Kabul (Kubha News)- Transparency International has unveiled a stark reality for Afghanistan’s economic landscape. The nation’s Gross Domestic Product (GDP) experienced a pronounced contraction of over six percent in the preceding year, marking a disheartening trend. Projections for 2023 reveal an estimated GDP of approximately 14 billion dollars, reflecting a substantial decrease of over 4 billion dollars compared to 2020. This follows a consecutive three-year decline, with 2022 and 2021 witnessing a cumulative GDP reduction of 21%, attributing its origins to the aftermath of the republican system’s collapse and stringent sanctions on the banking sector.
During the final years of the Republic of Afghanistan, market circulation boasted around 150 billion Afghanis, hinting at an annual economic turnover of 750 billion Afghanis. The present monetary circulation, however, stands starkly lower at about 50 billion Afghanis. This substantial contraction, when compounded over five periods, paints a disconcerting picture, reflecting a total economic and financial circulation of 250 billion Afghanis. The tangible impact of this plummeting GDP is glaringly evident in the significantly diminished annual budget for 2022, further exacerbated by the Taliban’s adherence to traditional financial methodologies.
A pivotal factor contributing to this burgeoning budget deficit is the reduction in foreign aid, resulting in the loss of hundreds of thousands of jobs and the shuttering of numerous projects. The absence of foreign aid has created a void in internal income sources, further intensifying the negative trajectory of GDP growth.
Despite a marginal improvement in Afghanistan’s GDP in 2022, owing to global aid and remittances totaling two billion dollars, the nation’s overall economic landscape remains in contraction. The ongoing drought poses an additional challenge, particularly as agriculture constitutes almost half of Afghanistan’s GDP, as reported by the Afghanistan National Bureau of Statistics.
In a glimmer of hope, the resumption of aid for select construction projects by international organizations, including the World Bank, is considered a potential lifeline to prevent the stagnation of GDP. However, concerns loom large regarding the alignment of these projects with the developmental objectives of the republic government.
The latest report from the United States Aid Inspection Office (SIGAR) reveals a substantial cash influx of 2.9 billion USD to Afghanistan over the past two years, facilitated through the United Nations. Of this, 2.6 billion dollars originated from the United States, with an additional 300 million dollars from other donor countries. Cash aid, primarily earmarked for humanitarian purposes, not only alleviates the cash dollar shortage in Afghan markets but also positively impacts GDP, as confirmed by the United Nations humanitarian aid agency (OCHA).
In the backdrop of the Taliban’s earnest efforts to bolster GDP through heightened focus on mining, a lack of clear legislative frameworks in this domain has dissuaded potential investors and major corporations from engaging. Consequently, Afghanistan appears to be treading a precarious path towards deepening poverty, with each passing year witnessing a further erosion of its GDP.
This analytical report has been compiled by the Economic Department of Kubha News