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- GDP (PPP):
- $29.7 billion
- 5.7% growth
- 10.3% 5-year compound annual growth
- $956 per capita
- Inflation (CPI):
- FDI Inflow:
Afghanistan’s economic freedom cannot be graded because of a lack of reliable, comparable data. The government’s compilations of official economic data are inadequate, and many of the international sources relied upon for Index grading contain incomplete data on Afghanistan. This assessment is based on the limited data available from government and international sources. Afghanistan’s economic freedom will be ranked in future editions when more reliable information becomes available.
The rule of law remains fragile and uneven across the country. The protection of property rights is undermined by political and security challenges, and the inability to deliver basic services on a reliable basis has severely eroded confidence in the government. Pervasive corruption and embezzlement continue to exacerbate the loss of trust.
The Afghan economy has recorded strong but very volatile growth, driven by agriculture, construction, and services. Although official policies aim to foster vibrant economic development, the private sector is hampered by regulatory ineffectiveness. Despite years of eradication efforts, Afghanistan remains the world’s top opium producer, accounting for around 90 percent of the global supply.
President Hamid Karzai was re-elected in 2009 after his chief rival declined to participate in a runoff, citing alleged vote-rigging in the first round of elections. The U.S. and NATO have committed to withdrawing all combat forces by the end of 2014 but will continue to fund and train the Afghan National Army and provide development aid. Afghanistan is one of the world’s poorest countries. GDP is growing, but the economy remains hobbled by poor infrastructure, a Taliban-led insurgency, and endemic corruption. The agricultural sector still depends heavily on cultivation of the opium poppy, and illegal drug trafficking fuels violence and instability. India and China are increasingly investing in Afghanistan’s mineral industry, especially iron ore and copper.
Afghanistan’s judicial system is severely underdeveloped. Protection of property rights is weak due to a lack of property registries or a land titling database, disputed land titles, and the poor capacity of commercial courts. Corruption permeates all sectors and levels of government and seriously impedes the rebuilding of state institutions. The very large opium economy is the most significant source of corruption.
The top income and corporate tax rates are about 20 percent. Other taxes include sales taxes. Budget deficits have remained below 2 percent of GDP on average, and the government has produced a surplus in the past two years. Government spending has moderated, but the government still relies heavily on foreign assistance.
Reform measures in recent years have streamlined the procedures for establishing a business, but the overall regulatory environment is still hampered by bureaucratic impediments to private-sector production and investment. The labor market remains severely underdeveloped, with the 2009 labor law poorly implemented. Inflation has been increasing steadily since 2009.
Inefficient customs administration, inadequate infrastructure, and corruption raise the cost of trade. The constitution prohibits discrimination against foreign investors, but 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 by the bailout of Kabul Bank, reportedly tied to the Karzai administration.