Crisis pushes Afghanistan’s economy closer to the brink

23rd Aug, 2021

Crisis pushes Afghanistan’s economy closer to the brink

The Taliban's ascension to power in Afghanistan has re-ignited interest in one of the world's poorest countries. A brief assessment of Afghanistan's economic status. The IMF predicted in June that after contracting by 2% in 2020 owing to the COVID-19 epidemic, GDP would rebound and increase by 2.7 percent this year as mobility and commerce resumed. That was in line with the current 2.5 percent average growth rate, but much below the high single digit levels seen in the decade after the 2001 US invasion. According to the Asian Development Bank, around two-thirds of the population lives in poverty, earning less than $1.90 per day. This is an increase from 55% in 2017. Afghanistan exported $783 million worth of products in 2020, down almost 10% from the previous year, according to the World Trade Organization. The bulk of exports, primarily to India and Pakistan, are dried fruits, nuts, and medicinal herbs. According to the IMF, a 5.8% increase in inflation in 2021 would have been the biggest annual increase since 2013. However, given the depreciation of the Afghani and the likelihood of trade interruptions if the Taliban seize control, it may increase over the Afghan national bank's upper band limit of 8%.