2015 Index of Economic Freedom

Afghanistan

overall scoreN/A
world rank
Rule of Law

Property RightsN/A

Freedom From Corruption8.0

Limited Government

Government Spending81.2

Fiscal Freedom91.7

Regulatory Efficiency

Business Freedom61.4

Labor Freedom67.5

Monetary Freedom72.6

Open Markets

Trade FreedomN/A

Investment Freedom55.0

Financial FreedomN/A

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Quick Facts
  • Population:
    • 30.6 million
  • GDP (PPP):
    • $35.1 billion
    • 3.6% growth
    • 10.5% 5-year compound annual growth
    • $1,150 per capita
  • Unemployment:
    • 8.5%
  • Inflation (CPI):
    • 7.4%
  • FDI Inflow:
    • $69.3 million
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Afghanistan’s economic freedom could not be fully assessed in the 2015 Index of Economic Freedom because of a lack of sufficient comparable data. This assessment is based on the limited information available from government and international sources. Afghanistan will receive an economic freedom score and ranking in future editions as more data become available.

While undergoing substantial political, economic, and social transformation over the past decade, Afghanistan has achieved rapid yet volatile economic growth. The construction and agricultural sectors have been the key contributors to economic expansion, which has averaged around 10 percent over the past five years. There have been noticeable improvements in such areas as health, education, and microfinance, but dependence on high levels of foreign aid continues.

The economy still lacks the overall institutional capacity to enhance productivity and promote self-sustaining growth. Although some progress has been made in developing the private sector, it remains small and informal, and there is little impetus for more vibrant entrepreneurial activity. Political uncertainty and security challenges undermine the rule of law and continue to be formidable.

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Background

Ashraf Ghani Ahmadzai is Afghanistan’s new president following a hotly contested election marred by allegations of vote-rigging. After three months of political wrangling between run-off candidates Ghani and former Afghan Foreign Minister Abdullah Abdullah, the two agreed to form a unity government. The terms of the agreement call for President Ghani, who won the election according to Afghanistan’s Independent Election Commission, to share power with Abdullah, who was named Chief Executive Officer. Ghani’s signing of the Bilateral Security Agreement with the U.S. shortly after his assumption of power opens the way for the U.S. to leave a non-combat presence of 9,800 troops in the country. Taliban insurgents continue to attack Afghan security forces and civilians. Afghanistan’s economy remains hobbled by poor infrastructure, insurgency, and corruption. The agricultural sector depends heavily on cultivation of the opium poppy.

Rule of LawView Methodology

Property Rights N/A Create a Graph using this measurement

Freedom From Corruption 8.0 Create a Graph using this measurement

In 2015, as foreign troops prepare to withdraw, the government is still challenged by serious corruption, heavy and persistent drug trafficking, and weak institutional capacity. Afghanistan’s judicial system is severely underdeveloped. Protection of property rights is weak. The lack of property registries or a land-titling database leads to title disputes, and an estimated 80 percent of land is held and transferred informally.

Limited GovernmentView Methodology

Despite efforts to improve the system, governance and security issues impede tax collection. The revenue that is collected comes from corporate and individual income taxes of 20 percent. Sales taxes also contribute to fiscal receipts. Expenditures have been rising and currently equal about 25 percent of the domestic economy. Future fiscal health may depend on the extent of donor contributions.

Regulatory EfficiencyView Methodology

The entrepreneurial environment still holds back private production and investment. Processes for establishing businesses and obtaining licenses have been relatively streamlined, but other structural barriers persist. The presence of a large informal economy continues to dampen development of a functioning labor market. The government has very limited influence on monetary policy.

Open MarketsView Methodology

Afghanistan has a 6.8 percent average tariff rate. Complex customs procedures deter imports. The constitution prohibits discrimination against foreign investors, but foreign ownership of land is not allowed. The underdeveloped financial sector remains dominated by banking. There are 17 commercial banks and three state banks, but scarce access to financing hinders private-sector growth.

Country's Score Over Time

Bar Graph of Afghanistan Economic Freedom Scores Over a Time Period

Country Comparisons

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Regional Ranking

rank country overall change
1Hong Kong89.6-0.5
2Singapore89.40.0
3New Zealand82.10.9
4Australia81.4-0.6
5Taiwan75.11.2
6Japan73.30.9
7South Korea71.50.3
8Malaysia 70.81.2
9Macau70.3-1.0
10Brunei Darussalam68.9-0.1
11Kazakhstan63.3-0.4
12Thailand 62.4-0.9
13Philippines62.22.1
14Samoa61.90.8
15Kyrgyz Republic 61.30.2
16Vanuatu61.11.6
17Azerbaijan61-0.3
18Tonga59.31.1
19Mongolia59.20.3
20Fiji590.3
21Sri Lanka58.6-1.4
22Indonesia58.1-0.4
23Cambodia57.50.1
24Bhutan57.40.7
25Pakistan 55.60.4
26India54.6-1.1
27Bangladesh 53.9-0.2
28Maldives53.42.4
29Papua New Guinea53.1-0.8
30China52.70.2
31Tajikistan52.70.7
32Vietnam51.70.9
33Laos51.40.2
34Nepal51.31.2
35Micronesia49.6-0.2
36Solomon Islands470.8
37Uzbekistan470.5
38Burma46.90.4
39Kiribati46.40.1
40Timor-Leste45.52.3
41Turkmenistan41.4-0.8
42North Korea1.30.3
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