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HIGHLIGHTS
Headline inflation continues to decline, and commodity availability has improved.
According to the latest official statistics published by the National Statistics and Information Authority (NSIA) in February 2023, year-on-year (y-o-y) headline inflation reached 3.5 percent. This deceleration in inflation reflects: (i) the continued downward trend in fuel and food prices in the international market; 1 (ii) a stable exchange rate; and (iii) a winter-induced slowdown in economic activity. Similar trends are visible in the data collected by the World Food Program (WFP), which showed that y-o-y inflation for basic household goods stood at 0.7 percent in February 2023. Correspondingly, the availability of food and non-food commodities, as reported by the Third-Party Monitoring Agent (TPMA), improved further.
The Afghani (AFN) appreciated against major currencies in February 2023.
During February 2023, the AFN strengthened against the United States dollar (USD) (by 0.8 percent), Euro (by 4.0 percent), Pakistani rupee (by 11.5 percent), and Iranian toman (by 29.4 percent). Cash shipments by the United Nations (UN) remained significant and continued to underlie currency stability: in February 2023 alone, USD 240 million were shipped to Afghanistan, for a total of USD 440 million in January–February 2023 (against a cumulative USD 1.85 billion in 2022, amounting to about USD 154 million monthly). Since Da Afghanistan Bank (DAB) provides conversion into AFN for payments requiring local currency, the cash shipments provide DAB with liquidity in USD, which is auctioned in the foreign exchange market. Auction frequency and amounts are not officially available from DAB data, as no statistics have been published officially. Reportedly, the Interim Taliban Administration (ITA) continues to exert strong controls on the illegal export of foreign currency.
Firms report difficulty withdrawing cash from banks.
Cash withdrawals for bank deposits in place before August 2021 continue to be regulated for both firms and individuals by statutory withdrawal limits imposed by DAB. No withdrawal limits exist on new deposits. Data collected by the TPMA confirm that individual depositors can access their deposits within the statutory limits (except for Maiwand Bank). In contrast, firms’ access to deposits remains below the permitted limits. Data show that the slight improvement recorded in January 2023 was not sustained in February.
Civil servants’ salaries continue to be paid on time.
According to TPMA data (gathered through telephone interviews with about 250 individuals), civil servants regularly receive salary payments (98 percent of men and women respondents). Crowding in bank branches remains the most critical challenge to withdrawing salaries, but the deteriorating quality of banknotes is increasingly reported as a key issue. The quality of notes improved slightly in February 2023 following the issuance of new notes by the DAB.
Employment for skilled and unskilled labor has declined since October 2022.
Extreme winters resulted in declining agriculture, construction, and related activities, as reflected in the employment figures. The parallel decline in household incomes may have further suppressed already low aggregate demand. This is also a reminder that despite signs of economic stabilization, Afghan families continue to face substantial pressures in sustaining their livelihoods.
Revenue collection during the first eleven months of the fiscal year 2022–23 was strong.
Between March 22, 2022, and February 21, 2023 (the first eleven months of the fiscal year), total revenue receipts were AFN 173.9 billion (USD 1.95 billion, around 87 percent of the fiscal year’s revised budget target of AFN 198.7 billion. Revenue collection continues to rely on regressive indirect taxes collected at borders: border taxes accounted for 57 percent of overall revenue, driven by strong imports. Revenue from inland sources depends to a large extent on non-tax sources: royalties and administration fees collected by ministries contribute 51 percent of total inland revenues. Anecdotal evidence suggests that a significant amount of non-tax revenue receipts is collected through arrears—a one-off approach that may not be available in the future. In addition, coal extraction and exports, particularly to Pakistan, and related increases in other royalty fees have contributed to the rise in ministries’ revenue and will depend on future export performance.
Merchandise exports in January–February 2023 continue to maintain strong momentum.
Based on unofficial Afghanistan customs data, exports have been substantial in 2022, at USD 1.9 billion in 2022 against an average of about USD 0.8 billion during 2019–21. Export performance remained strong in the first two months of 2023, reaching USD 0.3 billion—16 percent higher than in the same period in 2022. Export growth during January–February 2023 can be attributed primarily to an increase in exports of: (i) food, by 7 percent (59 percent of overall exports); (ii) coal, by 19 percent (20 percent of overall exports); and (iii) textiles, by 84 percent (15 percent of overall exports). Pakistan remains Afghanistan’s largest export market (accounting for 60 percent of total exports), followed by India (24 percent). Exports to Pakistan are mainly food and coal, contributing around 70 percent of total exports in January–February 2023. Coal exports to Pakistan reached USD 66 million in January– February 2023 (compared to a total of USD 476 million in 2022).
Trade data confirm the economy’s heavy dependence on imports.
Afghanistan’s merchandise imports in 2022 (USD 6.3 billion) remained broadly in line with trends during 2019–21. This figure does not include in-kind humanitarian imports. In the first two months of 2023, imports stood at USD 1.16 billion, reflecting 40 percent growth vis-àvis 2022, visible in all import groups. Food (a quarter of imports) grew by 14 percent y-o-y in January–February 2023. Similarly, minerals (including fuel), which represent 20 percent of imports, increased by 45 percent y-o-y in January–February 2023. Iran remains the most significant country of origin (22 percent), followed by China (18 percent), Pakistan (17 percent), and the United Arab Emirates (12 percent).
Balance of payments figures remain unavailable.
Aside from unofficial merchandise trade statistics and UN cash shipment flows, other balance of payments statistics are unavailable. Based on the available data, the trade deficit widened by 53 percent on a y-o-y basis, reaching USD 837 million in January–February 2023 compared to USD 547 million during the comparable period in 2022. UN cash shipments for the period (USD 440 million) cover only about half of the merchandise trade deficit.
The Health Emergency Response Project, financed by the Afghanistan Reconstruction Trust Fund, continues to provide critical health services for mothers and children.
According to TPMA data, from January 2022 to February 2023, the 2,300 supported facilities received approximately 3.9 million antenatal care (ANC) visits. The number of ANC visits in February 2023 increased by 9 percent compared to January 2023 and by 4 percent improvement compared to January 2022.