One Year in Review: Afghanistan since August 2021: A Socio-Economic Snapshot

The political change after 15 August 2021 plunged the country into a humanitarian and economic crisis that devastated peoples’ lives and livelihoods.

As the De Facto Authorities (DFA) mark one year in power, the situation in Afghanistan remains precarious and uncertain.

Drawing upon available data from various sources, One Year in Review provides a snapshot of changes in peoples’ socio-economic situation since August 2021.

Key Messages

• The economic shock in August 2021 precipitated a sharp contraction in the illicit economy that was already in decline. It lost nearly $5 billion in 12 months, which had taken almost 10 years to add.

• The shrinking of the illicit economy after August 2021 has increased the share of the illicit economy in total GDP to 12-18 percent, from about 9-14 percent one year ago.

• Numerous restrictions confine women to the home and prohibit them from entering DFA buildings, and their presence in public spaces 1s broadly contested. Limitations on women’s economic participation will likely have a long-term impact on household wellbeing and the economy.

• The freeze on the $9 billion in foreign assets and the international sanctions have led to a severe liquidity crisis. Restrictions on deposit withdrawals and other transactions have forced businesses to use cash for domestic and hawala for international payments. The microfinance sector is near collapse, harming the Prospects of the poor and women borrowers.

• Tightening of systems and the clamp down on corruption by DFA have helped maintain customs revenue; and trade deficit has reduced with the picking up of exports, mostly of coal to Pakistan. Yet Afghanistan may have lost about $60 million in revenue with its coal severely undervalued until July 2022

• The prospects of poverty reduction and achieving the SDGs are grim, with sharp reduction in development expenditure in the Afghan fiscal year 1401 (2022=2023)}.

• The food inflation rate has risen sharply since August 2021, driving up the overall inflation rate. The price of the food basket has increased by almost 35 percent on average, which is likely to further increase hunger, food insecurity, and poverty.

• Nearly 20 million people are classified under high and critical levels of food insecurity after August 2021, almost twice the average in the preceding three years. The elevated level of acute food insecurity may become the new normal if urgent steps are not taken.

• Children under five face a serious threat of severe acute malnutrition that is particularly severe in the five Provinces in the South region.

• There are almost as many population movements since 2020 as in the previous eight years. Afghanistan is in danger of losing its skilled and young workforce as proportionately twice as many people moved abroad in January—April 2022 as in the period 2012—2020.

• There are almost as many population movements since 2020 as in the previous eight years. Afghanistan is in danger of losing its skilled and young workforce as proportionately twice as many people moved abroad in January—April 2022 as in the period 2012—2020.

• As the DFA has reorganized the governing structures, both average salaries and staff numbers have been cut. There is a mismatch between DFA's stated prionties for Afghanistan’s economic recovery and the sharp reduction in the number of technical advisors in key economic ministries.