Attachments
KEY HIGHLIGHTS
Afghanistan Economic Outlook: Afghanistan’s economy showed modest recovery in 2024 with real GDP growth of 2.5%, driven by growth in agriculture (6.0%) and industry (2.1%). However, economic activity remains sluggish, due to low investment, limited access to finance, and ongoing international isolation. Growth is projected to slow down to 2.2% in 2025, reflecting persistent structural challenges and reduced foreign aid. The suspension of U.S. humanitarian aid has further strained resources, which will increase food insecurity, with 22.9 million people (nearly half of the population) requiring assistance as per OCHA-HNRP report for 2025. While trade with China and Central Asia has shown marginal improvement, domestic demand remains weak. A potential bright spot comes from China's offer of tariff-free access to its construction, energy, and consumer sectors, which could open new trade channels. However, this positive development is offset by Afghanistan's broader economic constraints.
A major additional strain comes from the mass return of Afghan refugees, with over 1.6 million expected from Pakistan and 1.1 million from Iran in 2025. This influx is overwhelming border communities, increasing demand for jobs, shelter, and basic services. Meanwhile, the return of skilled and unskilled workers from neighbouring countries has expanded the labour pool, but job creation remains insufficient due to weak private sector activity and limited opportunities. The services sector contracted (-0.3%), while the industry sector grew modestly (2.1%). Private consumption (4.9% growth) provided some support, but declining exports (-3%) and a widening trade deficit (24.6% of GDP) continue to drag on growth. The World Bank warns that without major policy reforms or increased external support, Afghanistan's growth will remain minimal, leaving poverty and unemployment entrenched.
Inflation Rate: As of March 2025, Afghanistan’s overall inflation rate increased to 0.3%, marking a modest upward trend from the low of -10.2% in January 2024. Food inflation rose to -1.0% (from -15.1% in January 2024), with notable price increases in oils and fats (10.2%), meat (5.3%), and spices (1.4%). Declines were recorded for bread and cereals (-4.9%), vegetables (-4.3%), and sugar and sweets (-7.1%). Non-food inflation remained at 1.6%, driven by a 7.7% rise in housing costs. Given Afghanistan’s reliance on imported food items, inflation remains sensitive to exchange rate fluctuations, global prices, and domestic economic and political conditions.
Afghani Exchange Rate: In April 2025, the Afghani depreciated slightly by 0.2%, averaging AFN 71.8 per USD, maintaining stability compared to the same period last year. Despite earlier volatility due to aid suspensions, interventions by Da Afghanistan Bank (DAB) have stabilized the currency. The Afghani has appreciated by 5% since the pre-COVID period and 9% since June 2021, recovering significantly from its peak depreciation of AFN 104.6 per USD in January 2022. However, political uncertainty and aid disruptions remain key risks to future stability.
Global Price Trends
- Cereals: The FAO Cereal Price Index rose to 113 points in April 2025 (+1.2% MoM), supported by higher wheat prices due to tightening Russian supplies and a weaker USD.
However, it remains 0.5% lower YoY. - Vegetable Oils: The Vegetable Oil Price Index declined by 2.3% MoM but remains 20.7% higher YoY, with palm oil prices falling amid increased Southeast Asian supply, while soy and rapeseed oil prices rose.
- Fertilizers: The World Bank Fertilizer Price Index dropped by 3.8% MoM in March 2025, driven by the decline in price of Urea (-9.6% MoM), but remains 11.3% higher YoY.
However, DAP prices rose (5% in Q1 2025) due to export restrictions by China and limited Russian supplies. Geopolitical risks, including EU tariffs on Russian/Belarusian fertilizers (effective July 2025), add further uncertainty with a 7% increase in fertilizer prices forecasted for 2025.
Food Basket Prices
- WFP In-Kind Food Basket: The national average price in April 2025 was AFN 5,234, down 1.3% MoM and 2% YoY. Prices were highest in Nuristan (22% above average) and lowest in Takhar (-14% below average).
- FSAC Food Basket (CBT): The AFN price declined by 0.9% MoM and 3% YoY, while the USD price saw a marginal 0.2% MoM increase. The current price is 4.4% lower than the last transfer value (TV) revision threshold, not triggering an adjustment.