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World Bank Forecasts Slowdown of Afghan Economic Growth

15 July 2020

According to the Afghan Ministry of Economy, the level of unemployment will increase by 61 percent this year.

“Afghanistan’s economy is set to contract by between 5.5 percent and 7.4 percent in 2020 because of COVID-19, exacerbating poverty, and leading to a sharp decline in government revenues, the World Bank said in its latest biannual "Afghanistan Development Update," released on Wednesday.

in the report, the World Bank warned that the proportion of Afghans living in poverty may increase from 55 percent in 2017 to between 61 percent and 72 percent in 2020 because of declining incomes and rising prices of food and other vital household goods.

However, the Afghan Ministry of Economy has rejected the report about Afghanistan’s economic growth rate, saying the report doesn’t match the ground realities.

The report finds that economic activity plummeted in the first half of 2020 as lockdowns and social distancing measures to curb COVID-19 negatively impacted the industry and service sectors. "Despite continued robust growth in agriculture following the recovery from the 2018 drought, lower outputs in industry and services, as well as declining revenues due to trade disruptions and weaker tax compliance have put government finances under pressure," the report said.

According to the Afghan Ministry of Economy, the level of poverty will increase by 61 percent this year, but the economic growth rate will reduce by half of what the World Bank has stated.

“The main reason was the coronavirus because borders were closed and economic activity inside the country was reduced, institutions were closed and our tax revenues also slumped, but alongside these issues, the lack of security, the lack of implementation of the law, corruption and other similar issues are also among the factors which reduce revenues,” said Shamroz Khan Masjidi, a spokesman for the Ministry of Finance.

economic growth rate will have a 4 percent slowdown. Of course, Afghanistan’s economy in terms of trade, national revenue and other related issues such as employment and poverty get affected,” said Suhrab Bahman, a spokesman for the Ministry of Economy.

“The COVID-19 crisis is having a devastating impact on the livelihoods of Afghans while undermining the government’s revenue collection and its capacity to finance comprehensive programs to save lives, protect the poor, and jumpstart the economy,” said Henry Kerali, World Bank Country Director for Afghanistan.

“The coronavirus (has had an impact) on Afghanistan’s economic development as the country faces continued insecurity, uncertainties regarding future levels of international support, and the expected initiation of peace talks with the Taliban,” says the report.

Previously, a report by the Biruni Institute, a non-partisan, and not-for-profit policy research think-tank also warned that COVID-19 would have major consequences on the Afghan economic growth rate.

“The report of the World Bank about a reduction in the revenues and economic slowdown to 7.5 percent is realistic,” said Nazir Kabiri, the head of Biruni Institute.