Attachments
KEY HIGHLIGHTS
Suspension of U.S. Humanitarian Aid: The recent suspension of U.S. humanitarian aid, particularly the funding cut in food assistance poses serious risks to food security, particularly for vulnerable population who are dependent on external support. The cuts come at a time when inflation rate is on the rise and increased number of returnees from Pakistan requires urgent humanitarian support.
Afghan Returnees: Pakistan and Iran have increased efforts to repatriate undocumented Afghan nationals, with over 2.7 million returned since August 2021. The return of Afghan nationals has intensified in 2025, with thousands being deported or choosing to return due to Pakistan's crackdown on undocumented refugees, putting pressure on host communities and services, particularly in border provinces. For year 2025 1.6 million Afghan refugees will be departed from Pakistan and a number of refugees from Iran. The growing number of returnees heightens demand for food, shelter, and jobs, while international aid organizations warn of worsening humanitarian concerns as many returnees face uncertain futures and lack resources.
Reopening of Torkham Border: On March 19, 2025, the Torkham border crossing between Pakistan and Afghanistan reopened after a 27-day closure due to disputes over border post construction. The reopening has facilitated the resumption of trade and movement between the two countries, which has helped ease some of the import delays seen in February.
Sluggish Economic Activity: Afghanistan’s economy continues to operate under constrained conditions due to low investment, limited access to finance, and international isolation. While trade through China and Central Asia has marginally increased, domestic demand remains weak, and growth prospects are modest. As per a Reuters report, China will offer the Taliban tariff-free access to its large construction, energy, and consumer sectors, which could potentially open new trade channels and stimulate some economic activity. Meanwhile, the return of skilled and unskilled labour from neighbouring countries offers some labour force potential but is offset by limited job opportunities and weak private sector activity. The World Bank projects minimal GDP growth for 2025 unless there is a significant shift in external support or internal reforms.
Inflation Rate: As of February 2025, Afghanistan's overall inflation rate stood at -0.3%, showing an increase compared to -10.2% in January 2024. Food inflation rose from -7.2% in January 2024 to -2.2% in February 2025. Non-food inflation was recorded at 1.6%, largely driven by an 8.6% increase in the housing sector. Given the country's reliance on imported essential food items, inflation is heavily influenced by exchange rate fluctuations, global prices, and domestic economic and political conditions.
Afghani Exchange Rate: In March 2025, the Afghani appreciated by 3.0% compared to the previous month, with an exchange rate of AFN 71.6 per USD, maintaining a similar rate to last year. Despite recent fluctuations due to aid suspensions, interventions by Da Afghanistan Bank have stabilized the currency. However, market uncertainty and aid disruptions remain key risks to future fluctuations.
Global Price Trends: As of March 2025, the FAO Cereal Price Index stood at 112 points, down by 2.6% from the previous month and 1.1% below its level during the same time last year. Meanwhile, the FAO Vegetable Oil Price Index increased by 3.7% month-on-month in March, with a notable 24% rise year-on-year, due to tight global supply and seasonal production declines in Southeast Asia. Moreover, the World Bank Fertilizer Index decreased to 128 points (-3.8% month-on-month decline), driven by a 9.6% drop in urea prices. However, year-on-year levels remain elevated (+11.3%) due to trade restrictions and strong demand in major agricultural economies.
Food Basket Price: The national average price of WFP’s in-kind food basket remained stable at AFN 5,302 in March 2025, which is 2.0% lower than last month and 0.6% lower than the same time last year. However, the price of food basket varies across provinces with the highest food basket price recorded in Nuristan (17% above the national average), while the lowest was in Takhar (-13% below the national average). The FSAC food basket price also remained stable, with only a marginal 0.2% month-on-month decrease and 3.1% year-on-year decline in AFN terms. Meanwhile, the national average USD price increased by 1.1% month-on-month and is 3.3% lower than last year due to USD depreciation against AFN.