Melon market in Pul-e Khumri. Photo: Börje Almqvist.

Economics and business/industry

During the 00s, the Afghan economy expanded steadily from year to year. Approximately 11% annually between 2003 and 2012. Income per capita more than doubled over the same period.

The rapid economic development of sectors such as construction, telecommunications, services, trade and transport were primarily responsible for this. For example, the services sector increased from 38% to 51% of gross domestic product between 2002 and 2011. However, expansion declined in 2014 from an average increase of 12% over a ten-year period to 2.2%.

The Achilles’ heel of this positive economic development was that it was driven by unsustainable, assistance-related consumption based on massive payouts linked to the international presence. Above all, the construction industry was dependent on foreign financing.

One major problem for future development is widespread corruption which hampers economic, social and community development, as well as the emergence of a functioning rule of law.

After the fall of the Taliban in 2001, the economic trend was upwards until 2013 when it turned and growth began to decline. From having risen to 14% in 2012 it decreased to 2% in 2014. The World Bank expects, however, that growth will increase to 3.9% in 2017.

This economic downturn as a result of the foreign military withdrawal and reduced aid is predicted to exert greatest impact in Kabul and southern Afghanistan.

The previous surge of investment in the country has now turned into the opposite. According to the Afghan Investment Agency, AISA, investments increased by 25% in 2013 whereas in 2014, investments decreased instead by 35% on the previous year.

An estimated 60% of all construction contracts in 2013 were financed either by foreign military or by foreign civilian aid.

The construction sector has, despite decreased foreign military presence and reduced assistance, fared relatively well and increased slightly in 2014 largely due to public sector projects that extend over several years.

However, the previous reduction of approximately 50% between 2010 and 2013 has led to increased unemployment, reduced trade and a decline in the transport sector as demand for building materials and consumer goods fell.

In recent years, estimated land and property prices (which rose dramatically after the fall of the Taliban) have fallen by 30-60%. Another sign of the downturn in the economy from 2014 is that registration of new companies decreased by almost 50% as compared to 2012.

In 2014, the World Bank estimated the Afghan gross domestic product at USD 20.84 billion. By comparison, Sweden’s 2014 GDP was USD 570 billion, Iran’s USD 415 billion and Pakistan’s USD 246 billion. About 90% of Afghanistan's GDP over the past decade came from foreign military and non-military aid.

If this situation is not handled carefully, the World Bank warned that a severe recession would begin in 2014 when foreign aid decreased on both the civilian and the military side.

According to a survey conducted by the Afghan Chamber of Commerce among private businesses in early 2015, lack of security being the greatest challenge. For 9 out of 10 companies, the lack of electricity also presented major problems and the majority also stated inadequate infrastructure as a serious drawback. Other problems for industry were given as difficulties with bank guarantees and corruption.

Afghanistan is the world's 12th most difficult country to do business in according to the World Bank Annual Report 2015. The year before, it was the world's 7th most difficult country for business.

The Afghan currency fell heavily against the dollar in 2015 and capital flight increased.

Government finances

Since the 1880s, Afghan government has, to varying degrees, been dependent on foreign financial assistance to meet expenditure. Since 2002, the Afghan government budget has largely been funded by development assistance.

The state budget for 2016 was USD 6.45 billion (approx. SEK 55 billion), including a development budget of nearly USD 2.5 billion (SEK 21 billion). The regular budget finances items such as salaries for civil servants and security forces personnel, which include approximately 350 000 military and police officers.

In 2015, government revenues had increased up to October compared with the previous year, and the Ministry of Finance expects that 50% of the total budget and about 90% of the development budget will be funded by assistance.

How much of the development budget that will actually be utilised is hard to say. So far, some years the Afghan state has not managed to use more than 50% of its development budget.

About a third of the state's own revenues usually go to security.

Natural resources

Estimates of Afghanistan's natural resources range from USD 1 trillion (according to the US Geological Survey which surveyed the country’s natural resources) to the Afghan Minister of Mines who claims they are worth USD 3 trillion (3 000 000 000 000). This is equivalent to just over SEK 25 500 trillion (25 522 200 000 000).

One of the primary natural resources is natural gas in northern Afghanistan. Extensive natural gas reserves are found in Jozjan Province, and also in the Sar-i-Pul and Faryab Provinces. The gas currently extracted in Jozjan Province is mainly consumed there. A negligible proportion goes to a fertilizer plant near Mazar-e-Sheriff. Totally the geological survey states that there could be 500 billion cubic meters of gas under the country.

The oil found in the Sar-i-Pul and Faryab Provinces in northern Afghanistan consists, according to the Geological Survey, of an estimated 1.5-2 billion barrels. In late 2011, the China National Petroleum Corp (CNPC) and the Afghan company Watan Oil and Gas won a major contract for oil extraction. Watan Oil is part of the Watan Group, in whcih ex-president Karzai's brother Qayum Karzai is a shareholder and the Director is the cousin of an ex-president. The two companies have formed a joint venture.

In the area where the extraction will be carried out, estimated oil reserves amount to 87 million barrels over the 25-year contract period and will provide the Afghan government with an income of USD 7 billion.

The project includes the construction of an oil refinery. Extraction will hopefully reduce the country's strong overseas gas and petroleum dependence. One problem for planned extraction is that armed conflicts of varying intensity are underway in both provinces.

Other natural resources include iron ore in Hajigak in Bamiyan in central Afghanistan, copper in Aynak in Logar Province just south of Kabul, uranium north of Kabul and in the provinces of Herat and Kandahar, lithium in Ghazni Province, and niobium, cobalt, chromium, magnesium, salt, marble, lead, tin, beryllium, silver, and gold and coal in several provinces, and more. Moreover, there are lapis lazuli, emeralds and rubies in northern Afghanistan.

The copper deposit in Aynak is said to be the world's second largest unexploited deposit consisting of 9 to 13 million tons. The mine could create 8-10 000 jobs - or a lower number depending on who is counting. Copper mining should have begun in mid-2013 but the Chinese state company Metallurgical Corporation of China (MCC) who won the contract has postponed start up several times. It has previously been calculated that actual copper production will not begin until at least 2019.

In their contract, MCC has promised to invest USD 3 billion (almost SEK 26 billion) in the project. This investment will fund railway infrastructure for the transport of the copper, roads, power plants (coal), sewage treatment, housing for workers, as well as schools, clinics and potable water supply.

At the end of 2013, the company asked to renegotiate the contract. When/if the project is started, the first years’ extraction of 200 000 tonnes of copper will give the state an income of up to USD 400 million annually (about SEK 3.4 billion). Then production levels will increase.

There are an estimated 1.8 billion tons of iron ore in Hajigak. In late 2011, a group of Indian companies led by State Steel Authority of India Ltd (SAIL), won contracts for three extraction sites. Here too, the consortium has asked to renegotiate the contract. Another contract went to a Canadian company, Kilo Goldmines. Initially, mining was planned to begin in 2016.

There are multiple problems with getting started on the extraction of natural resources. Lack of security above all, continuing conflicts, the Afghan government is not working properly, particularly the legal system, and is corrupt through and through. This, combined with the large-scale investment required in infrastructure to make investments profitable means businesses are reluctant to invest and it appears that several companies with mining rights have begun to back away from their infrastructure investment commitments.


The few industries that have been built up since the 1930s have either been ruined during the civil war in the 1990s, or are worn out, outdated and in poor condition.

Among the industries that are from a previous era can be found the cement factory in Jabal-us Seraj and Ghori Cement in Pul-e Khumri in Baghlan Province, as well as some outmoded textile factories that process one-tenth of the cotton levels they produced in the 1980s.

Moreover, there are small industries in the cities, however these are hampered by poor electricity supply. It is estimated that around 30% of the population have access to grid-based electricity, but this is unevenly distributed - over 75% of the population of major cities and 10% in rural areas.

The country has considerable hydro power potential, but large scale dams must be constructed before this can be utilised. The larger hydropower plants that are in action are mainly in Kabul and Helmand Provinces, however they produce far too little power and are in urgent need of repair. The larger part of energy consumed is imported from Uzbekistan, Tajikistan, Iran and Turkmenistan.

According to the Telecommunication and IT Ministry, 90% of the population have access to telecommunications services and there were more than 21 million mobile subscriptions (SIM cards) in use in 2013. The Ministry's annual revenues are approximately USD 200 million (about SEK 1.7 billion). In 2001, there were about 40 000 fixed lines and an estimated 1 000 satellite phones.

The telecoms sector is the fastest growing in the country, an average of 50% annually between 2003 and 2013. The number of Internet users increased from 1 million in 2011 to 3 million in 2014. This is due largely to all the providers in the country gaining access to 3G licenses. In addition, fibre optic networks are expanding. Cost levels for users have also fallen dramatically.

The major hinder to reviving industry is primarily corruption and a slow and unnecessarily-complicated bureaucracy.


Corruption in Afghanistan is widespread and forms a major stumbling block for the country's economic and social development. It impacts both the state and private citizens.

According to Transparency International, in 2015 Afghanistan was the world's third most corrupt country. The year before, Afghanistan was in fourth place. Ninety percent of respondents at the Asia Foundation's annual hearing in 2015 stated that corruption generates severe problems in daily life.

President Ashraf Ghani has promised both the Afghan people and the international community to take decisive measures to fight corruption, this being a prerequisite for continued international support.

Obstacles in the fight against corruption are legion as it permeates the ministries, the judiciary, the police and the administration at all levels. Bribes are often required to gain access to public services, as well as appointments in the state and public sectors.

For example, fake schools and teachers, soldiers and police officers have been discovered who are paid salaries even though they do not actually exist. Sale of military equipment (including to the Taliban) and fuel to the private market have also been discovered.

The authorities have made a deal to reduce corruption. Teachers who previously had to forego part of their salary in order to get it paid out from the local education ministry will now receive their pay via mobile phone (the M-Paisa system).

Some police officers who receive their wages in cash were not paid their entire salary. Those responsible for the payment may withhold up to half the amount.

Utility bills are also now paid via M-Paisa in order to by-pass meter readers who do not record the correct electricity consumption and demand bribes to arrange a lower energy bill. Many powerful people, and also ministries and state authorities, simply do not pay their electricity bills.

The greatest corruption scandal in the country was the looting of the Kabul Bank in 2010. Almost USD 900 million disappeared, largely in the form of unauthorised loans to a number of movers and shakers in society. Among others, a brother and other relatives of the former President, Hamid Karzai. About half the lost capital has been recovered.

Corruption is not only widespread among Afghans in the country. Bribes given to obtain contracts in the transport sector and for provision of goods to the international (mainly American) forces have been uncovered a number of times.

Even aid organizations such as the Swedish Committee for Afghanistan (SCA) has been hit by corruption. SCA has a unit dedicated to curbing and exposing corruption and applies zero tolerance. SCA operations to combat corruption are described in more detail in its Annual Report.


Agriculture is the primary source of income for about a third of the population (about half of the rural population), and an estimated half of these cultivate for their own consumption only.

Only about 12% of the land in the country (about 650 000 square kilometres) is arable due to lack of water. A large part of agriculture (around 80% in northern Afghanistan) is rain fed.

Irrigated agriculture uses mostly water from irrigation channels where mountain melt water is led in the spring from the rivers and streams in a pipe system. In addition, the irrigated part of agriculture particularly in southern and northern Afghanistan uses water pumped up from wells by diesel pumps. Water from karez (underground irrigation canals) is also used.

The main crop is wheat. Then, rice, corn, onions and potatoes. Other agricultural products of importance include melon, grapes and raisins, nuts and fruit such as pomegranates, apples, plums, citrus fruits, apricots and mulberries.

Livestock - sheep, cattle, goats and chickens are an important source of income for many.

The economically dominant crop is opium, the raw material for heroin production. About 90% of world production of heroin comes from Afghan opium. Opium production, which has increased steadily over a number of years, was reduced by 48% in 2015. According to the UN agency for combating organised crime and drug trafficking (UNODC), 3 300 tons of opium were produced on 183 000 hectares of arable land in 2015. This harvest could be refined to about 330 tons of heroin.

Despite this decline, it is the fourth largest harvest since 1994. Over half was harvested in southern Afghanistan. Just under half was harvested in Helmand province. The reported decrease is largely explained by poorer yields, but also improved methods of calculation.

Although a large number of provinces became opium-free in the 2000s, the number of provinces where opium is once again grown is now increasing - in 2015, 19-20 of the country's 34 provinces.

Foreign trade

Afghanistan's legal exports in 2014 were worth USD 571 million (nearly SEK 5 billion). Imports stood at USD 7.7 billion (SEK 66.5 billion), excluding smuggled goods.

Main export products are opium and heroin. UNODC estimated the export value of Afghan opium and heroin in Western Europe and the Balkans to USD 28 billion (nearly SEK 240 billion), 30% more than GDP in 2014.

Farmers' income from this harvest is estimated at around USD 5 billion in 2014.

The primary legal export goods are fruit, vegetables and dried fruit, carpets, cotton and karakuls. Main imports are food, petroleum products, vehicles, machinery and textiles.

Estimates suggest that 15-20% of all trade in Afghanistan concerns contraband.

Foreign economic support

Since the 1880s, Afghanistan has been dependent on foreign aid to finance government spending and this will probably remain the case for the foreseeable future.

Between 2002 and 2012, USD 55 billion in total has been allocated in non-military aid to Afghanistan by the international community.

Aid decreased after 2012, but at the international aid meeting in Tokyo in 2012 the international community pledged an additional USD 16 billion (about SEK 136 billion) over the next four years. Sweden pledged to contribute SEK 8-8.5 billion over the 2015-2024 period.

However, this aid is conditional. Afghanistan must meet certain requirements concerning anti-corruption, human and women's rights and more to receive the promised funds. The international community has pledged to allow half the aid go through the Afghan state and that 80% of total aid will be used within the framework of the priorities of the Afghan development strategy.

What exactly will happen with these assistance promises in reality is not clear. Neither is the fate of the Afghan government commitments. Experience has shown that many countries have pledged large and spent small. When support was at its highest level it is estimated that not even half of what was promised was actually paid out by the donor countries.

Moreover, the largest aid donor, USA, has cut its non-military assistance through USAID to USD 1.12 billion in 2014 - a decrease of 50% as compared with the previous year.