Afghanistan » Economy

A Critical Appraisal of Economic Situation of the Country under NUG

Published Date: September 9, 2017

 

Promising to create employment opportunities, improve exports, increase the domestic and foreign investments, reform the taxing process, provide cheap houses and hundreds of other pledges, the leaders of the National Unity Government (NUG) gave hope to people about boosting their lives and improving their economies.

The NUG leadership has always reiterated that they are striving to utilize the strategic location of Afghanistan as the crossroad of Asia and a way of transiting commodities to Central Asian countries, employ the agricultural abilities of the country for economic prosperity, extract the mineral resources professionally and efficiently, and achieve a sustainable economy through regulating the taxing and spending processes.

However, three years after the formation of the NUG, still 39.1% of Afghans have to deal with poverty and unemployment. Although the World Bank has reported the fiscal situation and economic growth of Afghanistan in 1395 [solar year] to be better than that of the preceding years, the perpetuation of the war and insecurity in the county have negatively affected the livelihood, trade, and business.

Here we have analyzed the economic situation in Afghanistan after the formation of the NUG as well as issues such as the country’s economic growth, the value of Afghani, imports and exports and the situation of poverty and unemployment.

Economic growth

Between 2001 and 2012 Afghanistan’s economic growth was an average of 9%. During this time, in 2009 Afghanistan had the highest economic growth, 21%. Nonetheless, after 2009 until 2016, the country did not have a remarkable economic growth. In 2010, 2011, 2012, 2013, 2014, 2015, and 2016 Afghanistan’s economic growth was respectively 8.4%, 6.1%, 14.4%, 1.9%, 2%, 1.5%, and 2.2%.[1]

 Chart-1: Afghanistan’s economic growth 2003-2016

The reason behind a remarkable economic growth in 2009 is relatively favorable security and economic situation in Afghanistan in the years before it. On the other hand, before this year, the issue of foreign forces’ withdrawal from the country was not raised either. Nevertheless, except for 2012 in which the economic growth was 14.4% and the reason behind which was an increase in the agricultural products, since 2009 the country’s economic growth rate is dropping, the reasons behind it are as follows:

  • In 2009 the US announced a date for the withdrawal of its troops from Afghanistan which increased distrust in trade and investment.
  • After 2009, the security situation in the country worsened, and the war expanded into the relatively secure areas as well.
  • In 2013, due to not signing the Bilateral Security Agreement (BSA) with the US, oppositions with the US within the country increased and, hence, the country faced political and security instability. The investment rate declined because the investors were concerned about the future of the country; that is why the economic growth dropped to 1.9% in this year.
  • In 2014, the economic growth was 2%. The prime reasons behind the decrease in the economic growth in this year were again political and security instability, the delay in the formation of the new government, and, to some extent, the withdrawal of the foreign troops.
  • In 2015, the security situation in the country, the internal disputes, and the return of Afghan refugees from the neighboring countries reduced the economic growth to 1.5%.
  • In 2016, although the security and political situation were concerning more than ever, with the announcement of international aids in Brussels and Warsaw conferences, Afghanistan had a slight increase in its economic growth.

In its report, the World Bank has estimated that Afghanistan’s economic growth in 2017 would increase to 2.6%, and until 2020 it will gradually reach 3.6%.

 

The value of Afghani

Before the formation of the NUG and during the electoral campaigns, the value of Afghani against the one US dollar was an average of 57.22 Afghanis on a monthly basis. However after the formation of the NUG until the end of 2014, the value of Afghani against one US dollar was 58.18 Afghanis. At the beginning of 2015, the value of Afghani against dollar improved as in January this year the value of Afghani against one US dollar was 57.76 Afghanis and in February it was 57.4 Afghanis.

After the second month of 2015, Afghani lost its value against the US dollar. At the end of 2015, the value of Afghani against one US dollar was 67.25 Afghanis. Now in the second half of 2017, the value of Afghani against one US dollar is 68.5 Afghanis.

The followings are reasons behind the depreciation of Afghani:

  • The appreciation of dollar in global markets;
  • The worsened security, political and economic situation in the country;
  • The artificial value of Afghan currency;
  • The decrease in the demand for Afghani in the market. 

 

Imports and exports

According to the statistics of the Central Statistics Organization (CSO), in 1395 [solar year], the value of registered exported goods was $596.5m, while in 1394, its value was $571.4m. Based on the most recent report of CSO, in the first quarter of 1396, the total value of Afghanistan’s exports was $124.1m, a significant part of which was the exports of carpet and fresh and dried fruits.

The imports of the officially registered goods in 1395 was $6534.1m, which compared to $7722.8m in 1394 marks a 15.4% decrease. The statistics of CSO show that the total value of imports in the first quarter of 1396 was $2089.9m. Moreover, the imports of oil, machinery, transport equipment, metal and metal products, wheat and floor are decreased by 15.4% compared to 1394. Therefore, the total value of trade in 1395 was $7131m, 91.6% of which was the imports while only 8.4% was exports.

Also, between 1387 and 1395, there was a significant trade balance deficit; it had reached from $2475m in 1387 to $5938m in 1395.

 

Poverty and unemployment

In 2007 and 2008, 36.3% of the Afghan population was living below the poverty line; however, based on the statistics of the World Bank, in 2011 and 2012, this percentage has dropped to 35.8%. Nevertheless, according to a joint report by the World Bank and the Afghan government, prepared in 2013 and 2014, 39.1% of Afghans are shown to be below the poverty line. [2]

According to this report, the reasons behind the increase in the poverty rate are the reduced international community’s aids, unemployment, internal crisis and the expansion of the war. It comes at a time that since 2014, the war is getting intensified in various part of the country, the number of internally displaced peoples (IDPs) has unprecedentedly increased, hundred thousands of Afghan refugees are returning from other countries, and tens of thousands of Afghan youth are leaving the country due to the lack of employment opportunities. Therefore, although there is no exact statistics in hand about the poverty rate in the country, it seems that it has increased compared to 2013 and 2014.

Besides that, in 2014, the Afghan Ministry of Labor, Social Affairs, Martyrs, and Disabled announced that from the 10m people who are capable of working, 800 thousand are unemployed. [3] However, the statistics of the World Bank show that in 2013 and 2014, approximately two million Afghans were unemployed, most of them youth.   

In the meanwhile, the Afghan Ministry of Economy has announced that the poverty rate has decreased in years after 2014 and that with the economic growth of the country in 2015 and 2016, the unemployment and poverty rate is also decreasing. However, in its report, the World Bank writes that 400 thousand people are annually added to the labor force in Afghanistan. On the other hand, since 2014, the war is intensified. According to a report of SIGAR, 40% of the Afghan soil is under the control of the armed opposition of the government and, in the meanwhile, the economic downturn in Afghanistan has also increased concerns about unemployment in the country.

The End

[1] The statistics of Afghanistan’s economic growth are taken from World Bank’s website.

[2] The world bank, http://www.worldbank.org/en/news/press-release/2017/05/08/poverty-afghanistan-rose-amidst-troop-withdrawal-poverty-update-2017

 

[3] BBC, نگاهی به وضعیت کار و کارگر درافغانستان [A glimpse to the work and workers status in Afghanistan]:

 http://www.bbc.com/persian/afghanistan/2014/05/140502_k05_afghan_worker_day_law

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