Ahmad Shah DURRANI unified the Pashtun tribes and founded Afghanistan in 1747. The country served as a buffer between the British and Russian Empires until it won independence from notional British control in 1919. A brief experiment in democracy ended in a 1973 coup and a 1978 communist countercoup. The Soviet Union invaded in 1979 to support the tottering Afghan communist regime, touching off a long and destructive war. The USSR withdrew in 1989 under relentless pressure by internationally supported anti-communist mujahidin rebels. A series of subsequent civil wars saw Kabul finally fall in 1996 to the Taliban, a hardline Pakistani-sponsored movement that emerged in 1994 to end the country's civil war and anarchy. Following the 11 September 2001 terrorist attacks, a US, Allied, and anti-Taliban Northern Alliance military action toppled the Taliban for sheltering Usama BIN LADIN.
Southern Asia, north and west of Pakistan, east of Iran
natural gas, petroleum, coal, copper, chromite, talc, barites, sulfur, lead, zinc, iron ore, salt, precious and semiprecious stones, arable land
Population - distribution
populations tend to cluster in the foothills and periphery of the rugged Hindu Kush range; smaller groups are found in many of the country's interior valleys; in general, the east is more densely settled while the south is sparsely populated
Afghan Persian or Dari (official) 50%, Pashto (official) 35%, Turkic languages (primarily Uzbek and Turkmen) 11%, 30 minor languages (primarily Balochi and Pashai) 4%, much bilingualism, but Dari functions as the lingua franca
KABUL (capital) 4.635 million (2015)
- Conventional long form
- Islamic Republic of Afghanistan
- Conventional short form
- Local long form
- Jamhuri-ye Islami-ye Afghanistan
- Local short form
presidential Islamic republic
- Geographic coordinates
- 34 31 N, 69 11 E
- Time difference
- UTC+4.5 (9.5 hours ahead of Washington, DC, during Standard Time)
has not submitted an ICJ jurisdiction declaration; accepts ICCt jurisdiction
Afghanistan is gradually recovering from decades of conflict. Before 2014, the economy had sustained nearly a decade of strong growth, largely because of international assistance. Since 2014, however, the economy has slowed, in large part because of the withdrawal of nearly 100,000 foreign troops that had artificially inflated the country’s economic growth. Despite improvements in life expectancy, incomes, and literacy since 2001, Afghanistan is extremely poor, landlocked, and highly dependent on foreign aid. Much of the population continues to suffer from shortages of housing, clean water, electricity, medical care, and jobs. Corruption, insecurity, weak governance, lack of infrastructure, and the Afghan Government's difficulty in extending rule of law to all parts of the country pose challenges to future economic growth. Afghanistan's living standards are among the lowest in the world.
- External debt stocks
- US$ 2,488,551,000
- Total tax rate (% of commercial profits)
- Real Interest Rate
- Manufacturing, value added (% of GDP)
- Current Account Balance
- US$ -5,056,729,110
- Labor Force, Total
- Employment in Agriculture
- Employment in Industry
- Employment in Services
- Unemployment Rate
- Imports of goods and services
- US$ 9,544,683,716
- Exports of goods and services
- US$ 1,342,632,359
- Total Merchandise Trade
- FDI, net inflows
- US$ 163,102,610
- Commercial Service Exports
- US$ 617,893,330
opium, wheat, fruits, nuts; wool, mutton, sheepskins, lambskins, poppies
small-scale production of bricks, textiles, soap, furniture, shoes, fertilizer, apparel, food products, non-alcoholic beverages, mineral water, cement; handwoven carpets; natural gas, coal, copper
- opium, fruits and nuts, handwoven carpets, wool, cotton, hides and pelts, precious and semi-precious gems
- India 43.6%, Pakistan 28.3%, Tajikistan 7.4% (2015)
- machinery and other capital goods, food, textiles, petroleum products
- Pakistan 39.1%, India 9%, US 8.4%, Turkmenistan 6.3%, China 6.1%, Kazakhstan 6% (2015)
- Country Risk Rating
- The highest-risk political and economic situation and the most difficult business environment. Corporate default is likely.
- Business Climate Rating
- The highest possible risk in terms of business climate. Due to a lack of available financial information and an unpredictable legal system, doing business in this country is extremely difficult.
- Substantial support from the international community
- Prospects for extraction of raw materials (gas, oil, minerals, etc.)
- Unstable geopolitical situation
- Widespread corruption and shortcomings in terms of governance
- Very heavy reliance on grants
- Fragile banking system
- Heavy reliance on the agriculture sector
Despite a deteriorating security situation, economic activity looks set to continue to grow, but without hitting the heights of the previous decade (11.5% average annual growth between 2007-2012). The agriculture sector will probably continue to be the country's main growth driver (25% of GDP) and its largest employer (80% of the active population). Production levels should remain high but constrained by climatic conditions (drought) and by the lack of water supply infrastructure. Opium production (80% of world production) may be illegal but looks likely to grow further (accounting for around 4% of GDP), after strong growth in 2016 (+43%). Farmers will probably turn increasingly to this crop because of its higher profitability, in particular in the north of the country where the deteriorating security situation may hinder the government's efforts to combat it. Investment will likely also suffer as a result of the security situation, which is putting a major brake on the inflow of foreign capital, especially in the mining sector, which nonetheless presents considerable economic opportunities.
Household consumption should be strong, in part because of revenues from opium production but also because of the massive influx of refugees. In 2016, some 600,000 Afghans were forced to leave Pakistan to return home. They face a worrying humanitarian situation, which is also aggravated by the 500,000 people displaced by the country's internal conflict.
Inflation is predicted to rise sharply in 2017. The moderate rise in oil prices will probably make imports more expensive, and the massive influx of refugees might add to inflationary pressures. The comfortable level of foreign exchange reserves should ensure that the currency remains stable in the short term.
Despite an apparently small public debt, Afghanistan's budget situation is anything but sustainable. 70% of the budget depends on international aid and the public deficit (excluding grants) is predicted to grow to around 10% of GDP. Nonetheless, the authorities, in partnership with international organizations, have drawn up an action plan aimed at several sections of the economy (water management, job creation outside the agriculture sector, etc.) in order to diversify and strengthen the economy. Better fiscal administration should gradually boost tax receipts (+20% in 2015) and in turn, reduce reliance on international aid. In addition, mining (where progress has been hampered by insecurity and the lack of adequate infrastructure) could be a promising source of tax receipts. However, given the recent deterioration in the security situation, a huge fundraising effort was organized in Brussels in late 2016 and saw 75 countries and 25 international organizations pledge €13.6bn in grants over the period 2017-2020.
The current account balance would be significantly in deficit (36% of GDP) without international support. In 2017, the balance of goods and service will probably remain in deficit (in value terms, imports outweigh exports by about four to one). The economy will probably still be heavily reliant on imports, mainly of capital goods, oil and foodstuffs, while the main exports are dried fruits and carpets.
Apart from the economy, the security situation remains a priority for President Ashraf Ghani, who was elected in September 2014, but it deteriorated sharply in 2016. The Taliban continues to conduct offensives in two-thirds of the country and terrorist attacks in the big cities are on the rise. This situation delayed the withdrawal of foreign troops from Afghanistan (at least 10,000 soldiers are staying on until the end of 2017) in order to help the regular army combat the rise of the Taliban.
Moreover, the increase in international aid is contingent on President Ghani stepping up his fight against corruption. Governance remains a major challenge: the country languishes towards the bottom of international league tables, ranked 183rd out of 190 states according to the World Bank's latest Doing Business survey, and 166th out of 168 according to Transparency International's corruption index.
Internationally, Afghanistan and Turkmenistan have increased bilateral cooperation in the last few years. Several infrastructure projects are being prepared, including a gas pipeline linking the two countries to Pakistan and India, and a large rail network.