The World Bank announced in its latest report titled “Afghanistan Development Update – Spring 2026” that the Afghan economy has continued to grow moderately, with real GDP reaching 4.8 percent despite regional tensions and border closures. However, the international institution warns that this economic growth has not led to improved living standards or increased incomes, and in fact, living standards in Afghanistan are declining.
Publish dateSaturday 30 May 2026 - 08:39
Story Code : 356264
Afghan Voice Agency (AVA) - Kabul: According to the report, the return of about 3.7 million Afghans to the country, coupled with rapid population growth that reached about 11 percent in 2025, has outpaced the pace of economic expansion, resulting in a 5.6 percent decline in per capita GDP. In simple terms, the Afghan economic pie has gotten bigger, but the number of people who need to share in this pie has grown much faster.
The World Bank says economic growth has been driven largely by strong domestic demand and the return of millions of Afghans to the country, but weak investment and deep structural constraints have offset the benefits of this growth.
Accelerating inflation; double pressure on purchasing power
While the inflation rate previously averaged 3.6 percent, the index jumped to 7.6 percent by March 2026. According to the World Bank, food price pressures, strong supply and demand constraints were the main factors behind this increase in inflation. This inflationary surge has further eroded the purchasing power of Afghan households and exacerbated the food insecurity and poverty crisis across the country.
Domestic revenue versus foreign aid
The World Bank’s Spring 2026 report also points to a positive development in the area of taxation: domestic revenue collection reached 19.8 percent of GDP in 2025, thanks to strengthened tax law enforcement. However, reduced foreign aid has limited investment in infrastructure and weakened the government’s ability to respond to economic shocks.
Fragile External Balance; Widening Trade Deficit
Afghanistan’s external position remains fragile. The country’s current account deficit is projected to reach about 36.1 percent of GDP in 2025, reflecting structural dependence on imports and declining foreign inflows. High import demand, coupled with weak export performance, has further widened the trade deficit.
Private Sector; Signs of Life Amid Structural Obstacles
The World Bank report points to signs of resilience in Afghanistan’s private sector. Firm-level data indicate a relative recovery in sales, employment, and investment since 2022. However, serious structural obstacles remain to sustainable growth and job creation. These include unreliable electricity, limited access to finance, and a widespread informal economy.
World Bank Senior Official Warns
“The Afghan economy is resilient against significant headwinds, but growth alone is not enough,” said Fares Haddad-Zervos, World Bank Country Director for Afghanistan. “With millions of Afghans returning home, rapid population growth has outpaced economic gains – resulting in lower incomes and deeper poverty and fragility. Unlocking private sector capacity and improving access to finance are essential steps to help create jobs and ultimately improve people’s lives.”
Outlook: Growing uncertainty and risks
In its forecast for the future of Afghanistan’s economy, the World Bank said economic growth in 2026 was likely to be revised down to around 4 percent, but warned that this figure could be lower depending on the length and intensity of the conflicts in the Middle East. Continued population growth, declining foreign aid, and external shocks—particularly from regional instability—have weighed on Afghanistan’s economic outlook. The World Bank report emphasizes that sustained economic recovery requires policies that strengthen the private sector, improve access to finance, invest in infrastructure, and create opportunities for productive employment. Addressing structural constraints is critical to improving people’s livelihoods and achieving more resilient and inclusive growth, the international institution believes.
The World Bank says economic growth has been driven largely by strong domestic demand and the return of millions of Afghans to the country, but weak investment and deep structural constraints have offset the benefits of this growth.
Accelerating inflation; double pressure on purchasing power
While the inflation rate previously averaged 3.6 percent, the index jumped to 7.6 percent by March 2026. According to the World Bank, food price pressures, strong supply and demand constraints were the main factors behind this increase in inflation. This inflationary surge has further eroded the purchasing power of Afghan households and exacerbated the food insecurity and poverty crisis across the country.
Domestic revenue versus foreign aid
The World Bank’s Spring 2026 report also points to a positive development in the area of taxation: domestic revenue collection reached 19.8 percent of GDP in 2025, thanks to strengthened tax law enforcement. However, reduced foreign aid has limited investment in infrastructure and weakened the government’s ability to respond to economic shocks.
Fragile External Balance; Widening Trade Deficit
Afghanistan’s external position remains fragile. The country’s current account deficit is projected to reach about 36.1 percent of GDP in 2025, reflecting structural dependence on imports and declining foreign inflows. High import demand, coupled with weak export performance, has further widened the trade deficit.
Private Sector; Signs of Life Amid Structural Obstacles
The World Bank report points to signs of resilience in Afghanistan’s private sector. Firm-level data indicate a relative recovery in sales, employment, and investment since 2022. However, serious structural obstacles remain to sustainable growth and job creation. These include unreliable electricity, limited access to finance, and a widespread informal economy.
World Bank Senior Official Warns
“The Afghan economy is resilient against significant headwinds, but growth alone is not enough,” said Fares Haddad-Zervos, World Bank Country Director for Afghanistan. “With millions of Afghans returning home, rapid population growth has outpaced economic gains – resulting in lower incomes and deeper poverty and fragility. Unlocking private sector capacity and improving access to finance are essential steps to help create jobs and ultimately improve people’s lives.”
Outlook: Growing uncertainty and risks
In its forecast for the future of Afghanistan’s economy, the World Bank said economic growth in 2026 was likely to be revised down to around 4 percent, but warned that this figure could be lower depending on the length and intensity of the conflicts in the Middle East. Continued population growth, declining foreign aid, and external shocks—particularly from regional instability—have weighed on Afghanistan’s economic outlook. The World Bank report emphasizes that sustained economic recovery requires policies that strengthen the private sector, improve access to finance, invest in infrastructure, and create opportunities for productive employment. Addressing structural constraints is critical to improving people’s livelihoods and achieving more resilient and inclusive growth, the international institution believes.
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