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Afghanistan - Economy (Notes)

In the 1930s, Afghanistan embarked on a modest economic development program. The government founded banks; introduced paper money; established a university; expanded primary, secondary, and technical schools; and sent students abroad for education.

Historically, there has been a dearth of information and reliable statistics about Afghanistan's economy. The 1979 Soviet invasion and ensuing civil war destroyed much of the country's limited infrastructure and disrupted normal patterns of economic activity. Gross domestic product had fallen substantially because of loss of labor and capital and disruption of trade and transport. Continuing internal strife hampered both domestic efforts at reconstruction as well as international aid efforts. However, Afghanistan's economy has grown at a fast pace since the 2001 fall of the Taliban, albeit from a low base. In 2004, Afghanistan's GDP grew 17%, and in 2005 Afghanistan's GDP grew approximately 10%.

In June 2006, Afghanistan and the International Monetary Fund agreed on a Poverty Reduction and Growth Facility program for 2006-2009 that focuses on maintaining macroeconomic stability, boosting growth, and reducing poverty. Afghanistan is also rebuilding its banking infrastructure, through the Da Afghanistan National Bank. Several government-owned banks are also in the process of being privatized.

The main source of income in the country is agriculture, and during its good years, Afghanistan produces enough food and food products to provide for the people, as well as to create a surplus for export. The major food crops produced are: corn, rice, barley, wheat, vegetables, fruits, and nuts. In Afghanistan, industry is also based on agriculture, and pastoral raw materials. The major industrial crops are: cotton, tobacco, madder, castor beans, and sugar beets. The Afghan economy continues to be overwhelmingly agricultural, despite the fact that only 12% of its total land area is arable and less than 6% currently is cultivated. Agricultural production is constrained by an almost total dependence on erratic winter snows and spring rains for water; irrigation is primitive. Relatively little use is made of machines, chemical fertilizer, or pesticides.

Overall agricultural production dramatically declined following severe drought as well as sustained fighting, instability in rural areas, and deteriorated infrastructure. The easing of the drought and the end of civil war produced the largest wheat harvest in 25 years during 2003. Wheat production was an estimated 58% higher than in 2002. However, the country still needed to import an estimated one million tons of wheat to meet its requirements for the 2003 year. Millions of Afghans, particularly in rural areas, remained dependent on food aid.

Opium has become a source of cash for many Afghans, especially following the breakdown in central authority after the Soviet withdrawal, and opium-derived revenues probably constituted a major source of income for the two main factions during the civil war in the 1990s. Opium is easy to cultivate and transport and offers a quick source of income for impoverished Afghans. Afghanistan produced a record opium poppy crop in 2006, supplying 91% of the world's opium. Much of Afghanistan's opium production is refined into heroin and is either consumed by a growing regional addict population or exported, primarily to Western Europe.

Afghanistan has begun counter-narcotics programs, including the promotion of alternative livelihoods, public information campaigns, targeted eradication policies, interdiction of drug shipments, as well as law enforcement and justice reform programs. These programs were first implemented in late 2005. In June 2006, the United Nations Office on Drugs and Crime estimated that the Afghan Government eradicated over 15,000 hectares of opium poppy.

Trade and Industry
Afghanistan is endowed with natural resources, including extensive deposits of natural gas, petroleum, coal, copper, chromite, talc, barites, sulfur, lead, zinc, iron ore, salt, and precious and semiprecious stones. Unfortunately, ongoing instability in certain areas of the country, remote and rugged terrain, and inadequate infrastructure and transportation network have made mining these resources difficult, and there have been few serious attempts to further explore or exploit them.

The most important resource has been natural gas, first tapped in 1967. At their peak during the 1980s, natural gas sales accounted for $300 million a year in export revenues (56% of the total). Ninety percent of these exports went to the Soviet Union to pay for imports and debts. However, during the withdrawal of Soviet troops in 1989, Afghanistan's natural gas fields were capped to prevent sabotage by the mujahidin. Restoration of gas production has been hampered by internal strife and the disruption of traditional trading relationships following the collapse of the Soviet Union. Trade in smuggled goods into Pakistan once constituted a major source of revenue for Afghan regimes, including the Taliban, and still figures as an important element in the Afghan economy, although efforts are underway to formalize this trade.

In the 1960s, the United States helped build a highway connecting Afghanistan's two largest cities. It began in Kabul and wound its way through five of the country's core provinces?skirting scores of isolated and otherwise inaccessible villages; passing through the ancient market city of Ghazni; descending through Qalat; and eventually reaching Kandahar, founded by Alexander the Great. More than 35% of the country's population lives within 50 kilometers of this highway, called, appropriately, modern Afghanistan's lifeline. In 1978, the Soviet Union invaded. By the time its forces withdrew more than a decade later, more than 1 million Afghans had been killed and 5 million had fled. Civil war followed. The Taliban emerged, controlling all but the remote, northern regions. Afghanistan was terrorized by this group, which was dogmatically opposed to progress and democracy. More than two decades of war had left the Kabul-Kandahar highway devastated, like much of the country's infrastructure. Little could move along the lifeline that had provided so many Afghans with their means of livelihood and their access to healthcare, education, markets, and places of worship.

Reviving the Road: Restoration of the highway has been an overriding priority of President Hamid Karzai. It is crucial to extending the influence of the new government. Without the highway link, Afghanistan's civil society and economy would remain moribund and prey to divisive forces. The economic development that the highway makes possible will help guarantee the unity and long-term security of the Afghan people. The restored highway is a visually impressive achievement whose symbolic importance should not be underestimated. It marks a palpable transition from the recent past and represents an important building block for the future. Recently, an official in Herat likened the ring road to veins and arteries that nourish and bring life to the 'heart' of Kabul and the body of the country. The highway will not end in Kandahar: there are plans to complete the circuit, extending it to Herat and then arcing it back through Mazar-e Sharif to Kabul. The route is sometimes referred to as the Ring Road. As of December 2006, three-quarters of the Ring Road had been funded, with plans to be completed in 2007.

Landlocked Afghanistan has no functioning railways, but the Amu Darya (Oxus) River, which forms part of Afghanistan's border with Turkmenistan, Uzbekistan, and Tajikistan, has barge traffic. During their occupation of the country, the Soviets completed a bridge across the Amu Darya. The United States, in partnership with Norway, has agreed to reconstruct this bridge, which will stretch more than 650 meters over the Amu Darya/Pyandzh River between Afghanistan and Tajikistan, near Pyanji Poyon (Tajikistan) and Shir Khan Bandar (Afghanistan). The bridge is set for completion in 2007.

Afghanistan's national airline, Ariana, operates domestic and international routes, including flights to New Delhi, Islamabad, Dubai, Moscow, Istanbul, Tehran, and Frankfurt. A private carrier, Kam Air, commenced domestic operations in November 2003. Many sections of Afghanistan's highway and regional road system are undergoing significant reconstruction. The U.S. (with assistance from Japan) completed building a highway linking Kabul to the southern regional capital, Kandahar. Construction is soon to begin on the next phase of highway reconstruction between Kandahar and the western city of Herat. The Asian Development Bank is also active in road development projects, mainly in the border areas with Pakistan.

Humanitarian Relief
Many nations have assisted in a great variety of humanitarian and development projects all across Afghanistan since the fall of the Taliban in 2001. The United Nations, World Bank, Asian Development Bank and other international agencies have also given aid. Schools, clinics, water systems, agriculture, sanitation, government buildings and roads are being repaired or built.

Afghanistan is one of the most heavily mined countries in the world; mine-related injuries number up to 100 per month, and an estimated 200,000 Afghans have been disabled by landmine/unexploded ordinances (UXO) accidents. As of March 2005 the United Nations Mine Action Program for Afghanistan had approximately 8,000 Afghan personnel, 700 demobilized soldiers, 22 international staff, and several NGOs deployed in Afghanistan. The goal of the program is to remove the impact of mines from all high-impact areas by 2007 and to make Afghanistan mine-free by 2012. Between January 2003 and March 2005 a total of 2,354,244 mines and pieces of UXOs were destroyed. Training programs are also being used to educate the public about the threat and dangers of land mines. The number of mine victims was reduced from approximately 150 a month in 2002 to less than 100 a month in 2004.

Refugees and Internally Displaced People
Afghanistan has had the largest refugee repatriation in the world in the last 30 years. The return of refugees is guided by the Ministry of Refugees and Repatriation (MORR) and supported by the United Nations High Commissioner for Refugees (UNHCR), International Organization of Migration (IOM), United Nations Children's Fund (UNICEF), the World Food Program (WFP), the World Health Organization (WHO) and a number of other national and international NGOs. As of December 2006, approximately 3 million Afghans remained in neighboring countries. The U.S. provided more than $350 million to support Afghan refugees, returnees, and other conflict victims between September 2001 and March 2006.

In response to a strategy outlined by the Ministry of Health, the international community is supporting the government in rebuilding the primary health-care system. Tuberculosis remains a serious public health problem in Afghanistan. Since this strategy was outlined, the Afghan Government with support from the World Health Organization (WHO) has established 162 health facilities in 141 districts across the country. The treatment success rate in 2002 was 86%. WHO is also assisting the Ministry of Health and local health authorities to combat malaria where the disease is widespread. Through this project, 600,000 individuals are receiving full treatment for malaria every year. In addition 750,000 individuals are protected from malaria by sleeping under special nets provided under the project.

There were 45,000 children enrolled in school in 1993, 19% were girls. The latest official statistics show there are now 64,000 children in school, one third are girls. In addition 29% of the teachers in the province are women, compared with 15% in 1993. Effort is being made to ensure that teachers receive salaries on time and increasing the attendance of girls in school. The total enrollment rate for Afghan children between 7 and 13 years of age has increased to 54% (67% for boys and 37% for girls). A number of factors such as distance to schools, poor facilities and lack of separate schooling for boys and girls continue to be challenges to higher enrollment.

Facts at a Glance: Geography - People - Government - Economy - Communications - Transportation - Military - Current Time - Ranking Positions
Notes and Commentary: People - Economy - Government and Political Conditions - Historical Highlights - Foreign Relations - Relations with U.S.

Facts at a Glance
Current Time
Ranking Positions

Notes and Commentary
Government and Political Conditions
Historical Highlights
Foreign Relations
Relations with U.S.

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