Economy Economy

Foreign Trade
Currency and Banking

In the mid-1990s, after a decade of Soviet occupation, war, and economic manipulation, followed by the ongoing civil war, the economy of Afghanistan was in shambles. Even in the 1970s, prior to the war, Afghanistan had one of the lowest standards of living in the world; things have declined since then, with the production, trafficking, and movement of drugs and guns as a major hidden part of the economy. As the war and its effects spread throughout the country in the early 1980s, two separate economies emerged; the urban financial and industrial facilities, tied especially to the Soviet Union, and the largely independent rural subsistence economy. In 1990 annual income was estimated to be $714 per person.

Over the centuries, Afghans have developed a number of different strategies to earn a living from their difficult environment. Most Afghans are settled farmers, herders, or both, depending upon ecological, economic, and political factors. They are usually self-sufficient in foodstuffs and other necessities. Industry and mining developed considerably in the 20th century, but local handicrafts are still important. In 1956 the government launched the first of several five-year plans. Irrigation efforts and development of a better road and telecommunications network had top priority, with later efforts toward production of textiles, cement, electricity, fertilizer, and grain storage facilities. Progress was made to develop better trade with the outside world, especially toward Europe, the United States, and Japan. Major nations aided Afghanistan in building roads, dams, hydroelectricity facilities, airports, factories (including those for light machinery, cement, and textiles), and irrigation networks for such crops as cotton, wheat, barley, and rice. After the Soviet invasion in 1979, development aid from the West ceased, and Afghanistan became economically dependent on the USSR. Fruits, vegetables, fine carpets, and gemstones now constitute the majority of the export market.

Afghanistan's economic freedom score is 51.3, making its economy the 154th freest in the 2018 Index. Its overall score has increased by 2.4 points because of notable increases in investment freedom, financial freedom, and monetary freedom and a higher property rights score. Afghanistan is ranked 38th among 43 countries in the Asia-Pacific region, and its overall score is below the regional and world averages. The improved availability of key economic data made it possible to grade Afghanistan's economic freedom for the first time in the 2017 Index. The country's score in the 2018 Index reflects dramatic improvement in several economic freedom indicators. Over the past decade, economic growth has been volatile but rapid, with construction and agriculture the key contributors to economic expansion. Political uncertainty, corruption, and security challenges remain formidable, and the rule of law remains fragile and uneven across the country.

Afghanistan Discussion Forum

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