KABUL, AFGHANISTAN – Afghanistan’s economy is showing signs of gradual recovery, but its outlook remains uncertain due to growing fiscal pressure, a widening trade deficit, and persistent poverty and food insecurity, the World Bank said in its latest report.
The Afghanistan Development Update, released on Wednesday, April 23, revealed that Afghanistan’s GDP grew by 2.5% in 2024, marking the country’s second consecutive year of economic expansion. However, the report warns that this recovery remains fragile, with significant challenges ahead.
The report attributes the country’s modest economic recovery to growth in agriculture, mining, construction, and commerce. However, manufacturing and services continue to struggle due to an unfavorable business environment, persistent export barriers, and a decline in foreign aid.
While private consumption and real estate investment have shown modest improvement, the report highlights a worrying increase in imports, which has widened the trade deficit and heightened Afghanistan’s external vulnerabilities. The growing trade deficit, combined with inflationary pressures, is contributing to an uncertain economic outlook for the country.
The report highlights that per capita income has stagnated amid rapid population growth. Poverty and food insecurity remain critical issues, exacerbated by high unemployment and restrictions on women’s participation in the economy.
“In early 2025, 14.8 million people face food shortages, and acute malnutrition— now affecting 4.7 million women and children—is worsening. Without urgent action, human capital development will be further undermined,” the report stated.
The report also flags concerns over Afghanistan’s banking sector, describing it as “fragile” due to regulatory uncertainty, rising non-performing loans, and limited lending activity. Liquidity issues in the sector remain a serious concern, underscoring the need for substantial financial reforms to bolster economic stability.
“While Afghanistan’s economy is showing signs of recovery, it continues to be held back by significant fiscal challenges, with domestic revenue mobilization proving insufficient to offset a decline in aid,” said Faris Hadad-Zervos, World Bank Country Director for Afghanistan.
A chapter of the update focuses on the employment crisis, particularly among youth and women. Nearly one in four young Afghans—aged 15 to 29—is unemployed, and many of those who are employed work in low-productivity, informal jobs that do not match their educational qualifications.
“Young people—including women—who are in the workforce are working fewer hours for less money, and they are in jobs that do not match their education levels,” said Hadad-Zervos. “Policies and programs that support the private sector are essential to create more and better jobs.”
“By 2030, 1.7 million more young job seekers will enter an already saturated market—far beyond what the current, stagnant economy can absorb,” the World Bank stated.
The World Bank has also warned that the Taliban policies limiting women’s participation in the labour force and girls’ access to post-primary education could severely hamper Afghanistan’s human capital development, long-term growth prospects, and potential for foreign aid.
The Afghanistan Development Update is part of the World Bank’s Afghanistan Futures program, which includes research, monitoring, and analytical reports on the country’s economy and society. The program aims to support evidence-based policymaking and inform the international community on the economic developments in Afghanistan.
