Attachments
KEY HIGHLIGHTS
Economic Outlook
• Afghanistan’s economy remains under strain, facing multiple shocks including the mass return of migrants, severe drought, earthquakes, and shifting regional trade dynamics. Although modest economic expansion is supported by low inflation and stronger revenues, rapid population growth and weak investment continue to weigh on average income growth.
• Inflation gradually increased since early 2024, reflecting the country’s vulnerability to import dependence, exchange rate fluctuations, and global price pressures. Headline inflation peaked at 3.1% in August 2025 before easing to 2.1% in September, while food inflation rose from –15.1% in January 2024 to –0.8% in September 2025. Non-food inflation rose to 4.9%, driven by a 15% rise in housing costs amid returnee inflows.
• The Afghani remained stable in 2025, averaging AFN 66.5 per USD in November. Lower domestic inflation relative to trading partners and strong monetary controls, including US dollar auctions, helped preserve external competitiveness and continued the currency’s recovery from the sharp depreciation in early 2022.
• Trade dynamics: Following the closure of the Pakistan border in October 2025, with exports rerouted to India and Uzbekistan and imports increasingly sourced from Iran and Central Asia. Exports grew 13% month-on-month in October, led by food products, while imports remained stable as trade flows realigned, though higher transport costs and rerouting pressures affected overall volumes.
Global Market Position
• The Global Cereal Price Index was mostly stable in 2025, rising 1.8% in November but still 5.3% below last year. Wheat prices increased 2.5% amid Black Sea tensions, expected reduced planting in Russia, and potential Chinese purchases from the US.
• The Global Vegetable Oil Price Index fell to a five-month low in November, down 2.6% from October. Palm, rapeseed, and sunflower oil prices declined due to higher Malaysian palm oil output, improved rapeseed supply, and increased seasonal sunflower oil availability from the Black Sea region.
• Global fertilizer prices rose to 140.5 in November, up 0.7% from last month and 17% year-on-year. Prices remain high despite being below their peak in 2022, driven by high input and energy costs, geopolitical risks, and export restrictions, with Urea and DAP prices reflecting ongoing market volatility.
Domestic Market Conditions
• Since mid-October 2025, the Torkham crossing closure halted the flow of goods from Pakistan, including transit items from other countries. Higher imports from Central Asian countries partially offset this disruption, while rice prices continue to rise due to supply constraints from Pakistan and higher transportation costs from India via alternate routes.
• The onset of winter also affected market conditions, with reduced domestic food availability in remote areas and increased reliance on imports from Iran and Central Asian countries. As temperatures drop, transportation costs rise in areas with heavy snowfall and supplies decline, which is expected to further push food prices upward.
• Diesel prices, which surged in October 2025 due to government restrictions on low-quality fuel imports, declined by 6.3% month-on-month to AFN 73.4/litre due to improved availability and higher supplies from Central Asian countries.
• Overall, national food prices continued a slight month-on-month increase in November 2025, driven by low domestic supply, winter-related constraints, and disrupted trade, highlighting Afghanistan’s ongoing vulnerability to high import dependence compounded by external and seasonal shocks.
Labour Market
• Labour availability and unskilled wages remained low in November 2025, reflecting limited income opportunities and rising unemployment. The seasonal slowdown in agricultural and construction activities further reduced labour demand, leaving national average labour availability at 2.2 days per week and unskilled wages averaging AFN 305 per day, both lower than last year and the two-year average.
• The nominal casual labour Terms of Trade (ToT) fell by 6.6 percent in November 2025 due to lower wages and higher wheat flour prices, with year-on-year levels down 15 percent. The real ToT has declined further by 10.1% from last month due to the decline in labour availability and remains low at 3.3 kg of low-price wheat flour, reflecting constrained purchasing power of households reliant on daily labour.