PUBLIC AFFAIRS SECTION
Press Release
31 January 2006
Economy and Business Climate
In a few short years, Afghanistan's leaders have made great progress in building a new foundation for their country's shattered economy. With help from the international community, they established a new currency, managed inflation, and steadily improved the business climate with new economic laws, development of the banking sector, customs and tax reform, and better fiscal accountability.
Real progress:
- Growth: IMF estimates of real GDP growth were 16% in 2003-04; 8% for 2004-05; and
14% for 2005-06. Active sectors include construction, telecommunications
and hotels/services.
- Exports: Exports increased from an estimated $300 million last year to an expected
$500 million in 2005-06, although imports will likely outpace exports for the next
several years as the country rebuilds.
- Regional integration: The Afghan government is actively working to improve its
trade relations and develop energy and transportation corridors with its neighbors as
it seeks to re-establish its traditional role as a "land bridge" between
Central and South Asia.
Of course, challenges remain:
- Narcotics: In 2005, narcotics trade was equivalent to about 52% of Afghanistan's
legitimate GDP. Acreage under poppy cultivation declined significantly from 2004,
but, because of better growing conditions the decline in total opium yield was
smaller.
- Infrastructure: Afghanistan needs more roads, electrical power, water
infrastructure, and other transportation services.
- Laws: A modern legal and regulatory framework is needed to support commercial
activity. Some basic investment and economic laws still need to be adopted and
implementing regulations and standards developed.
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