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GDP earnings

The Gross Domestic Product (GDP) in Afghanistan was worth $19.47 billion in 2016. The GDP value of Afghanistan represents 0.03% of the world economy. GDP in Afghanistan averaged $6.24 billion from 1960 until 2016, reaching an all-time high of $20.54 billion in 2012 and a record low of $0.54 billion in 1960. The biggest sector of Afghanistan’s economy is services. Wholesale and retail trade, restaurants and hotels, transport, storage and communications, finance, insurance and real estate and community, personal, social and government services account for 49% of the GDP. Agriculture creates 26% of the output. Manufacturing and mining constitute 13% of the wealth and construction accounts for 12%.

Export and Import

Exports in Afghanistan increased to $571.41 million in 2016 from $570.50 million in 2015. Exports in Afghanistan averaged $350.55 million from 2000 until 2016, reaching an all-time high of $571.41 million in 2016. In Afghanistan, exports account for around 20% of GDP. Afghanistan’s main exports are carpets and rugs (45% of total exports), dried fruits (31%) and medicinal plants (12%). Main export partners are Pakistan (48% of total exports), India (19%) and Russia (9%). Other countries include Iran, Iraq and Turkey.

In 2016, Afghanistan imported commodities worth $3.77 billion, making it the 93rd largest importer in the world. During the last five years, the imports of Afghanistan have decreased at an annualised rate of -51.126%, from $12.5 billion in 2011 to $3.77 billion in 2016. The most recent imports are led by wheat flours which represent 17.6% of the total imports of Afghanistan, followed by peat, which accounts for 15.9%. Ornamental trimmings (8.9%), inedible fats and oils (8.4%), stone processing machines (6.1%), chocolates (4.2%), curb stones (3.1%) etc. are some of the other import items.

Intra-SAARC trade

In January 2011, former President of Afghanistan Hamid Karzai signed the Agreement for the South Asia Free Trade Area (SAFTA), a free trade agreement among Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka. Under SAFTA, Pakistan, India and Sri Lanka lowered tariffs on many Afghan exports. Afghanistan currently has duty free access to India under SAFTA, for all traded goods except cigarettes and alcohol and pays duties of 5% to Pakistan on non-sensitive goods.  Afghanistan developed and notified SAARC members of its tariff reductions in August 2011. The schedule reduces customs duties for non-sensitive goods from the original rates down to 5% in equal instalments over a period of 10 years (August 2011 to August 2021). Afghanistan’s contribution to Intra-SAARC trade was 15% in 2012 amounting to $2.89 billion. In 2013 the trade reduced to 13% amounting to $3.032 billion.

Investments

Afghanistan signed a copper deal with China (Metallurgical Corp. of China Ltd.) in 2008, which is related to a large-scale project that involves the investment of $2.8 billion by China and an ensures an annual income of about $400 million for the Afghan government. The country’s Ainak copper mine located in Logar province is one of the biggest in the world and is expected to provide jobs to 20,000 Afghans. It is estimated to hold at least 11 million tonnes or $33 billion worth of copper.

Experts believe that the production of copper could begin within two to three years and iron ore in five to seven years. The country’s other recently announced treasure is the Hajigak iron ore mine, located 130 miles west of Kabul and is believed to hold an estimated 1.8 billion to 2 billion metric tonnes of the mineral. AFISCO, an Indian consortium of seven companies, led by the Steel Authority of India Limited (SAIL), and Canada’s Kilo Goldmines Ltd are expected to jointly invest $14.6 billion in developing the Hajigak iron mine. The country has several coal mines but they need to be modernised.

In December 2011, Afghanistan signed an oil exploration contract with China National Petroleum Corporation (CNPC) for the development of three oil fields along the Amu Darya River. The state will have its first oil refineries within the next three years. According to the US Geographical Survey, Afghanistan possesses minerals worth $1 trillion. In the past decade, Afghanistan has experienced an unprecedented growth in its construction industry. The construction sector has contributed 7–10% to GDP in recent years.

Challenges

Although Afghanistan is rich in natural resources, very little has been done to explore them. Some of these resources are extensive deposits of natural gas, petroleum, coal, copper, chromite, talc, barites, sulfur, lead, zinc, iron ore, salt, and precious and semiprecious stones. However, the country’s rugged terrain and lack of transportation network restrict trade activities. In the 1980s, export of natural gas was at its peak, with $300 million being added to export revenues annually.  However, 90% of this revenue was utilised for the payment of imports and debts to the erstwhile Soviet Union. The Afghan economy also rode on goods smuggled to Pakistan.

Major challenges included the Taliban’s temporary re-capture of the strategic provincial capital of Kunduz for a second time in 2016, the re-emergence of the Islamic State in eastern Afghanistan, and the government’s inability to create employment opportunities to stop the exodus of Afghans into Europe. The government of Afghanistan needs to initiate projects that can create employment opportunities.