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Afghanistan’s economy shows modest growth but recovery remains fragile

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The Afghan economy is showing signs of moderate growth, but still faces significant challenges, including fiscal constraints, trade imbalances, and a limited capacity for public investment, the World Bank (WB) said Wednesday.

According to the organization’s latest Afghanistan Development Update, issued on Wednesday, “Afghanistan’s economic recovery remains uncertain”.

Modest GDP growth of 2.7%, driven by private consumption, has recouped only about 10% of past economic losses, indicative of the slow and fragile nature of the recovery, the WB said.

According to the organization, this level of growth has done little to address deeper structural issues and significant vulnerabilities within Afghanistan’s economy.

“Enabling women’s participation in the economy, strengthening domestic resource mobilization, maintaining price stability, and addressing critical deficits in human capital - particularly in education and healthcare, and especially for women - will be essential for long-term recovery and reducing vulnerability to future shocks,” the WB said in a statement.

Faris Hadad-Zervos, World Bank Country Director for Afghanistan said: “Afghanistan's long-term growth prospects depend on tapping into the substantial potential of the domestic private sector and improving the overall business environment.

“Key to this is increased investment, providing access to finance to small businesses, and supporting educated and skilled women entrepreneurs so their businesses can thrive. Without this, the country risks prolonged stagnation with limited prospects for sustainable development,” he said.

Meanwhile, the partial recovery, coupled with falling food prices, has contributed to a gradual improvement in household welfare.

But most Afghan households continue to struggle to meet basic needs and poverty remains widespread.

“Vulnerable groups, including women, children, and displaced populations, continue to bear the brunt of the economic hardship, due to the lack of social protection mechanisms,” the WB stated.

In addition, Afghanistan’s trade dynamics remain a significant challenge.

In 2023-24, the country’s exports remained stable, but imports surged, leading to a widening trade deficit, the WB reported.

The appreciation of the afghani (AFN) made imports cheaper, fueling demand for foreign goods, while domestic industrial activity revived, increasing the need for imported inputs.

However, the trade deficit, exacerbated by Afghanistan’s reliance on imports for essential goods like fuel, food, and machinery, might pose a risk to the country’s economic stability, the organization stated.

Meanwhile, Deputy Minister of Economy Abdul Latif Nazari said that Afghanistan's economy has a clear outlook and the current problems are caused by sanctions and the freezing of the country's foreign exchange reserves.

“Afghanistan's economic outlook is bright and hopeful. Some of the economic problems that exist are due to sanctions, banking restrictions and the freezing of assets of the Afghan people,” Nazari added.

“Our effort is to free the property of the people of Afghanistan as soon as possible and use it in line with the economic growth and development of the country.”

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Trump claims Russia invaded Ukraine due to U.S. withdrawal from Afghanistan

Trump claimed that he was in power during a time when “we had no wars,” but now he is “going into a world that’s burning.”

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US President-elect Donald Trump believes the withdrawal of American troops from Afghanistan was "badly handled" and that seeing this, Russia decided to launch a full-scale invasion of Ukraine.

Trump claimed that he was in power during a time when "we had no wars," but now he is "going into a world that's burning."

The US President-elect criticized how the American withdrawal from Afghanistan was carried out. According to Trump, he would have withdrawn the troops from Afghanistan earlier than President Joe Biden and done so "with dignity and strength."

"The way they got out was outrageous. Leaving billions of dollars of brand new military equipment that I bought in the hands of the Afghans. And specifically to the Taliban (Islamic Emirate)," Trump added.

He emphasized that the US withdrawal from Afghanistan was "badly handled."

"And because of that, I think Russia went and attacked Ukraine when they saw that. They said, 'these guys are incompetent - they don't know what they're doing'. But we know what we're doing now," Trump added.

In April 2021, it was announced that the United States had begun withdrawing its troops from Afghanistan, where they had been stationed since 2001. All American soldiers were fully withdrawn from the country by August 31, 2021.

US forces were initially deployed to Afghanistan to combat terrorism following the September 11 attacks.

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US congressman urges Trump to stop aid to Afghanistan

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Congressman Tim Burchett has urged President-elect Donald Trump to halt financial aid to Afghanistan.

Burchett said in a letter that the US government should not fund its enemies abroad.

"I want to express my serious concern about sending foreign aid to the Taliban (Islamic Emirate) and my willingness to work with the Trump administration to prevent the transfer of US taxpayer dollars. The United States should not provide financial assistance to its enemies abroad,” he said.

Meanwhile, the Ministry of Economy has expressed hope that international aid should not be stopped and that efforts are ongoing to strengthen Afghanistan's infrastructure and move the country towards self-sufficiency.

Abdul Latif Nazari, Deputy Minister of Economy, said: "We hope that international aid to the people of Afghanistan will not be halted. However, at the same time, our focus is on national capacities. We want to strengthen Afghanistan's infrastructure so that the country gradually moves towards self-sufficiency."

Experts, however, do not view international aid as a fundamental solution for Afghanistan's economy but stated that given the country's humanitarian and economic situation, the continuation of such aid remains essential.

Abdul Zuhoor Madaber, an economic expert, said: "Humanitarian aid is not a fundamental solution to the country's economy, but given the economic crisis we are facing, it can be impactful."

The US has provided over $2 billion in aid-to-aid organizations in Afghanistan over the past three years.

The US State Department has stated that this aid is solely for relief and charitable programs, intended to support ordinary Afghan people struggling with poverty, hunger, and food shortages.

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McCall claims Daesh has been revived in Afghanistan

The Islamic Emirate of Afghanistan (IEA) has however repeatedly said that Daesh has been eliminated in Afghanistan.

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Michael McCall, the chairman of the US House Foreign Affairs Committee said over the weekend that the US is witnessing a resurgence of Daesh in the Afghanistan region.

In a discussion with America’s ABC television, McCall said one thing he was “worried about, is with the fall of Afghanistan and the debacle, ... we are seeing a resurgence of ISIS and ISIS-K (Daesh) in the Khorasan region between Afghanistan and Pakistan that concerns me greatly.”

McCall added that eight people with ties to Daesh recently entered the United States.

“We know that eight ISIS individuals have entered the United States. ... So you really have two types of threats.

“One is operational; the other one is inspired attacks, radicalized over the internet. They're both equally lethal, and they need to be focused on to stop it," he said.

The Islamic Emirate of Afghanistan (IEA) has however repeatedly said that Daesh has been eliminated in Afghanistan.

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