Afghanistan - Economy

Economy

Afghanistan is an impoverished and least developed country, one of the world's poorest due to the decades of war and nearly complete lack of foreign investment. The nation's GDP stands at about $27 billion with an exchange rate of $15 billion, and the GDP per capita is about $900. Its unemployment rate is 35% and roughly the same percentage of its citizens live below the poverty line. About 42% of the population live on less than $1 a day, according to a 2009 report. On the positive side, the nation has a very low external debt and is recovering by the assistance of the world community.

The Afghan economy has been growing at about 10% per year in the last decade, which is due to the infusion of over $50 billion dollars in international aid and remittances from Afghan expats. It is also due to improvements made to the transportation system and agricultural production, which is the backbone of the nation's economy. The country is known for producing some of the finest pomegranates, grapes, apricots, melons, and several other fresh and dry fruits, including nuts.

While the nations's current account deficit is largely financed with the donor money, only a small portion is provided directly to the government budget. The rest is provided to non-budgetary expenditure and donor-designated projects through the United Nations system and non-governmental organizations. The Afghan Ministry of Finance is focusing on improved revenue collection and public sector expenditure discipline. For example, government revenues increased 31% to $1.7 billion from March 2010 to March 2011.

Da Afghanistan Bank serves as the central bank of the nation and the "Afghani" (AFN) is the national currency, with an exchange rate of about 47 Afghanis to 1 US dollar. Since 2003, over 16 new banks have opened in the country, including Afghanistan International Bank, Kabul Bank, Azizi Bank, Pashtany Bank, Standard Chartered Bank, First Micro Finance Bank, and others.

One of the main drivers for the current economic recovery is the return of over 5 million expatriates, who brought with them fresh energy, entrepreneurship and wealth-creating skills as well as much needed funds to start up businesses. For the first time since the 1970s, Afghans have involved themselves in construction, one of the largest industries in the country. Some of the major national construction projects include the $35 bn New Kabul City next to the capital, the Ghazi Amanullah Khan City near Jalalabad, and the Aino Mena in Kandahar. Similar development projects have also begun in Herat in the west, Mazar-e-Sharif in the north and in other cities.

In addition, a number of companies and small factories began operating in different parts of the country, which not only provide revenues to the government but also create new jobs. Improvements to the business-enabling environment have resulted in more than $1.5 billion in telecom investment and created more than 100,000 jobs since 2003. The Afghan rugs are becoming popular again and this gives many carpet dealers around the country to expand their business by hiring more workers.

Afghanistan is a member of SAARC, ECO and OIC. It is hoping to join SCO soon to develop closer economic ties with neighboring and regional countries in the so-called New Silk Road trade project. Foreign Minister Zalmai Rassoul told the media in 2011 that his nation's "goal is to achieve an Afghan economy whose growth is based on trade, private enterprise and investment". Experts believe that this will revolutionize the economy of the region. Opium production in Afghanistan soared to a record in 2007 with about 3 million people reported to be involved in the business but then declined significantly in the years following. The government started programs to help reduce cultivation of poppy, and by 2010 it was reported that 24 out of the 34 provinces were free from poppy grow. In June 2012, India strongly advocated for private investments in the resource rich country and creation of suitable environment therefor.