Afghanistan: World Bank report highlights slight fall in exports amidst inflation challenges

In a nuanced trade scenario, Afghanistan’s total exports for January to October 2023 amounted to $1.5 billion, marking a slight 2 percent decrease primarily attributed to a 43 percent drop in coal exports, the World Bank says in a new report. However, the report highlights a resilient sector with a 13 percent increase in food exports and a notable 31 percent surge in textile exports.

Despite negative growth in the initial ten months of 2023, a reversal occurred from August to October 2023, witnessing a significant 49 percent surge. This resurgence was predominantly driven by a remarkable 51 percent growth in food exports, constituting 80 percent of total exports during this period, the report says. It adds that vegetable exports to India and Pakistan played a pivotal role, soaring by 36 percent and 58 percent, respectively.

Persistent negative inflation

The report underscores Afghanistan’s economic challenges as the country grapples with persistent negative inflation at -8.1 percent in October 2023. The deflationary trend is fueled by a 12.1 percent decline in food items and a 3.5 percent decrease in non-food items. Core inflation, excluding food and energy prices, further decreased to 4.9 percent.

Contributing factors include depleted household savings, reduced public spending, shocks to farmers’ income, and the aftermath of a recent earthquake, according to the report.

Unemployment escalates amid economic strain

The report says that economic challenges have prompted households to expand their workforce, particularly engaging marginalized individuals like youth and women. However, this has led to increased unemployment due to insufficient job opportunities.

The involuntary repatriation of Afghans from Pakistan further strains employment opportunities and resources, exacerbating the unemployment rate, the report says.

Import growth surges by 25%

Afghanistan’s total imports for January to October 2023 reached US$6.3 billion, marking a significant 25 percent growth, the report says.

Contrary to the country’s depressed economic conditions, the report notes increased demand across all categories, including food, textiles, and minerals. Despite a 12 percent decline in September 2023, imports rebounded by 11 percent in October 2023, potentially influenced by temporary border closures, the report indicates.

Currency appreciation amid expanding trade deficit

The report says that despite the expanding trade deficit, the Afghan currency continues to appreciate. From January 1 to November 27, the Afghani currency exhibited a 27.8 percent rise against the US dollar.

The report highlights considerations for imports to the Pakistani market, revealing a forex market in surplus due to ongoing cash shipments for humanitarian aid and remittances. The central bank’s policy of maintaining a strong Afghani through occasional US$ auctions favors imports but impacts domestic producers.

Revenue collection records modest growth

According to the World Bank report, revenue collection for the initial eight months of FY2023 reached AFN 131.2 billion, reflecting a 3.1 percent increase from the previous fiscal year. However, the overall revenue fell short by AFN 8 billion, with specific revenue departments performing below targets.

The report highlights the challenge of achieving the fiscal year 2023-24 revenue target, considering the persistence of sluggish economic activity due to depressed aggregate demand.

Health management information system

On a positive note, the report cites data from the Health Management Information System (HMIS), revealing positive strides in health services. Between January 2022 and September 2023, approximately 6.2 million women received antenatal care (ANC) at 2,300 facilities supported by the Health Emergency Response (HER) Project.

The HER Project witnessed a six percent increase in ANC visits over the specified period, with an additional eight percent increase since January 2023. In total, HER-supported facilities have played a crucial role in assisting around 1.3 million births since January 2022.