Attachments
KEY HIGHLIGHTS
Macroeconomic Highlights
• Afghanistan's economic growth remains sluggish, marked by persistent deflation, unemployment, and diminished activities in service sector. Following the takeover by the DFA in August 2021, Afghanistan's economy experienced a significant contraction of 20.7% in 2022 and a further 6.2% contraction in 2023. Besides political changes, the economy has been impacted by several factors, including the ban on opium cultivation, the forced repatriation of Afghans from neighbouring countries, and natural disasters like floods and earthquakes in parts of the country.
• The inflation rate started to move upward after a year in deflation. Following the August 2021 political changes, inflation surged, peaking at 18.3% in July 2022. However, it subsequently plummeted into deflation, reaching -7.5% in May 2024. Similarly, food inflation declined from +26% in June 2022 to -11.5% in May 2024. The deflationary trend, which began in April 2023, persisted into January 2024, driven by falling food prices and weak consumer demand. While deflation has led to lower food prices, it has also been accompanied by limited job opportunities and low wages, which continue to weaken household purchasing power. Since February 2024, however, the deflationary trend has been reversing, indicating a potential stabilization of price levels across the country.
• AFN remaining stable against USD in June 2024. The average monthly exchange rate between the Afghani and the US Dollar stood at AFN 70.8/USD during June 2024. Following a notable increase in January 2022, the value of Afghani began to consistently appreciate against the USD throughout 2023, maintaining relative stability within the range of AFN 70-74 per USD since November 2023. The stability of AFN against foreign currencies and the reduction in exchange rate volatility can be attributed to several key factors. These include the consistent UN dollar cash shipments and flow of remittances, which provide a steady inflow of foreign currencies. Furthermore, the utilization of monetary policy tools by the Central Bank of Afghanistan, an increase in export volumes, along with measures to prevent dollar smuggling abroad, has contributed to maintaining the exchange rate stability.
Market Highlights
• Since June 2022, the price of the WFP’s in-kind food basket shows a declining trend, due to decrease in prices of major food items associated with the appreciation of Afghani, inflation rate and the decrease in the global food prices. During June 2024, the price of the WFP food basket stood at AFN 5,184, reflecting a 0.1% decrease from the previous month. Among the surveyed markets, Daykundi emerged as the most expensive, with the food basket priced at AFN 6,226, while Baghlan represented the least expensive market, with the same basket priced at AFN 4,586.
• In June 2024, the availability of unskilled labour workdays per week increased by 3.0% (2.31 days per week on average) marking a 20 percent increase since January 2024. On average, a casual labour can gain AFN 317 per day whereas a skilled labour can gain AFN 655 per day. The national average expected monthly income for full-time casual labour workers considering the availability of workdays is AFN 3,138, which can only afford 61% of the WFP's in-kind food basket (AFN 5,184).
• The terms of trade for casual labour is on improving trend. The M-o-M nominal casual labour ToT has improved by 6.8%, due to a 5.6 percent decrease in the national average price of wheat grain and a 0.8 percent increase in the casual labour wage. Likewise, the real ToT for casual labour has also significantly improved by 9.9 percent due to an additional 3.0 percent increase in the number of casual labour work availability per week. As of January 2024, the real and nominal ToT for casual labour has improved by 44% and 20%, respectively.
• The national average terms of trade for livestock holders is at an all-time high of 341 Kgs of wheat against a one-year-old alive female sheep during the month of June 2024. With a 5.6 percent decline in the national average price of wheat grain, the ToT is showing a similar 6.3 percent improvement compared to last month and a significant 32 percent improvement compared to the same time last year.
• Prices collected from food markets/shops in remote districts compared to markets in provincial capitals indicate a significant difference. Prices of food and non-food items vary across the country due to several factors. These include market availability, transportation costs, the distance from the source market to the target market, regional consumption habits, and the availability of different qualities and brand marks in each province, while also considering the import routes. Out of 21 remote districts which were surveyed, 18 districts showed significantly higher prices for food and non-food items compared to provincial centres.