Discusses key economic indicators and trade statistics, which countries are dominant in the market, the U.S. market share, the political situation if relevant, the top reasons why U.S. companies should consider exporting to this country, and other issues that affect trade, e.g., terrorism, currency devaluations, trade agreements.
Last Published: 8/15/2016
  • After posting robust growth between 2005 and 2012, Afghanistan’s economy is expected to grow 1-2 percent in 2015.  This growth will not be sufficient to cover anticipated government budget deficits.  As such, we anticipate the Afghan government will seek to increase domestic revenue generation by implementing reforms that should lead to private-sector-led development and growth. 

  • An important signal of the Afghan government’s willingness to pursue reform is the March 2015 conclusion of a nine-month International Monetary Program (IMF) staff-monitored program (SMP).  The SMP is designed to support the government’s reform agenda with a framework to address economic vulnerabilities and facilitate engagement with the international community to sustain donor support.  The SMP will address fiscal and banking vulnerabilities and preserve buffers (low debt and a comfortable international reserve position), maintain low inflation, and strengthen competitiveness, thereby laying the basis for high growth.  Under the SMP, fiscal policy will focus on mobilizing domestic revenue to finance projected expenditures and rebuild the treasury’s cash balance.  Monetary policy will aim to preserve low inflation.  Exchange rate policy will protect international reserves and strengthen competitiveness.  Structural reforms will focus on: (i) revenue mobilization, expenditure control and repayment of arrears; (ii) financial sector reform to deal with weak banks, promulgate and implement the new banking law, amend the central bank law, strengthen banking supervision, and address weaknesses in state banks; and (iii) better economic governance by strengthening anti-corruption, anti-money laundering and countering the financing of terrorism.

  • The Government of Afghanistan recognizes the development of a vibrant private sector is crucial to the reconstruction of an economy ravaged by decades of conflict and mismanagement.  The government has stated a commitment in principle to fostering private-sector-led economic development and increasing domestic and foreign investment, as reflected in President Ghani’s Realizing Self-Reliance paper presented at the November 2014 London Conference.  However, the government’s efforts to build an enabling environment for a competitive private sector; to expand the scope of private investment by developing natural resources and infrastructure; and to promote investment from domestic sources, the Afghan diaspora, and foreign investors have been limited by weak capacity and a lack of political will to undertake necessary reforms. 

  • As part of its World Trade Organization (WTO) accession process, the Government of Afghanistan is modifying existing legislation and drafting new laws and regulations to bring its trade policy framework into accordance with WTO standards.  At present, Afghanistan’s legal and regulatory frameworks and enforcement mechanisms remain nascent.  Much of the framework necessary for encouraging and protecting private investment is not in place, and the existence of three overlapping systems Sharia (Islamic Law), Shura (traditional law and practice), and the formal legal system instituted under the 2004 Constitution can be confusing to both investors and legal professionals.  Moreover, corruption affects the consistency of the application of the laws.

  • The international community remains committed to Afghanistan's development, pledging more than $67 billion at nine donors’ conferences between 2003 and 2010.  In July 2012, donors at the Tokyo Conference pledged an additional $16 billion in civilian aid through 2015, and sustaining support, through 2017, at or near levels of the past decade to respond to the fiscal gap as estimated by the World Bank and the Afghan Government.  Despite this assistance, the Government of Afghanistan will need to overcome a number of challenges, including low revenue collection, anemic job creation, and high levels of corruption, weak government capacity, and poor public infrastructure.

  • Throughout Afghanistan, corruption remains a persistent problem which increases the cost of doing business.

  • Doing business in Afghanistan is more difficult than in other countries in the region.  In the World Bank’s 2014 Doing Business Index, Afghanistan ranks 183 out of 189 economies in the ease of doing business. For more information please refer to the following link: http://www.doingbusiness.org/rankings.

  • Currency reform was completed in early 2003; since then, the nominal exchange rate has oscillated between 45 and 61 Afghani’s to the dollar.  The currency has steadily depreciated since the start of 2011, though other regional currencies have similarly depreciated.  The tax code was restructured and clarified in 2005 and in 2009 the Afghan government passed the Income Tax Law.  Customs tariffs have been rationalized, existing trade agreements are being renewed and new agreements entered into force.

  • Comprehensive foreign direct investment (FDI) statistics for Afghanistan are unavailable.  The data available are not reliable because of inconsistencies in data collection.  The United Nations 2014 World Investment Report estimated 2013 FDI flow into Afghanistan at $69 million and total FDI stocks at $1.638 billion, representing 7.9 percent of GDP.

  • Significant investment in Afghanistan comes from the United Arab Emirates, Canada, the United States, Turkey, Iran, China, Pakistan, India, and the United Kingdom.

  • The most recent data available show both the current account (excluding aid) and trade account deficits widened marginally during 2012, financed through grants, though the trade deficit has become gradually less severe since 2007 (from 70 percent of GDP in 2007 to an estimated 43 percent in 2012).  While overall recorded trade has grown steadily in the past five years, trade as a percentage of GDP has fallen consistently in the past five years due to GDP growth.  In the past five years, imports have been three to four times the size of exports (balance of trade does not show military dollar inflows).  It should be noted, however, that official export figures are underestimated and do not account for opium.  Continued inflows of grants have ensured that the overall current account has remained roughly flat over the past five years (ranging from -42 percent in 2010 to -43 percent in 2014.

  • Afghanistan’s top export markets are Pakistan, India, the United States, the European Union, Russia, UAE, China, Iraq, Netherlands, Turkmenistan, Kazakhstan and Iran.  Imports primarily come from the United States, Pakistan, Russia, India, the European Union, the Central Asian Republics and China. Imports totaled $6.241 billion in 2014.  Exports from Afghanistan increased to $845.9 million in the calendar year 2014 from 515 million in the calendar year 2013.  Historically, from 2008 until 2014, Afghanistan exports averaged $499.6 million, reaching an all-time high of $845.9 Million USD in 2014 and a record low of $375.8 million in 2011. In Afghanistan, exports account for 4.1 percent of GDP.  Afghanistan’s main exports are: carpets (17 percent of total exports); dried fruits (27 percent) and medicinal plants (13 percent). Main export partners are: Pakistan (38 percent of total exports), India (20 percent), UAE (5 percent) and Russia (2.7 percent). Others include: Iran, Iraq, Netherlands, China, and Turkey.

  • Afghanistan’s history and location give it the potential to develop into a vital trade and transit hub for the region.  With population growth at 2.8 percent and 400,000-500,000 new labor market entrants per year the country is well positioned with a young, educated and dynamic workforce.

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.

Afghanistan Trade Development and Promotion