1980s to a low of about 600 thousand cubic meters (2.2 × 10⁷ cu ft) in 2001. After the formation of the new government under Hamid Karzai, production of natural gas is planned to be restored again. A locally owned company, Azizi Hotak General Trading Group, is currently the main supplier of diesel fuel, gasoline, jet fuel and LPG in Afghanistan.^[32]

Trade in goods smuggled into Pakistan once constituted a major source of revenue for Afghanistan. Many of the goods that were smuggled into Pakistan have originally entered Afghanistan from Pakistan, where they fell under the Afghan Trade and Transit Agreement (ATTA). This permitted goods bound for Afghanistan to transit through Pakistan free of duty. This resulted in considerable problems for the Pakistani government, particularly its customs bureau who realized that many of the items being resold on the black market in Pakistan were the very same items being allowed duty free exemption from Pakistani ports (notable Karachi) on their way to Afghanistan. When Pakistan clamped down in 2000 on the types of goods permitted duty-free transit, and introducing stringent measures and labels to prevent such practices, re-routing of goods through Iran from the Persian Gulf increased significantly. The pre-2000 smuggling trade provided undocumented jobs to tens of thousands of Afghans, but also helped fuel the black economy, often intertwined with the drug cartels, of both countries.

Economic development and recovery

New commercial buildings such as this one in Kabul are constructed across the country to help modernize the financial sector

Afghanistan embarked on a modest economic development program in the 1930s. The government founded banks; introduced paper money; established a university; expanded primary, secondary, and technical schools; and sent students abroad for education. In 1956, the government of Afghanistan promulgated the first in a long series of ambitious development plans. By the late 1970s, these had achieved only mixed results due to flaws in the planning process as well as inadequate funding and a shortage of the skilled managers and technicians needed for implementation.

The nation's banking system has improved recently with over fourteen different banks operating as of 2003. They include Da Afghanistan Bank, Afghanistan International Bank, Kabul Bank, Azizi Bank, Pashtany Bank, Standard Chartered Bank, First Micro Finance Bank, and others. Money can be transferred electronically in and out of the country. A new law on private investment provides three to seven-year tax holidays to eligible companies and a four-year exemption from exports tariffs and duties. As a result of the new banks in the country, Afghans living overseas are sending more money back home to their family or relatives. According to a UN report in 2007, Afghanistan has received over $3.3 billion from its expatriate community in 2006. UN officials familiar with the issue said remittances to Afghanistan could have been more if the banking regulations are more convenient.^[7] However, in early September 2010, one of the principal owners of the Kabul Bank, at the center of an accelerating financial crisis in Afhganistan, said depositors had withdrawn $180 million in the past two days. He predicted a “revolution” in the country’s financial system unless the Afghan government and the United States moved quickly to help stabilize the bank.^[33]

The UN and the international community continue to provide considerable humanitarian relief. Since its inception in 1991, the UN Office for the Coordination of Humanitarian Affairs (OCHA) to Afghanistan has channelled more than $1 billion in multilateral assistance to Afghan refugees and vulnerable persons inside Afghanistan. The US, the European Union (EU), and Japan are the leading contributors to this relief effort. One of its key tasks is to eliminate from priority areas—such as villages, arable fields, and roads—some of the 5 to 7 million land mines and 750,000 pieces of unexploded ordnance, sown mainly during the Soviet occupation, which continue to litter the Afghan landscape. Afghanistan is still a heavily mined country; mine-related injuries number about 60 per-month. Without successful mine clearance, refugee repatriation, political stability, and economic reconstruction will be severely constrained.

The plan for Kabul's nine billion dollar future modern urban development project, the Kabul - City of Light Development.

An initial concept design called the City of Light Development, envisioned by Dr. Hisham N. Ashkouri, Principal of ARCADD, Inc. for the development and the implementation of a privately based investment enterprise has been proposed for a multi-function commercial, historic and cultural development within the limits of the Old City of Kabul along the southern side of the Kabul River and along Jade Meywand Avenue,^[34] revitalizing some of the most commercial and historic districts in the City of Kabul, which contains numerous historic mosques and shrines as well as viable commercial activities among and within war-damaged buildings. Also incorporated in the design is a new complex for a new Afghan National Museum. The design has garnered interest from President Hamid Karzai, and has support from Ambassador Said Tayeb Jawad, who signed a Memo of Understanding regarding the development.

The United States has not delivered $5 billion worth of aid it pledged to help rebuild Afghanistan, and other donors have fallen short by about that same amount, reported The Agency Coordinating Body for Afghan Relief on March 25, 2008. Since 2001, the international community has pledged $25 billion in help but has delivered only $15 billion. The reconstruction of Afghanistan requires a sustained and substantial commitment of aid.^[35] Too much money meant for Afghanistan aid is wasted, with a vast amount spent on foreign workers' high salaries, security and living arrangements.^[36]

National accounts

The majority of the following information is taken from, or adapted from the CIA World Factbook

GDP: purchasing power parity - $31.9 billion (2006 est.)

GDP - real growth rate:

• 7.5% (2008 est.)

GDP - per capita: purchasing power parity - $800 (2008 est.)

GDP - composition by sector:

• agriculture: 31%
• industry: 26%
• services: 43% (2008 est.)

note: data excludes opium production

Population below poverty line:

• 36% (2008/2009)

Household income or consumption by percentage share:

• lowest 10%: NA%
• highest 10%: NA%

Inflation rate (consumer prices): 13% (2007)
country comparison to the world: 183

Labor force: 15 million (2004 est.)
country comparison to the world: 36

Labor force - by occupation: agriculture 80%, industry 10%, services 10% (2004 est.)

Unemployment rate: 40% (2005)
country comparison to the world: 185

Budget:

• revenues: $890 million
• expenditures: $2.7 billion

Industries: small-scale production of textiles, soap, furniture, shoes, fertilizer, and cement; handwoven rugs; natural gas, petroleum, coal, copper, marble

Electricity - production: 839 million kWh (2007)
country comparison to the world: 149

Electricity - production by source:

• fossil fuel: 36.3%
• hydro: 63.7%
• nuclear: 0%
• other: 0% (2001)

Electricity - consumption: 1.418 billion kWh (2007)
country comparison to the world: 137

Electricity - exports: 0 kWh (2007)

Electricity - imports: 608 million kWh (2007)

Oil - production: 0 barrel/day (2003 est.)
country comparison to the world: 210

Oil - consumption: 5,036 barrel/day (2006)
country comparison to the world: 165

Oil - proved reserves: 1.6 billion barrels (2006 est.)^[19]

Natural gas - production: 220 million m³ (2001 est.)

Natural gas - consumption: 220 million m³ (2001 est.)

Natural gas - proved reserves: 15.7 trillion cubic feet (2006 est.)^[19]

Agriculture - products: opium poppies, wheat, fruits, nuts, karakul pelts

Exports: $327 million; note - not including illicit exports or reexports (2007)
country comparison to the world: 175

Exports - commodities: opium, fruits and nuts, handwoven rugs, wool, cotton, hides and pelts, precious and semi-precious gems

Exports - partners: India 22.8%, Pakistan 21.8%, United States 20.5%, Tajikistan 7.2% (2007)

Imports: $4.85 billion (2007)

Imports - commodities: capital goods, food, textiles and petroleum products

Imports - partners: Pakistan 36.8%, United States 11%, India 5%, Germany 4.2% (2005)

Debt - external: $8 billion in bilateral debt, mostly to Russia; $500 million in debt to multilateral development banks

Economic aid - recipient: multi-billion dollars were provided as non-returnable grants to cover the years 2002 to 2009, most of it from the United States and European Union (2007)^[5][6]

Current account balance: -$67 million (2007)
country comparison to the world: 79

Currency: Afghani (AFN)

Exchange rates: Afghanis per one US dollar ($1) - 50 (2007), 49 (2006), 49 (2005), 48 (2004), 48 (2003), 48 (2002) note: in 2002, the Afghani was revalued and the currency stabilized at about 48 afs. to the dollar.

Fiscal year: 21 March - 20 March

See also

• Mining in Afghanistan

References

•  This article incorporates public domain material from websites or documents of the CIA World Factbook.
•  This article incorporates public domain material from websites or documents of the United States Department of State (Background Notes).

External links

• Ministry of Finance, Afghanistan
• Ministry of Commerce & Industry, Afghanistan
• Afghanistan Customs Department
• Ministry of Rural Rehabilitation & Development, Afghanistan
• Afghanistan Investment Support Agency (AISA)
• Afghanistan National Development Strategy (ANDS)
• Da Afghanistan Bank (Central Bank)
• Afghanistan's Paper Money
• Global Economic Prospects: Growth Prospects for South Asia The World Bank, December 13, 2006
• Drug Industry Threatens to Derail Afghanistan's State Building UNODC and The World Bank, November 28, 2006

Afghanistan topics History Timeline of the history of Afghanistan · Pre-Islamic period · Greater Khorasan · Islamic conquest · History of Arabs in Afghanistan · Mongol invasion · Hotaki dynasty · Durrani Empire · Third Battle of Panipat · Battle of Jamrud · First Anglo-Afghan War  · Second Anglo-Afghan War  · Third Anglo-Afghan War · European influence · Reforms of Amanullah Khan and civil war · Reigns of Nadir Shah and Zahir Shah · Daoud's Republic · Democratic Republic · Soviet war · since 1992 · 2001 invasion Politics Government Administrative divisions · Constitution of Afghanistan · Loya jirga · President of Afghanistan · Hamid Karzai · Vice President of Afghanistan · Ahmad Zia Massoud · Karim Khalili · Afghan Cabinet of Ministers · National Assembly of Afghanistan · House of Elders · House of the People (Afghanistan) · Elections in Afghanistan (List of political parties in Afghanistan) · List of Afghanistan Governors · Afghan Supreme Court · Chief Justice of Afghanistan · Human rights in Afghanistan · LGBT rights · Foreign relations of Afghanistan Demography Religion · Pashtun people · Tajiks · Farsiwan · Qizilbash · Hazara people · Uzbek people · Turkmen people · Baloch people · Nuristani people · Arabs · Persian (Dari) · Sunni Muslim · Shi'a Muslim · Languages of Afghanistan · Culture of Afghanistan Geography Environmental issues Administrative divisions · Provinces · Districts · cities · List of volcanoes in Afghanistan Economy Afghan afghani · Energy · Mining · Taxation · Tourism · Heroin · International rankings Society Culture Music of Afghanistan · Poetry of Afghanistan · Pashtunwali · Cuisine of Afghanistan · Education in Afghanistan · War rugs · Islamic Holiday · Postage stamps and postal history of Afghanistan · List of birds on stamps of Afghanistan · List of fish on stamps of Afghanistan · Flag · Olympics Infrastructure Transport in Afghanistan · Kabul-Kandahar Highway · Kandahar-Herat Highway · Trans-Afghanistan Pipeline · List of airports in Afghanistan · Ariana Afghan Airlines · Afghan railway history  · Communications in Afghanistan Portal