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- GDP (PPP):
- $62.3 billion
- 1.5% growth
- 5.4% 5-year compound annual growth
- $1,947 per capita
- Inflation (CPI):
- FDI Inflow:
Afghanistan’s economic freedom is graded for the first time in the 2017 Index, reflecting the improved availability of key economic data. Over the past decade, the country has achieved rapid yet volatile economic growth. Construction and agriculture have been the key contributors to economic expansion. Afghanistan became a member of the World Trade Organization in 2016.
Political uncertainty and security challenges remain formidable. The rule of law continues to be fragile and uneven across the country; the inability to deliver even basic services reliably has eroded public confidence in the government; and systemic corruption has undermined the effectiveness of the courts, the banking sector, and other parts of the economy.
Mohammad Ashraf Ghani became president following an election marred by allegations of vote-rigging in 2014. After three months of political wrangling, Ghani and former Foreign Minister Abdullah Abdullah agreed to form a unity government with Abdullah as chief executive officer. Taliban insurgents stepped up their attacks during the past year and now hold more territory than they have held at any other time since 2001 when they were ousted from power. In response to this offensive, President Obama decided to slow the withdrawal of U.S. troops from Afghanistan and keep about 8,400 U.S. forces in the country through the end of his term.
Protection of property rights is weak due to the lack of a comprehensive land titling system, disputed land titles, and the incapacity of commercial courts. The judicial system operates haphazardly; in many places, justice is administered by inadequately trained judges according to a mixture of legal codes. Corruption is endemic throughout society, and demands for bribery at border crossings hamper development of a market economy.
The top income and corporate tax rates are 20 percent. The overall tax burden equals 6.5 percent of total domestic income. Government spending has amounted to 26.4 percent of total output (GDP) over the past three years, and budget deficits have averaged 1.3 percent of GDP. Public debt is equivalent to 6.8 percent of GDP. Years of political and security uncertainty have caused increased budgetary uncertainty and fiscal vulnerability.
Processes for establishing businesses and obtaining necessary licenses are relatively streamlined, but other structural barriers persist. The presence of a large informal economy continues to dampen development of a functioning labor market. Due to the severe underdevelopment of Afghanistan’s financial system, the government has very limited influence on monetary policy.
Trade is important to Afghanistan’s economy; the value of exports and imports taken together equals 53 percent of GDP. The average applied tariff rate is 7.0 percent, and regulatory barriers deter trade and investment. Security concerns and the financial system’s weak capacity have slowed investment growth. The financial sector remains underdeveloped, and trust in the banking system has been undermined.