Afghanistan’s economic woes
AFGHANISTAN’S ECONOMY WAS struggling for years before the Taliban recaptured the country.
The country’s gross domestic product (GDP) was lower in 2020 than in 2013. It had grown multifold between 2001 and 2013. But most of this was driven by foreign aid. The World Bank pegged foreign aid in 2009 at 100 per cent of GDP. It fell to 42.9 per cent in 2020. Growth also declined relative to the rest of the world once flows tapered (chart 1).
Security concerns affected investments. Business Standard looked at foreign direct investment in Afghanistan relative to other low-income peers. The share in 2019 was lower than 1999 (chart 2). India is said to have invested over $3 billion over the years.
Around 54.5 per cent of the population was below the national poverty line in 2016 and the situation only seems to have worsened. The unemployment number was at its worst in 30 years, show data for 2020 (chart 3). The Covid-19 pandemic hit its first peak in Afghanistan in June 2020 followed by a worse surge in 2021.
Trade has been limited by its landlocked position. India accounted for 47.1 per cent of exports in 2019. Pakistan, which has 1.4 million Afghan refugees, accounted for another 34.3 per cent. Imports came from a more diversified set of countries (charts 4 and 5). Around three quarters of exports are agricultural, according to a December 2019 International Monetary Fund report and around 44 per cent of the workforce is employed in agriculture, according to the World Bank. An agricultural economy vulnerable to droughts is likely to be a key challenge for the Taliban, which has historically made money from drugs, donations and extortion.
Their absence coincided with gains in social indicators over the last several years. Infant mortality and life expectancy are around other low-income peer levels. Literacy has improved but remains relatively low. More than half the adult population in the country can’t read or write (chart 6).