2019 Index of Economic Freedom

Afghanistan

overall score51.5
world rank152
Rule of Law

Property Rights19.6

Government Integrity25.2

Judicial Effectiveness29.6

Government Size

Government Spending80.3

Tax Burden91.7

Fiscal Health99.3

Regulatory Efficiency

Business Freedom49.2

Labor Freedom60.4

Monetary Freedom76.7

Open Markets

Trade Freedom66.0

Investment Freedom10.0

Financial Freedom10.0

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Quick Facts
  • Population:
    • 35.5 million
  • GDP (PPP):
    • $69.6 billion
    • 2.5% growth
    • 2.9% 5-year compound annual growth
    • $1,958 per capita
  • Unemployment:
    • 8.8%
  • Inflation (CPI):
    • 5.0%
  • FDI Inflow:
    • $53.9 million

Afghanistan’s economic freedom score is 51.5, making its economy the 152nd freest in the 2019 Index. Its overall score has increased by 0.2 point, with advances in labor freedom, property rights protection, and judicial effectiveness outpacing declines in business freedom and monetary freedom. Afghanistan is ranked 39th among 43 countries in the Asia–Pacific region, and its overall score is below the regional and world averages.

The improved availability of key economic data made it possible to grade Afghanistan’s economic freedom for the first time in the 2017 Index. Its score in the 2019 Index reflects steady, incremental improvement in several economic freedom indicators. Over the past decade, economic growth has been volatile but rapid, with construction and agriculture the key contributors to economic expansion. Political uncertainty, corruption, and security challenges remain formidable, and the rule of law remains fragile and uneven across the country.

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Background

Former World Bank technocrat Ashraf Ghani became president of this mountainous and landlocked country in 2014 following an election marred by allegations of vote rigging. After much political wrangling, President Ghani and former Foreign Minister Abdullah Abdullah formed a unity government with Abdullah as the newly created chief executive officer. Timing of the scheduled 2019 presidential election will likely depend on progress in talks with the Taliban. Afghanistan is heavily dependent on international military and economic assistance, which constituted an estimated 4 percent of GDP in 2016, and its living standards are among the lowest in the world. Licit exports include table grapes and raisins, but the economy remains heavily dependent on illicit opium cultivation. An ongoing insurgency and drought have hampered economic growth.

Rule of LawView Methodology

Property Rights 19.6 Create a Graph using this measurement

Government Integrity 25.2 Create a Graph using this measurement

Judicial Effectiveness 29.6 Create a Graph using this measurement

Protection of property rights is weak due to a lack of a comprehensive land titling system, disputed land titles, and slow-moving commercial courts. The judicial system operates haphazardly, and justice is often administered based on a mixture of legal codes by inadequately trained judges and local elders or shuras. Corruption is endemic throughout society and hampers economic development. Reforms to reduce corruption have stalled.

Government SizeView Methodology

The top income and corporate tax rates are 20 percent. The overall tax burden equals 5.0 percent of total domestic income. Over the past three years, government spending has amounted to 25.6 percent of the country’s output (GDP), and budget deficits have averaged 0.6 percent of GDP. Public debt is equivalent to 7.3 percent of GDP.

Regulatory EfficiencyView Methodology

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. The government has a limited influence over monetary stability because of Afghanistan’s severely underdeveloped financial system.

Open MarketsView Methodology

The combined value of exports and imports is equal to 55.9 percent of GDP. The average applied tariff rate is 7.0 percent. As of June 30, 2018, according to the WTO, Afghanistan had 22 nontariff measures in force. 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.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Hong Kong90.20.0
2Singapore89.40.6
3New Zealand84.40.2
4Australia80.90.0
5Taiwan77.30.7
6Malaysia 74-0.5
7South Korea72.3-1.5
8Japan72.1-0.2
9Macau710.1
10Thailand 68.31.2
11Indonesia65.81.6
12Kazakhstan65.4-3.7
13Azerbaijan65.41.1
14Brunei Darussalam65.10.9
15Philippines63.8-1.2
16Bhutan62.91.1
17Kyrgyz Republic 62.3-0.5
18Fiji62.20.2
19Samoa62.20.7
20China58.40.6
21Papua New Guinea58.42.7
22Cambodia57.8-0.9
23Tonga57.7-5.4
24Laos57.43.8
25Sri Lanka56.4-1.4
26Vanuatu56.4-13.1
27Bangladesh 55.60.5
28Tajikistan55.6-2.7
29Mongolia55.4-0.3
30Vietnam55.32.2
31India55.20.7
32Pakistan 550.6
33Solomon Islands54.6-2.9
34Nepal53.8-0.3
35Burma53.6-0.3
36Uzbekistan53.31.8
37Maldives53.22.1
38Micronesia51.9-0.4
39Afghanistan51.50.2
40Turkmenistan48.41.3
41Kiribati47.3-3.5
42Timor-Leste44.2-3.9
43North Korea5.90.1
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