Afghanistan Times
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KABUL – The World Bank has warned that the ongoing economic turmoil in Afghanistan is getting worse. In its most recent Afghan Development Update, it says Afghanistan economy continues to contract, even after the Taliban’s takeover, leading to increased uncertainty and fragility.
According to the report, one significant trend is the sharp decline in inflation, which has, since April 2023, transitioned into deflation. This shift is attributed to the economy adjusting to lower aggregate demand, improved supply conditions, and the strengthened Afghani currency. However, the report also warns that if deflation persists, the economy may face further deterioration.
While falling food prices have provided some relief to Afghan households, poverty rates remain distressingly high. The crisis has particularly hit the labor market, resulting in elevated unemployment, especially among the youth and women.
The report further highlights the stability of the Afghani currency, which has appreciated despite a significant trade deficit, largely driven by high imports in specific categories. The Islamic Emirate’s reliance on border taxes, due to underperforming inland revenue receipts, has led to a shift from development expenditure to operating expenditure.
In addition, the World Bank has issued a warning about liquidity and stability risks in the financial sector. These concerns underscore the complex economic challenges facing Afghanistan in the wake of the recent changes.
