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Afghanistan Economic Overview
Headline and Food inflation continued to decline
Food inflation continued to decrease from 26 percent in June 2022 to 3.2 percent in January 2023, with prices of basic household items also showing a decline on a year-on-year basis. The declining trend in global food prices from their mid-2022 peak has contributed to easing the inflationary pressures in Afghanistan. While household purchasing power has been eroded due to the overall higher price level compared to August 2021, the recent deflationary trend in basic household item prices indicates a positive development.
The AFN has appreciated against the USD since January 2022
The stability of the AFN began to take hold between January and March 2022 when UN cash shipments began, and the De facto authorities exerted strong controls on the illegal export of foreign currency, strengthening the AFN rate. The appreciation of AFN against foreign currencies can be seen as a positive development for the economy, as it can help to stabilize prices and improve household purchasing power.
Afghanistan’s export sector has shown a slight improvement with a steady contribution from food and coal exports
Based on World Bank economic monitoring data, Afghanistan's export in the first quarter of 2023 reached US$ 500 million, representing a growth of 7 percent compared to the same period last year. While food exports continued to account for half of the national exports, there has been an increase in the share of textile merchandise, which now represents 15 percent of all exports.
There was a persistent increase in merchandise imports in Q1 2023 while the trade deficit further widened
Imports into Afghanistan amounted to 1.8 billion USD in Q1 2023, growing 32 percentage points compared to the same period in the previous year. The trade deficit between Q1 2023 and Q1 2022 was 1.3 billion USD, indicating a growth of 45 percent year-on-year. UN cash shipments for the period of 560 million USD covered less than half of the merchandise trade deficit