Economy of Afghanistan

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Economy of Afghanistan
Currency	Afghani (AFA)
Fiscal year	21 March - 20 March
Trade organisations	negotiating WTO accession
Statistics
GDP (PPP)	$31.9 billion (2006) (91st [1])
GDP growth	14% (2005)
GDP per capita	$1,310 (2006)
GDP by sector	agriculture: 38% industry: 24% services: 38% (2005)
Inflation (CPI)	16.3% (2005)
Pop below poverty line	53% (2003)
Gini index	{{{gini}}}
Labour force	15 million (2004)
Labour force by occupation	agriculture 80%, industry 10%, services 10% (2004)
Unemployment	40% (2005)
Main industries	small-scale production of textiles, soap, furniture, shoes, fertilizer, and cement; handwoven carpets; natural gas, petroleum, coal, copper
Trading Partners
Exports	$471 million (formal sector only) (2005)
Export goods	opium, wheat, fruits and nuts, handwoven carpets, wool, cotton, hides and pelts, precious and semi-precious gems
Main partners	United States 25.3%, Pakistan 20.9%, India 20.8%, Finland 4% (2005)
Imports	$3.87 billion (2005)
Imports goods	capital goods, food, textiles and petroleum products; most consumer goods
Main Partners	Pakistan 23.9%, United States 11.8%, Germany 6.8%, India 6.5%, Turkey 5.1%, Turkmenistan 5%, Russia 4.7%, Kenya 4.4% (2005)
Public finances
Public debt	external: $500 million in debt to Multilateral Development Banks (2006)
Revenues	$269 million
Expenses	$561 million
Economic aid	recipient: Over 18 billion was provided to cover 2002 to 2009, mostly from the United States. (2006)
Main source [2] All values, unless otherwise stated, are in US dollars

The economic outlook of Afghanistan's Economy has improved significantly since 2002 due to the infusion of over 18 billion US dollars in international assistance, dramatic improvements in agricultural production, and the end of a four-year drought in most of the country. However, Afghanistan remains extremely poor, landlocked, and highly dependent on foreign aid, farming, and trade with neighboring countries. It is probable that it will take the remainder of the decade, continuing donor aid and attention to raise Afghanistan's living standards up from its current status among the lowest in the world. Much of the population continues to suffer from shortages of housing, clean drinking water, electricity, and employment, but the Afghan government and international donors have remained committed to improving access to these basic necessities by prioritizing infrastructure development, education, housing development, jobs programs, medical care, and economic reform over the year of 2005. The replacement of the opium trade - which can account for one-third of the country's GDP - is one of several potential spoilers for the economy over the long term.

Contents 1 Economic History 2 Agriculture 3 Trade and Industry 4 Economic Development and Recovery 5 Reconstruction 6 National accounts 7 References and footnotes 8 External links

[edit] Economic History

Historically, there has been a dearth of information and reliable statistics about Afghanistan's economy. Current GDP per capita of Afghanistan grew 14% in the Sixties reaching a peak growth of 75% in the Seventies.

The Soviet invasion and ensuing civil war destroyed much of the underdeveloped country's limited infrastructure and disrupted normal patterns of economic activity. Gross domestic product has fallen substantially since the 1980s 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.

According to the International Monetary Fund, the Afghan economy grew 20% in the fiscal year ending in March 2004, after expanding 30% in the previous 12 months. The growth is attributed to international aid and to the end of droughts. An estimated 4.4 billion US dollars of aid entered the nation from 2002 to 2004, about equal to its GDP. A GDP of US 4 billion dollars in fiscal year 2003 was recalculated by the IMF to US 6.5 billion, after adding proceeds from opium products.

[edit] Agriculture

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.

Grain production is Afghanistan's traditional agricultural mainstay. Overall agricultural production dramatically declined following 3 years of drought as well as the sustained fighting, instability in rural areas, and deteriorated infrastructure. Soviet efforts to disrupt production in resistance-dominated areas also contributed to this decline as did the disruption to transportation resulting from ongoing conflict.

The war against the Soviet Union and the ensuing civil war also led to migration to the cities and refugee flight to Pakistan and Iran, further disrupting normal agricultural production. Recent studies indicate that agricultural production and livestock numbers are only sufficient to feed about half of Afghanistan's population. Shortages are exacerbated by the country's already limited transportation network, which has deteriorated further due to damage and neglect resulting from war and the absence of an effective central government.

Opium became a source of cash for some Afghans, especially following the breakdown in central authority after the Soviet withdrawal. Opium-derived revenues constituted a major source of income for the two main factions. The Taliban earned roughly $40 million per year on opium taxes alone. Opium is easy to produce and transport and offers a quick source of income for impoverished Afghans. Afghanistan has been the world's largest producer of opium for most of the past decade. In 2000, the Taliban banned opium poppy cultivation in part to attract foreign aid and, allegedly, to control the opium market with large existing stockpiles that earned substantially large price increases. While cultivation of opium poppy was virtually eliminated in Taliban-controlled areas, drug trafficking has continued unabated. Later, in 2001, the Taliban reportedly announced that poppy cultivation could resume. 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. The current Afghanistan government has begun to enact major counter-narcotics policies and programs.

According to research by the Afghan government and the United Nations, presented December 11, 2005, two million people (about 9% of the population) are engaged in opium poppy cultivation. According to the United Nations, about 92% of the world's heroin originates from Afghanistan.

[edit] Trade and Industry

Trade accounts for a small portion of documented Afghan economy, and there are no reliable statistics relating to trade flows. In 1996, exports, not including opium, were estimated at $80 million and imports estimated at $150 million. Since the Soviet withdrawal and the collapse of the Soviet Union, other limited trade relationships are emerging with Asian states, Pakistan, Iran, the EU, and Japan.

Afghanistan is endowed with a wealth of natural resources, including extensive deposits of natural gas, petroleum, coal, copper, chromite, talc, barites, sulfur, lead, zinc, iron ore, salt, and precious and semi-precious stones. In 2006, the United States estimated that Afghanistan has as much as 36 trillion cubic feet of natural gas, 3.6 billion barrels of oil and condensate reserves.^[1]

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. Gas production has dropped from a high of 8,200,000 m³ (290 million cubic feet) per day in the 1980s to a current low of about 600,000 m³ (22 million cubic feet) in 2001.

Trade in goods smuggled into Pakistan once constituted a major source of revenue for Afghan regimes, including the Taliban, and also figured as an important element in the Afghan economy. Many of the goods smuggled into Pakistan originally entered Afghanistan from Pakistan, where they fell under the Afghan Trade and Transit Agreement (ATTA), which permitted goods bound for Afghanistan to transit Pakistan free of duty. When Pakistan clamped down in 2000 on the types of goods permitted duty-free transit, routing of goods through Iran from the Gulf increased significantly. Shipments of smuggled goods were subjected to fees and duties paid to the Afghan Government. The trade also provided jobs to tens of thousands of Afghans on both sides of the Durand Line, which forms the border between the government of Afghanistan and Pakistan. Pakistan's closing its Afghan border in September 2001 presumably drastically curtailed this traffic.

[edit] Economic Development and Recovery

Afghanistan embarked on a modest economic development program in the 1930s. The government founded banks; introduced paper money; established a university; expanded primary, secondary, and technical schools; and sent students abroad for education. In 1956, the Afghan Government promulgated the first in a long series of ambitious development plans. By the late 1970s, these had achieved only mixed results due to flaws in the planning process as well as inadequate funding and a shortage of the skilled managers and technicians needed for implementation.

These constraints on development have been exacerbated by the flight of educated Afghans and the disruption and instability stemming from the Soviet occupation and ensuing civil war. Today, economic recovery and long-term development will depend on establishing an effective and stable political system and an end to more than 22 years of conflict.

The UN and the international donor community continue to provide considerable humanitarian relief. Since its inception in 1988, the umbrella UN Office for the Coordination of Humanitarian Assistance to Afghanistan (UNOCHA) has channelled more than $1 billion in multilateral assistance to Afghan refugees and vulnerable persons inside Afghanistan. The U.S., the European Union (EU), and Japan are the leading contributors to this relief effort. One of its key tasks is to eliminate from priority areas--such as villages, arable fields, and roads--some of the 5 to 7 million land mines and 750,000 pieces of unexploded ordnance, sown mainly during the Soviet occupation, which continue to litter the Afghan landscape. Afghanistan is the most heavily mined country in the world; mine-related injuries number about 100 per-month. Without successful mine clearance, refugee repatriation, political stability, and economic reconstruction will be severely constrained.

[edit] Reconstruction

An initial concept design called the City of Light Development, envisioned by Dr. Hisham N. Ashkouri, Prinicpal of ARCADD, Inc. for the development and the implementation of a privately based investment enterprise has been proposed for a multi-function commercial, historic and cultural development within the limits of the Old City of Kabul along the Southern side of the Kabul River and along Jade Meywand Avenue,^[2] revitalizing some of the most commercial and historic districts in the City of Kabul, which contains numerous historic mosques and shrines as well as viable commercial activities among and within war-dameaged buildings. Also incorporated in the design is a new complex for a new Afghan National Museum. The design has garnered interest from President Hamid Karzai, and has support from Ambassador Said Tayeb Jawad, who signed a Memo of Understanding regarding the development.

[edit] National accounts

The majority of the following information is taken from, or adapted from the CIA World Factbook

GDP: purchasing power parity - $31.9 billion (2006 est.)

GDP - real growth rate:

• 14% (2005 est.)

GDP - per capita: purchasing power parity - $1,310 (2006 est.)

GDP - composition by sector:

• agriculture: 38%
• industry: 24%
• services: 38% (2005 est.)

Population below poverty line:

• 53% (2003)

Household income or consumption by percentage share:

• lowest 10%: NA%
• highest 10%: NA%

Inflation rate (consumer prices): 16.3% (2005)

Labor force: 15 million (2004 est.)

Labor force - by occupation: agriculture 80%, industry 10%, services 10% (2004 est.)

Unemployment rate: 40% (2005)

Budget:

• revenues: $269 million
• expenditures: $561 million

Industries: small-scale production of textiles, soap, furniture, shoes, fertilizer, and cement; handwoven carpets; natural gas, petroleum, coal, copper

Electricity - production: 905 million kWh (2003)

Electricity - production by source:

• fossil fuel: 36.3%
• hydro: 63.7%
• nuclear: 0%
• other: 0% (2001)

Electricity - consumption: 1.042 billion kWh (2003)

Electricity - exports: 0 kWh (2003)

Electricity - imports: 200 million kWh (2003)

Oil - production: 0 barrel/day (2003 est.)

Oil - consumption: 5,000 barrel/day (2003)

Oil - proved reserves: 1.6 billion barrels (2006 est.)^[1]

Natural gas - production: 220 million m³ (2001 est.)

Natural gas - consumption: 220 million m³ (2001 est.)

Natural gas - proved reserves: 15.7 trillion cubic feet (2006 est.)^[1]

Agriculture - products: opium poppies, wheat, fruits, nuts, karakul pelts

Exports: $471 million; note - not including illicit exports or reexports (2005 est.)

Exports - commodities: opium, fruits and nuts, handwoven carpets, wool, cotton, hides and pelts, precious and semi-precious gems

Exports - partners: United States 25.3%, Pakistan 20.9%, India 20.8%, Finland 4 %. (2005)

Imports: $3.87 billion (2005 est.)

Imports - commodities: capital goods, food, textiles and petroleum products

Imports - partners: Pakistan (23.9%), United States 11.8%, Germany 6.8 %, India 6.5%, Turkey 5.1%, Turkmenistan 5%, Russia 4.7%, Kenya 4.4% (2005)

Debt - external: $500 million to Multilateral Development Banks (2006)

Economic aid - recipient: international pledges made by more than 60 countries and international financial institutions at the Berlin Donors Conference for Afghan reconstruction in March 2004 reached $8.9 billion for 2004-09

Currency: Afghani (AFA)

Exchange rates: afghanis per US dollar - 49 (2006), 49 (2005), 48 (2004), 48 (2003), 48 (2002) note: in 2002, the afghani was revalued and the currency stabilized at about 48 afghanis to the dollar

Fiscal year: 21 March - 20 March

[edit] References and footnotes

• This article contains material from the CIA World Factbook which, as a U.S. government publication, is in the public domain. 2006
• This article contains material from the US Department of State's Background Notes which, as a US government publication, is in the public domain.

[edit] External links

• Global Economic Prospects: Growth Prospects for South Asia The World Bank, Dec. 13, 2006
• Drug Industry Threatens to Derail Afghanistan's State Building UNODC and The World Bank, Nov. 28, 2006
• Tackling Afghan Narcotics [3],June 12, 2006
• Report finds Afghanistan is on the verge of becoming a narcotics state on Wikinews, March 5, 2005
• U.N. reports Afghan opium production is up again on Wikinews, February 11, 2005
• [4]
• Dealing With the Illicit Drug Trade: The Afghan Quandary U.S. Institute of Peace Briefing, April 2005