Ongoing civil war has set back the development of Afghanistan by decades, hampering implementation of financial and economic development projects, Tajik economist, Dr. Hojimuhammad Umarov, told Asia-Plus in an interview.  

According to him, there is no favorable investment climate in the country because of ongoing hostilities and some other reasons.

“The private sector refrains from investing in Afghanistan’s economy and such a situation can last until the end of the civil war,” said Tajik expert.  “Foreign direct investment (FDI) made in Afghanistan’s economy during the period from 2009 to 2015 amounted to only 1.2 billion U.S. dollars.”

There is high mortality rate caused by war, poverty, starvation and infectious diseases in Afghanistan and life expectancy was recorded at only 49 years in 2006. Umarov noted.  

“According to expert estimates, 40 percent of Afghanistan’s trade turnover is not mentioned in official figures.  This means that the national budget receives considerable tax resources less.  Meanwhile, Afghanistan has huge potentials to increase export of cotton and silk products,  hand-made carpets, fresh fruits and vegetables, dried fruits, handicraft goods and so forth,” Tajik researcher said. 

“Labor migration plays a significant socioeconomic role for Afghanistan.   Currently, Afghan labor migrants working in Pakistan, Iran, Saudi Arabia, the United Arab Emirates, Qatar, Bahrain, Kuwait, Russia and other countries  account for 2-2.5 million.  There are no exact data on Afghan labor migrants’ remittances because they send money via hawala system (Hawala is an informal value transfer system in which money is transferred via a network of hawaladars. The system is based on trust whereby money can be made available internationally without actually moving it – Asia-Plus),” Tajik expert noted.

According to him, international organizations play an important role in speeding up reconstruction of Afghanistan’s economy.  

Meanwhile, Trading Economics notes that the Gross Domestic Product (GDP) per capita in Afghanistan was last recorded at 596.30 US dollars in 2016. The GDP per Capita in Afghanistan is reportedly equivalent to 5 percent of the world's average. GDP per capita in Afghanistan averaged 498.89 USD from 2002 until 2016, reaching an all time high of 630.40 USD in 2012 and a record low of 364.10 USD in 2004.

The World bank says Afghanistan’s biggest economic challenge is finding sustainable sources of growth.

Economic recovery is reportedly slow as continued insecurity curtails private investment and consumer demand.  Growth remains principally driven by agriculture. 

The security situation has worsened, according to the World Bank. Civilian casualties are reportedly at their highest since 2002, with an unprecedented level of conflict-induced displacement.  In 2017 alone, more than 202,000 Afghans were internally displaced by conflict and 44,000 others were displaced by natural disasters. A surge in returnees from Iran and Pakistan (over 296,000 in 2017) has brought mounting pressure on humanitarian assistance.

Insecurity is taking a heavy toll on private investment and consumer demand. Business sentiment shows no sign of recovery.  Inflation reportedly rose slightly in the first half of 2017, edging up to 5.1 percent in July from 4.5 percent in December 2016, driven by higher food prices—particularly for fruit and vegetables.

According to the World Bank, growth is expected to increase from 2.6 percent in 2017 to 3.4 percent in 2018, assuming political stability and no further deterioration in security.  However, with an average annual population growth rate of 3 percent and 400,000 Afghans entering the labor market each year, living conditions may further deteriorate.

Meanwhile, opium poppy cultivation is one of sources of income for the population of Afghanistan.  Afghanistan's opium poppy production goes into more than 90% of heroin worldwide.  Afghanistan has been the world's greatest illicit opium producer.  In addition to opiates, Afghanistan is also the largest producer of cannabis (mostly as hashish) in the world.  According to the latest Afghanistan Opium Survey figures released by the Afghan Ministry of Counter Narcotics and UNODC on November 16, 2017, opium production in Afghanistan increased by 87 per cent to a record level of 9,000 metric tons in 2017 compared with 2016 levels.