24 Mar 2012
Afghanistan’s Economy

This paper is to explain the past, current and future economy of Afghanistan. As of 2011, Afghanistan has a population of roughly 30 million and is expected to increase to around 82 million people by the year 2050. Afghanistan is the 41st largest country in the world, and is similar in size to the state of Texas. Ranked 91st in world economies it has very high unemployment, nearly 35% countrywide. According to data from the Central Intelligence Agency, nearly 42% of Afghanistan’s population lives on less than $1 a day and almost 35% of the population lives below the poverty line. Gross Domestic Product (GDP) per capita is a trifling $900, and is mainly due to the fact that 78% of the workforce is agricultural in nature. Only 5.7% of Afghans work in industries like mining and textiles, and another 15.7% of the Afghani work force are in the service industry. But to truly understand the Afghani people and their nation’s future economic endeavors, we must understand their past economy.

In the 1930’s Afghanistan began a momentous undertaking of instituting new monetary methods unto their nation such as introducing paper money, created numerous facilities for general and higher education, and established a national bank. Unfortunately until roughly the 1950’s, Afghanistan lacked much of the necessary national infrastructure such as roads and railways to support an expansion in their industrial sectors. This factor locked them into decades of reliance on animal husbandry, agriculture and hand-made or small-scale manufacturing products. While agriculture has played a dominate role in Afghanistan’s past economy, natural resources such as natural gas and minerals have contributed significantly more to the country’s economy since roughly 1967. From the late 1960’s to the 1980’s natural gas sales accounted for over 56% of all total national revenues. Unfortunately in 1979, the Soviet Union invaded and the resulting civil war destroyed most of the country’s infrastructure and completely disrupted its economic activities. During these events the GDP was negatively affected by loss of human capital (escaping refugees) and the destruction of its transportation infrastructure kept Afghanistan from recovering for many years. But an interesting and dubious source of economic income in Afghanistan’s past was its black market trading of goods into and through Pakistan, which produced in excess of tens of thousands of jobs for Afghans well into late 1990’s and early 2000’s.

Pakistan’s older, duty-free trade laws created a black market trade across its borders that were a major source of income for Afghans until around 2003. Pakistan finally realized the scope of non-taxed trade moving across its borders and revamped its trade laws effectively killing a booming, yet possibly dishonest, industry. Although it started at a much smaller base than some of its neighboring countries, Afghanistan’s current economy is slowly improving, and during the last decade the country’s growth rate has been at around 8% a year.

Economy of Afghanistan

|Economy of Afghanistan |
| |
|Rank |91st |
|Currency |Afghani (AFN) |
|Fiscal year |21 March - 20 March |
|Trade organizations |SAARC, ECO, negotiating SCO and WTO accession |
|Statistics |
|GDP |$27.36 billion (2010 est.) |
|GDP growth |8.2% (2010) |
|GDP per capita |$900 (2010) [1] |
|GDP by sector |agriculture: 31.6% industry: 26.3% services: 42.1% (2008) |
|Inflation (CPI) |0.9% (2009) |
|Population |36% (2009) |
|below poverty line | |
|Labor force |15 million (2004) |
|Labor force |agriculture 78.6%, industry 5.7%, services 15.7% (2009) |
|by occupation | |
|Unemployment |35% (2008) |
|Main industries |small-scale production of textiles, soap, furniture, shoes, fertilizer, apparel, food-products, |
| |non-alcoholic beverages, mineral water, cement; handwoven carpets; natural gas, coal, copper |
|Ease of Doing Business |160th [2] |
|Rank | |
|External |
|Exports |$547 million (2009) |
|Export goods |opium, fruits and nuts, Afghan rugs, wool, cotton, hides and pelts, and gemstone |
|Main export partners |Pakistan 25.9%, India 25.5%, US 14.9%, Tajikistan 9.6%, Germany 5% (2010) |
|Imports |$5.3 billion (2008) |
|Import goods |machinery and other capital goods, food, textiles and petroleum products; most consumer goods |
|Main import partners |United States 29.1%, Pakistan 23.3%, India 7.6%, Russia 4.5%, Germany 4.2% (2010) |
|Public finances |
|Public debt |$2.3 billion (2011)[3] |
|Revenues |$2.587 billion (2009 including grants) |
|Expenses |$2.86 billion (2009 total exp.) |
|Main data source: CIA World Fact Book |
|All values, unless otherwise stated, are in US dollars |

A closer look at the changes and improvements in Afghanistan’s economy shows some attention-grabbing changes such as the move from productive food-crops to other questioningly beneficial harvests. In the past wheat, fruit and nuts made up a large portion of the crops grown for money, lately with its more lucrative returns, Afghanistan’s main agricultural cash-crop is opium poppies. In fact, due to the large monetary returns of this crop, and the suitable growing climate, the country has become the largest grower and exporter of opium in the world. This has fueled a drug trafficking trade worth billions and has even forced US and NATO forces into challenging predicaments such as ignoring the multitudes of acres of the illicit crop. Despite the obvious negative effects of the Afghani opium trade on the world, there are other areas of Afghanistan’s economy that are growing and providing positive effects. Afghanistan’s natural mineral, gas and man-power resources are vast and fairly untapped. The U.S Geological Survey estimates that the mineral deposits of Afghanistan alone are worth between $900 billion and $3 trillion dollars. China has already paid $3 billion dollars for a 30 year lease on one copper mine alone. Oil, natural gas, marble and other mineral resources are slowly growing into more stable and dependable revenue sources and these industries could eventually overtake agriculture as the primary money-generating industry. Afghan’s rapidly developing service industry is pushing the economy forward at an incredible rate, with its percentage of GDP —composition by sector— looking like this in 2008:

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If stability is brought to Afghanistan as a country, then the future could be bright for many of the country’s 30 million people. Despite two major conflicts involving global Super-Powers such as Russia and the US, and a Civil War coupled with religious strife, Afghanistan has the resources and the people to rise from its antiquated third-world ways and become a viable economic power in the 21st century. Change will come slowly and be difficult, but Afghani’s are a determined people, who possess the capacity, resources and the will to rise up and take their country’s future into its own hands, to become a strong and economically stable country instead of a war torn one.

Works Cited

Author(s), Unknown. "Afghanistan." CIA world factbook. CIA, 2012. Web. 20 Apr 2012. https://www.cia.gov/library/publications/the-world-factbook/geos/af.html.

Author , Unknown. "Economy - Afghanistan." Encyclopedia of the Nations. Unknown, Unknown Pub. Date. Web. 18 Apr 2012. http://www.nationsencyclopedia.com/Asia-and-Oceania/Afghanistan-ECONOMY.html.

Nordland, N. "U.S. turns a blind eye to opium in Afghanistan." NYTimes.com. The New York Times, 2010. Web. 19 Apr 2012. http://www.nytimes.com/2010/03/21/world.