‘Afghanistan economy shows modest signs of growth but recovery remains fragile,’ says World Bank

An Afghan woman tailor works with a sewing machine in the Afghan Women Business Hub in Kabul. File
| Photo Credit: AP

“Afghanistan’s economy is showing modest signs of growth after two years of severe contraction,” the World Bank said.

In its latest development update issued late on Wednesday (December 4, 2024), the Financial Institution said modest Gross Domestic Product (GDP) growth of 2.7% was driven by private consumption. The partial recovery, coupled with falling food prices, helped to gradually improve household welfare.

Before the Taliban returned to Power in August 2021, Afghanistan’s economy relied heavily on foreign aid and corruption was rife. Their takeover three years ago sent the economy into a tailspin, as billions in International funds were frozen, and tens of thousands of highly skilled Afghans fled the country and took their money with them.

Afghanistan’s exports remained stable in 2023-24 but imports surged, creating a widening trade deficit, according to the World Bank. This deficit, exacerbated by dependence on imports for essential goods like fuel, food and machinery, could pose a risk to the country’s economic stability.

Mr. Faris Hadad-Zervos, the World Bank’s country director for Afghanistan, said “Long-term growth prospects required tapping into the substantial potential of the domestic private sector and improving the overall business environment.”

“Key to this is increased investment, providing access to finance to small businesses, and supporting educated and skilled women entrepreneurs so their businesses can thrive,” said Mr. Hadad-Zervos. Without this, the countryrisks prolonged stagnation with limited prospects for sustainable development. The update comes days after media reports that the Taliban have ordered educational institutions to stop providing medical training to women and girls. The Taliban have neither confirmed the order nor responded to the reports.