AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

AFGHANISTAN
SOCIO-ECONOMIC
OUTLOOK

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AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

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 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Acknowledgements
This report is the second Afghanistan Socio-economic Outlook prepared by the United
Nations Development Programme Team in Afghanistan under the overall direction
and guidance of Abdallah Al Dardari, UNDP Resident Representative in Afghanistan.
The lead authors were Zafiris Tzannatos and Violetta Dalla (co-author).

Individual chapters were prepared by the UNDP Afghanistan team: Adnan Mazarei, Ali
Çufadar, Sebnem Sahin, Taoufik Rajhi and Chokri Thabet (UNDP consultants: Macro
Chapter), Muhammad Nassim Attahi (UNDP Policy Unit and Task Manager: Policy
Chapter), and Mohammadullah Rahmdil (UNDP Programme Unit: data coordinator).

The report has benefitted from comments from Kanni Wignaraja (UNDP Regional
Director, Asia-Pacific), Surayo Buzurukova (Senior Deputy Resident Representative,
UNDP Afghanistan), Stanislav Saling (Communications Specialist, UNDP RBAP),
Philip Schellekens (Chief Economist, UNDP RBAP), Amos Peters, Devika Iyer, Mizuho
Okimoto-Kaewtathip, Basudeb Guha-Khasnobis and Sudyumna Dahal (UNDP Inclusive
Growth team), Renata Rubian (UNDP Policy Advisor, Inclusive Growth), Yasmina
Azhari (UNDP SME Advisor), Sahba Sobhani and Johannes Sahmland-Bowling (UNDP
Istanbul International Center for Private Sector Development – IICPSD), and Güven
Sak and Sibel Güven (The Economic Policy Research Foundation of Turkey -TEPAV).

The UNDP Afghanistan Country Office team included Usha Rao and Michel de Buono
(Energy) Fawaz Sabri (Private Sector, Finance and Banking), and Hyewon Jung, Riad
Sabbagh, Won-Na Cha, Summer Lee and Syeed Farhad Zalmai (Communications
team). Pashtana Durrani, Esin Erkan, Sayed Eshaq Fahim Maqsodi, Nazar Muhammad
Shinwari and Mohammad Shiraz Ayazi provided logistics support during the preparation
of the report and the workshops held in Istanbul, Amman, Dubai and Kabul.

The UNDP team also held constructive discussions on poverty issues with Melinda
Good, Ximena Del Carpio, Cesar Cancho, Oscar Eduardo Barriga Cabanillas, Andrea
Mario Dall’Olio, Silvia Redaelli, and Mohammad Waheed (World Bank); and with Omar
Joya (University of Bordeaux). The report was peer reviewed by Sultan Barakat, Logan
Cochrane, Rey Jureidini and Mazar Saleh (Hamad Bin Khalifa University, Doha).

This report has been designed by Farin Sadiq and Munisa Rashid, UNDP Afghanistan
Communications Team.

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Contents
ACKNOWLEDGEMENTS.................................................................................................................................1
ACRONYMS......................................................................................................................................................6
FOREWORD......................................................................................................................................................9
EXECUTIVE SUMMARY.................................................................................................................................12
Economic Developments since August 2021......................................................................................13
Economic Outlook for 2023 and Beyond..............................................................................................14
Impact on Social Conditions.....................................................................................................................14
Food Affordability and Poverty Trends......................................................................................................14
Multiple Shocks Faced by Households....................................................................................................15
Household Coping Strategies..................................................................................................................15
The Impact of Humanitarian Relief.............................................................................................................15
Social Outlook for 2023 and Beyond....................................................................................................16
Bolder Policy Directions for the Future?................................................................................................17
KEY FINDINGS AND MESSAGES OF THIS REPORT..............................................................................18
INTRODUCTION.............................................................................................................................................21

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1. ECONOMIC COLLAPSE AND FUTURE PROSPECTS
• Introduction
• Pre-existing Conditions in Afghanistan
• The Pivotal Moment: August 15, 2021
• Exchange Rate and Balance of Payments
• Inflation Dynamics
• Public Finance Challenges
• Financial Sector Crisis
• Monetary Policy Dilemmas
• Impediments to private sector development
• Recent Stabilization Signs but Grim Near-term Outlook
• Longer-Term Growth Challenges
• Conclusions
• KEY FINDINGS AND MESSAGES

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2. THE DECLINE IN INCOMES HAS BROUGHT
MILLIONS BELOW THE 2020 POVERTY LINE
• Introduction
• Per capita incomes and poverty in the last 10 years
• Poverty estimates since 2020.
• IE&LFS2020 and WoAA2022: A comparison
• How many Afghans in 2022 were below the 2020 poverty line
of AFN2,268?
• Funding the gap to bring per capita expenditures in 2022
to the 2020 poverty line
• Conclusions
• KEY FINDINGS AND MESSAGES

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3. FOOD, JOBS, RESTRICTIONS ON WOMEN’S WORK:
THE MANY SHOCKS HOUSEHOLDS FACE
• Introduction
• Major shocks
• Priority Needs
• Conclusions
• KEY FINDINGS AND MESSAGES

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4. CRIPPLING DEBT AND CHILD BRIDES:
COPING MECHANISMS
• Introduction
• How do households cope with the current situation compared to
2020?
• Many households have run out of coping mechanisms
• Some households are in a better position than others
• The limited role of income from employment
• Conclusions
• KEY FINDINGS AND MESSAGES

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5. WHAT CAN AND DOES HUMANITARIAN ASSISTANCE
PROVIDE?
• Introduction
• The extent and characteristics of humanitarian assistance
• Impact of humanitarian assistance
• Conclusions
• KEY FINDINGS AND MESSAGES

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6. POLICY DIRECTIONS
• Introduction
• Policy Objective
• Macroeconomic Priorities
• Private Sector
• Banking and Finance
• Sanctions
• Energy
• Opium
• Gender
• Governance and Institutions
• Conclusions
• Policy Directions

REFERENCES.................................................................................................................................................89
ENDNOTES.....................................................................................................................................................93

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List of Figures

Figure 1: Real GDP decline, overall and by sector, 2020-2021 (in percent)...............25
Figure 2: Exchange rate (AFN per US$, monthly averages).........................................26
Figure 3: International trade in goods (in billions of US$).............................................27
Figure 4: Price index (2015=100)........................................................................................28
Figure 5: Inflation rate (y/y percentage change).............................................................28
Figure 6: Real GDP level (2019=100).................................................................................33
Figure 7: Per capita income (in current US$)...................................................................33
Figure 8: Per capita GDP in US$ adjusted by the exchange rate................................39
Figure 9: The per capita distribution of expenditures (August/September 2022)........40
Figure 10: GDP per capita and poverty rate (right axis)..................................................41
Figure 11: Food Price Index (September 2020 = 100).....................................................41
Figure 12: % of households and persons below selected levels of monthly per capita
expenditure...........................................................................................................................44
Figure 13: Households affected by major adverse event in the last 6 months (in
millions)..................................................................................................................................49
Figure 14: Type of impact of specific events on households (in millions)...................50
Figure 15: % and number of households that experienced at least one shock by type
of impact.................................................................................................................................50
Figure 16: Listed priorities by households (% of households).......................................53
Figure 17: Share of households with water, cooking and sanitation issues...............54
Figure 18: Access to electricity (% of households)..........................................................54
Figure 19: Use of heating sources (% of households)....................................................55
Figure 20: Share of households with shelter issues......................................................55
Figure 21: % of households who cannot use a specific coping strategy for securing
food........................................................................................................................................63
Figure 22: Ratio of debt to expenditures of indebted households, by decile...........64
Figure 23: Distribution of workers within HHs by gender and age.............................66
Figure 24: Workers by size of households with at least one man/woman working..66
Figure 25: Reasons for lower incomes in the past 30 days compared to usual income..67
Figure 26: Problems women and men face at work.......................................................67
Figure 27: Percentage of households that received humanitarian assistance in the
last month...............................................................................................................................72
Figure 28: Awareness of households regarding from where to obtain information
about assistance....................................................................................................................73
Figure 29: Information channels that women use to access assistance.....................73
Figure 30: Assistance queries among households.........................................................73
Figure 31: An approach for economic recovery.................................................................83

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List of Tables
Table 1: Macroeconomic indicators and projections, 2019-24.....................................24
Table 2. Public finances, 2019-22 (in billions of Afghanis)...........................................29
Table 3: Countries with the lowest per capita income in the world (in US$)..............43
Table 4: % of households potentially affected by various events and their impact on
the population*......................................................................................................................52
Table 5: Coping strategies of households to mitigate shocks against food insecurity.62
Table 6: % of households who were able to use a strategy and number of
households............................................................................................................................64
Table 7: Selected indicators among better off households...........................................65
Table 8: Households that receive humanitarian assistance..........................................74
Table 9: Policy Recommendations.....................................................................................85

List of Textboxes
TEXTBOX 1: The significant progress in gender equality in the last 20 years...............19
TEXTBOX 2: Noticeable economic trends since August 15, 2021...............................37
TEXTBOX 3: Demographic and employment differences between HHs....................47
TEXTBOX 4: Gender differences in perceived needs and education.........................58
TEXTBOX 5: The implications of restrictions on women’s work..................................70
TEXTBOX 6: Women are affected differently by shocks compared to men..............77

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ACRONYMS

ABADEI Area Based Approach for Development Emergency Initiatives

ACG Afghanistan Coordination Group
AFN Afghani (national currency)
ALCS Afghanistan Living Conditions Survey (2016-17)
AML Anti-Money Laundering
ASYCUDA UNCTAD Automated System for Customs Data
BIS Bank for International Settlement
CFT Combating the Financing of Terrorism
COVID-19 Coronavirus Disease 2019
CPD Country Program Document
CPI Consumer Price Index
DAB Da Afghanistan Bank (Central Bank)
DABS Da Afghanistan Breshna Sherkat (electricity company)
DFA De Facto Administration
DSSI Debt Service Suspension Initiative
EPZs Export Processing Zones
ERWs Explosive remnants of war
ES Emergency Shelter
G-20 Group of 19 largest economies plus the EU
GDP Gross Domestic Product
GNI Gross National Income
HH Household
HNO Humanitarian Needs Overview
HPC Humanitarian Programme Cycle
HRP Humanitarian Response Plan
IDPs Internally Displaced Persons
IE&LFS Income Expenditure and Labor Force Survey (2019-20)
IED Improvised explosive device
ILO International Labour Organization
IMF International Monetary Fund
IPC Integrated Food Security Phase Classification
IPP Independent Power Producers
KFW National Development Bank (Germany)
KNOMAD World Bank database
LCS Livelihood Coping Strategy
MAIL Ministry of Agriculture, Irrigation and Livestock
MFI Microfinance Institutions
MoEW Ministry of Energy and Water
MoF Ministry of Finance

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MoIC Ministry of Industry and Commerce

MSME Micro and Small-Medium Enterprises
NFIs Non-food Items
NGO Non-governmental Organization
NRVA National Risk and Vulnerability Assessment, (2007-08) and (2011-12)
NSIA National Statistic and Information Authority (Afghanistan)
OCHA United Nations Office for the Coordination of Humanitarian Affairs
PPIEDs Pressure plate improvised explosive device (IED)
PPP Purchasing Power Parity
PPPs Public-Private Partnerships
SDGs Sustainable Development Goals
SME Small and Medium Enterprises
TBI Temporary Basic Income
UN United Nations
UNAMA UN Assistance Mission in Afghanistan
UNDP United Nations Development Programme
UNCDF United Nations Capital Development Fund
UNICEF United Nations International Children’s Emergency Fund
WASH Water, Sanitation and Hygiene
WFP World Food Program
WoAA Whole of Afghanistan Assessment

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FOREWORD
Afghan people continue grappling with the unprecedented humanitarian and socio-
economic crises that have been causing destitution for an overwhelming majority of
the population since the past few years. Humanitarian assistance to the tune of US$3.7
billion in 2022 is helping contain the humanitarian catastrophe and is quickening the
pace of economic recovery from an enormous contraction in 2021. But this crucial
lifeline for the people of Afghanistan is being severely threatened by the restrictions
on women’s rights which has culminated in a ban on women’s employment with the
UN. It is already evident that humanitarian aid to Afghanistan in 2023 will be lessened
in response to the curtailment of women’s rights as the Humanitarian Response Plan
2023 has received significantly less amount of funding compared to a similar period
in 2022.

This report demonstrates that the economy and poverty situations are greatly
sensitive to humanitarian assistance. Simulations presented in this report show that if
humanitarian assistance is cut by 30 percent this year, the economy would continue a
declining trend. If, however, aid is not reduced growth will return but at very low levels.
In both scenarios, the population outgrows the economy locking Afghanistan into a
poverty trap for the foreseeable future. Per capita income will keep falling and the
costs of raising the poor up to the poverty line will keep increasing, as a result.

Although the humanitarian and poverty crises will be contained by continued

humanitarian and basic human needs aid, the solution rests with the de facto
government willingness to shift policies and revamp institutions to spur greater and
sustainable growth that could qualify for development assistance by the international
community. The restructuring of the economy toward agricultural output, not
necessarily because of productivity gains in agriculture rather due to shrinkages in
non-agricultural sectors caused by the recent shocks, is unhelpful for the kind of
growth model that Afghanistan needs given its growing population and intensifying
poverty.

The macroeconomic contraction is translating into extremely difficult socio-economic

conditions for Afghan households. A fresh survey that collected detailed and thematic
household data in 2022 show that 84 percent of the population spend less than
AFN2,268 per person per month – the national poverty line. If considered in terms
of only food poverty line and adjusted for different locational characteristics and food
inflation, the percentage of population unable to spend on basic items as much as

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AFN1,330 per person per month increases to more than 90 percent. This means, inter
alia, that funding needed to cover the poverty gap has increased to about US$5 billion
in 2022 from US$900 million in 2020. This report further shows that more than three
quarters of Afghan population are borrowing food or money to buy food and spend
the remainder, if any at all, on essential healthcare and tertiary basic needs.

Compared to 2020 when 41 percent of the households did not need to employ
strenuous coping mechanisms to manage the socio-economic hardships, 2022 has
been profoundly challenging when only 8 percent of households did not need coping
strategies.

To make matters worse, Afghan households remain profusely prone to natural

disasters and vulnerable to climatic shocks. The recent survey shows that 3.9 million
of total 5.1 million households in the country were affected by drought, two thirds of
the households live in mud houses or partially damaged shelters. Afghanistan has the
highest number of fatalities caused by natural disasters in the last 40 years – among
low-income countries and is ranked 5th among the most climate at-risk countries
worldwide.

There are few positive developments, nonetheless, including increased exports,

appreciation in the value of Afghani against the US$, decreasing inflation and
corruption. However, all these positive developments are products of the economic
recovery that has been made possible largely due to the humanitarian assistance in
2022. The restrictions on women’s rights to education and work is rapidly arriving at
a point beyond which the continuation of humanitarian assistance, the driving force
behind the economic recovery, without any reductions is highly unlikely.

In the two analytical scenarios for economic recovery that the report considers for
the 2023 and 2024, humanitarian assistance support to basic human needs is a
determinant factor of the fate of the economy. In a scenario where aid is assumed to
continue at the 2022 level, the economy is projected to have positive but negligible
growth rates in 2023 and 2024. On the other hand, a reduction of humanitarian aid by
30 percent will force the economy to contract by about half a percent this year instead
of growing as in the first scenario.

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The report concludes by offering an array of sectorial policy recommendations, aimed

at strengthening the economic recovery, for resolving pressing barriers of the banking
and financial system and improving sectoral performance and output.

I am pleased to present the Afghanistan Socio-Economic Outlook 2023 which is the

second publication in a series of socio-economic outlooks for Afghanistan. We hope
this knowledge product will be useful to national and international stakeholders, in
planning and delivering efforts for the benefit of the Afghan people.

Abdallah Al Dardari
Resident Representative
UNDP Afghanistan

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Executive Summary
August 15, 2021 marked a seminal point in Afghanistan’s long history and a somber
day for human development, as the Taliban’s takeover of the state unleashed an
economic and social catastrophe. In the upheaval, girls and women – half of the
country’s 40 million people – have been dispossessed of basic rights and freedoms,
stifling their agency and participation in public life. The massive collapse of the
economy immediately after the takeover, combined with the adverse effects of an
unusually severe drought, have accelerated Afghanistan’s decade-long slide into
poverty, and turned it into one of the poorest countries in the world.

The economic collapse triggered a staggering drop in per capita income. The
economy contracted by 20.7 percent in 2021, followed by a further contraction of 3.6
percent in 2022. Considering a population growth rate around 2 percent, per capita
income is estimated to have fallen by a staggering 30 percent between 2020 and
2022. Recent indicators suggest a degree of economic stabilization, the exchange
rate more stable and inflation more muted, but relative stabilization has happened at
a significantly lower level of economic activity.

For an overwhelming majority of ordinary Afghans, the country’s turmoil translated

into personal adversity. With limited coping mechanisms available, impoverished
Afghans have had to reduce consumption (including food), borrow heavily, beg, and
take extreme measures to survive. Some have been compelled to sell their homes,
land, or assets that generate income; others have resorted to the distressing practice
of commodifying their own family members, turning children into laborers and young
daughters into brides.

In the aftermath of the Taliban takeover, international aid has proven crucial in
averting even more dire humanitarian and economic conditions. The provision of aid
has supported essential services and facilitated the delivery of vital resources to the
most vulnerable segments of the population. Yet, the restrictions and bans on women’s
employment and presence in public life continue to make the situation worse, and
depriving girls from secondary schools and universities is limiting the prospects for
recovery for generations to come.

This report traces the social and economic developments in Afghanistan from
August 15, 2021 through December 2022. It analyses the repercussions of the policy
and financing realities of that period on the outlook for the socio-economic progress
of Afghanistan in 2023; and proposes policy directions for economic stabilization
and recovery, as well as for addressing the country’s immediate humanitarian crisis.
It provides evidence for the urgent and continued need for critical humanitarian
assistance and livelihood support. And it demonstrates that without the full scope
and continuity for girls’ education and women’s ability to pursue work and learning
across all disciplines and sectors, the country’s progress will remain severely muted.

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Economic Developments since August 2021

The August 2021 transition in authority fundamentally altered the political and
economic landscape of Afghanistan. Following the takeover, the country has faced
considerable economic turmoil alongside a structural shift toward agriculture at the
expense of manufacturing and services, which largely catered to the foreign presence
since 2001. The country has also entered a period of profound uncertainty about the
social and economic role of women.

Afghanistan is currently grappling with a fiscal crisis. The cutoff in foreign assistance
that previously accounted for almost 70 percent of the government budget, has
resulted in a sizable squeeze of public finances. Lacking foreign revenues and
reserves, the DFA has lost much fiscal space to alleviate economic hardships. In
2022, the budget deficit was estimated to be 28 percent larger than in 2020, while
development spending dropped by 80 percent compared to 2020.

The central bank (DAB) has lost most of its tools, and hence its ability, to affect
economic events. Hindered by the ability to print money and the freezing of its foreign
assets, the DAB struggled to provide adequate liquidity to banks. However, the DAB’s
capital controls and deposit withdrawal limits have prevented the complete collapse
of the banking system. Overall inflation rose considerably after August 2021 reflecting
in good part the depreciation of the exchange rate and the subsequent increase in
global food and fuel prices due to the war in Ukraine.

The banking system has faced a severe liquidity crisis. Reasons include the cutbacks
in foreign aid, DAB’s inability to provide liquidity, heavy deposit withdrawals, and
concerns about anti-money laundering and combating financing of terrorism issues
(AML/CFT). Bank transfers have become more difficult and more expensive, hindering
not only private sector operations but also humanitarian support activities. The
microfinance sector, previously reliant on donor grants, shrunk by about half between
August 2021 and the end of 2022, harming prospects for micro enterprises and the
poor. This is particularly concerning in a country where local economies depend
heavily on the vibrancy of micro and small businesses.

Several improvements have recently emerged contributing to economic stabilization,

albeit at a much-lower level of activity. Domestic revenues, historically small, are
projected to increase due to better collections at customs and some expansion
of domestic taxes to businesses such as small vendors. Cross border trade is also
picking up. Inflation slowed from 18.3 percent in July 2022 to 5.2 percent in December
2022 and corruption reduced as shown by Transparency International’s Corruption
Perception Index 2022

Bank deposit limitations have been somewhat relaxed, although not all banks allow
withdrawals in line with these limits. Some banks have recently improved their
liquidity position due to collection efforts and by not lending. The hawala system has
proven resilient and transactions have risen, facilitating remittances, import financing,
and NGO transactions. However, this system may also contribute to capital flight. The
U.S. has released US$3.5 billion of Afghanistan’s official reserves to a new vehicle,
the Afghan Fund, allowing targeted disbursements to help stabilize the Afghan
economy. The Fund may be used for disbursements including for critical imports,
such as electricity, arrears payment to international financial institutions, and essential
banking services such as SWIFT payments.

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Economic Outlook for 2023 and Beyond

Afghanistan’s economic outlook for 2023 remains very challenging, particularly
as recent restrictions on women’s education and employment may further reduce
international aid. This would exacerbate pressures on the exchange rate and
inflation, especially for imported food items, result in a decline in imports, and lower
revenues from customs, a major source of budget revenue. Acquiring raw materials
for manufacturing may become increasingly difficult, and liquidity may decrease,
and international transactions could become harder. Energy imports may also face
obstacles. In short, incomes would be very likely to fall, unemployment to increase,
and poverty to deepen. The recent restrictions on women working at the UN and
in NGOs also undermine delivery of humanitarian aid and basic needs assistance,
potentially jeopardizing assistance provided by the international community to
Afghanistan. These factors could exacerbate the already dismal social conditions and
make Afghanistan fall further behind in reaching the SDG goals.

UNDP projects real GDP growth of 1.3 percent in 2023 and 0.4 percent in 2024,
with GDP per capita expected to decline from US$359 in 2022 to US$345 in
2024, intensifying the hardships faced by Afghans. These projections assume that
international support for Afghanistan will remain at the 2022 level of US$3.7 billion.
However, this outlook faces significant downside risks due to the DFA’s restrictive
policies towards women, which could prompt a reduction in international aid, economic
difficulties in neighboring countries, a deterioration in domestic security conditions,
and weather conditions.

Afghanistan’s longer-term future confronts a demanding landscape, as pre-existing

constraints have intensified alongside fresh challenges. The ban on women,
governance issues, limited fiscal space, disruptions to banking and international
finance, and energy-related impediments will all restrict the country’s ability to maintain
non-inflationary growth.

The private sector’s role in rebuilding infrastructure is critical for Afghanistan’s

economic future. Prolonged compression in development spending will restrict the
public sector’s capacity to undertake infrastructure projects and enhance agriculture’s
scale and productivity. Without investments in infrastructure, including agriculture,
transit trade, and mining (a promising sector), private sector development will be
weak. The banking system’s limited role in providing credit will further hinder private
sector development.

Impact on Social Conditions

Food Affordability and Poverty Trends
Securing food has become the prime concern of households as poverty has increased
significantly. The latest available poverty estimates before August 2021 were based
on the Income, Expenditure and Labor Force Survey (IE&LFS2020) conducted by
the national statistical authority (NSIA) between October 2019 and September 2020,
which reported a poverty rate of 47.5 percent. Subsequent estimates, mainly aiming
to assess the impact of the COVID-19 pandemic, raised the rate to around 70 percent.
Applying the IE&LFS official poverty thresholds for overall poverty and for food poverty
in 2020 to the latest survey results reported in the Whole of Afghanistan Assessment
as of September 2022 (WoAA2022), suggests that around 85 percent of Afghans
were below the poverty threshold of 2020 and more than 90 percent were below the
food poverty threshold adopted in 2020.

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Multiple Shocks Faced by Households

The high proportion of those with current expenditures below the 2020 poverty
thresholds is due to a series of events (“shocks”).These events include the economic
shocks in the last couple of years, multiple natural disasters - droughts, floods,
earthquakes, avalanches and heavy snowfall -, conflict and the lingering effects of the
pandemic.

Only around 12 percent of households reported that they had not been subjected
to any of the above shocks since early 2022. Most households experienced more
than one shock (averaging 1.6 of shocks per household). Natural disasters affected
4.1 million households. The economic shocks that ensued, in combination with the
massive reduction in GDP, impacted 3.3 million households. For those affected, loss
of income and access to food were the heaviest burdens to bear. Around 4.8 million
households reported lost income, and 3.4 million went into debt.

Household Coping Strategies

The crisis has left most households with few coping mechanisms. Only 8 percent
of households reported not needing to use any coping mechanism in 2022. Among
the remaining 92 percent, many had no coping mechanisms at all, either because
they had depleted them or because such mechanisms were not applicable to them.
For example, 24 percent of households had no savings and another 12 percent
had depleted them in the past. More than 30 percent had no property, house, land,
income-generating equipment or other assets (such as means of transport) to sell,
which itself would be a desperate act in the short-term at the expense of longer-term
income-generating prospects. Most households (91 percent) listed food as their top
current priority. And 77 percent of households mentioned that food prices are too
high, despite some reports, admittedly not nationally representative, suggesting that
food availability stands at 98 percent. This suggests that household incomes are too
low to afford available food items.

Most households used one or more mechanisms to cope with their current conditions,
often at the cost of their future. The most common way to cope was to borrow (nearly
80 percent of affected households), followed by decreased expenditures on less
pressing priorities than food, such as health and education (45 percent). As many
as 40 percent drew upon whatever savings they had available, 34 percent sold
household assets, and many others sold productive assets such as their last female
animals (27 percent) and other income-generating assets (16 percent), with almost
10 percent selling land or a house at distressed prices. Extrapolating to the national
population, nearly 470,000 households may have engaged in begging or relied on
charity, 850,000 sent their children to work outside the home, and almost 80,000
households married their daughters earlier than intended.

The Impact of Humanitarian Relief

Had it not been for the continuing international humanitarian assistance since 2021,
the economy would have gone into a faster and deeper dive and humanitarian
conditions would have been worse. Humanitarian relief reached 30 percent of all
households and nearly 40 percent of female-headed households in the month prior
to the data collection August/September, 2022 and, according to UN estimates, more
than double that percentage throughout the year.

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The assistance has also been well targeted: recipients in 2022 below the 2020
poverty threshold had lower average incomes than their counterparts who did not
receive assistance. The assistance was also effective - those who received assistance
did not need to deploy coping strategies as often, and were better able to address
their hunger needs, than those who did not receive this assistance.

Social Outlook for 2023 and Beyond

The current economic and social conditions in Afghanistan offer little optimism for
substantial and swift changes for the better in 2023. Even if the economy does not
decline further, the population keeps increasing annually at 2 percent or more, thereby
reducing the per capita GDP on average by the same.

In addition to the dim prospects for rising real incomes, without significant
intervention, the massive adverse effects from natural disasters persist. And this
cannot be addressed by relief assistance alone. The results indicate that 4.1 million
households (around 27 million Afghans) were affected in 2022 by natural disasters
that resulted in lost incomes, reduced food security, and the greater need to borrow
at the detriment of their future economic and human security.

Being deprived of coping strategies, households have little ability to increase

income through employment. The average household has 6.6 members of whom 1.6
work, mainly men (1.19). The other working family members include adult women (0.15)
and children (boys: 0.23 compared to only 0.03 girls). Among households with male
workers, 32 percent reported minimum or no savings from their day-to-day activities,
and 15 percent do not receive their salaries or payments on time. Only 10 percent
of households have home-based income-generating activities. It is worth noting that
households have, on average, more boys working than women. This is not unexpected
given that women’s employment faces many restrictions fueled by strong views
regarding gender roles in society, and further exacerbated by the recent bans. More
than 70 percent of female-headed households cited social and cultural restrictions
as the main barrier to women’s employment, as well as the bans introduced by the
Taliban since August 2021.

Humanitarian aid since 2021 has helped avert a deeper economic collapse and
further deterioration in social conditions. Much of the humanitarian assistance has
been delivered through NGOs. The recently introduced ban on women working for
NGOs and international organizations risks a significant reduction in the amount of
aid that can keep the economy from contracting further, and it will deprive access to
Afghan women to services that can only be provided to them by women workers. As
many as 94 per cent of 127 national organizations surveyed either fully or partially
ceased operations immediately after the ban was imposed in December 2022, and
150 NGOs and aid agencies have suspended all or part of their work. If the outreach of
humanitarian assistance from national organizations is reduced further, it will adversely
affect millions of Afghans in need.

Given the difficulties households face, humanitarian assistance will remain critical
to prevent the most vulnerable from falling further behind. For 2020, the UNDP
estimated that the number of Afghans below the poverty line was 19 million, the
poverty gap US$900 million (5 percent of GDP in 2020), and the number of people in
need of food assistance nearly 23 million. A similar exercise today suggests that the
number of Afghans in need may have reached 34 million (an increase of 15 million)
and the poverty gap US$5.3 billion (nearly 35 percent of the current GDP). Even if the

16
 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

UN Appeal for international assistance reaches the US$4.6 billion asked for in 2023,
it still falls short of what is needed to improve basic living conditions for millions of
Afghans currently on the edge.

Bolder Policy Directions for the Future?

Afghanistan urgently needs massive physical and social infrastructure development
- to reduce the direct impact of natural disasters, to enhance sustainable food
production, and to provide social services, including social protection to those deeply
affected. This will depend to a large extent on growing the domestic private sector, with
backward and forward linkages that attract foreign investment. This, in turn, demands
deep institutional reforms that improve the rule of law, business transparency and
accountabilities, including the ability to follow-the-money.

None of this is do-able without a new social contract that demonstrates respect
for the rights of girls and women, as equal members of society. By dismantling
the obstacles that prevent girls and women from fully engaging in all aspects of
society, Afghanistan can unlock untapped potential, boost productivity, and stimulate
innovation. This social contract must prioritize inclusivity, ensuring that women have
equal opportunities to participate in decision-making processes, thereby fostering
more inclusive and representative governance. To accomplish these objectives, the
collaboration of all stakeholders, including the government, civil society, and the
international community, is essential.

In light of this, the stakeholders should consider prioritizing policies that attract
international humanitarian and basic needs assistance towards supporting the most
vulnerable households. This includes lifting the bans on girls secondary education
and women’s work and continued learning and training. The Afghan economy remains
overwhelmingly dependent on international support. Over the next year or two, the
livelihoods of ordinary Afghans will depend on the volume and targeted outreach of
humanitarian assistance and meeting the development basic needs.

International assistance not only saves lives but also helps create temporary jobs
and livelihood opportunities that could benefit over a million Afghans each year. It
can also contribute to a temporary universal basic income (UBI), a social protection
measure that is highly preferred by Afghans in dire need.

In the short to medium term, the DFA would need to consider implementing policies
focused on macroeconomic stabilization, private sector development, banking and
finance, to foster the economic revival of the country. This is essential for supporting
the population and preventing further outward migration. Renewable energy is a
sector with immediate investment potential and high returns, given the growing costs
of electricity required to power critical sectors that have to advance rapidly.

If aid is reduced, the already grave conditions facing ordinary Afghan citizens,
especially women and girls, will deteriorate further. UNDP continue their efforts in
direct support of the Afghan people. UNDP proposes several policies and programs
(see Chapter 6) including scaling the tested area-based approach (Area-Based
Approach to Development Emergency Initiatives: ABADEI), complementing the work
of other UN agencies and partners. The aim for the coming years is to relieve poverty
and to create and sustain livelihood opportunities, so Afghan women and men, can
expand their capabilities and lead their own pathways out of poverty, and define their
country’s progress.

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AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

KEY FINDINGS AND MESSAGES OF THIS REPORT

• The economic situation in Afghanistan continues to spiral down, with

GDP estimated to have further declined by 3.6 percent in 2022 after
the 20.7 contraction in 2021. With a population estimated by the UN
at about 40 million and GDP of US$14.3 billion in 2021, Afghanistan is
among the countries with the lowest per capita income in the world.

• Despite this, there are signs of stabilization in some areas, albeit

at a much lower level of economic activity: a rise in exports, an
expected 35 percent increase in domestic fiscal revenue, a more
stable exchange rate, and reduced inflation. These improvements
have been supported by substantial international assistance of US$3.7
billion in 2022, of which US$3.2 billion was provided by the UN.

• The country faces considerable headwinds due to adverse geopolitical

factors and economic difficulties in neighboring countries, which
could spill over into Afghanistan in the form of repatriating nationals,
imported inflation for staples such as food and fuel, and heightened
security risks.

• The recovery remains weak, unsustainable and insufficient in

the long-term. In a baseline scenario developed by UNDP, GDP is
projected to increase by 1.3 percent in 2023, and 0.4 percent in
2024. Both are well below the population growth rate that exceeds
2 percent, implying that per capita incomes will keep declining.

• A further scaling back of aid would be disastrous. UNDP simulations

suggest that if aid were to drop by 30 percent, which is a possibility given
current DFA decisions, GDP could contract by 0.4 percent in 2023 and
inflation rate could reach about 10 percent in 2024. Per capita incomes
could then decline to a projected US$306 compared to US$512 in 2020
– a drop of 40 percent.

• In fact, the near-term economic and social outlook hinges critically on

the scale of foreign aid. Survey results suggest that around 85 percent
of the population has per capita expenditures below the 2020 poverty
line. Foreign aid will be crucial to scale up the humanitarian response.

• The UN Appeal for US$4.6 billion in international assistance for 2023

is the minimum required to help Afghans in need. The number of poor
people has risen to 34 million in 2022 (from 19 million in 2020), and the
funding needed to maintain expenditures of all Afghans above the 2020
poverty line may have reached US$5.3 billion (nearly 35 percent of the
current GDP) from US$900 million (5 percent of the GDP) two years ago.

• Any reduction in international aid during 2023-2024 will worsen

Afghanistan’s economic prospects and perpetuate extreme poverty for
decades. It is also clear that the economy and social conditions cannot
be revived if women cannot learn and earn. Future economic growth
and human development progress of Afghanistan will be severely
undermined by underinvestment in girls’ and women’s education and
opportunities for work and well-being.

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 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

TEXTBOX 1: The significant progress in gender equality in the last 20 years

has been swiftly reversed by actions and proclamations since August 2021
Total Fertility Rate
Women and girls had made several
(births per women 1980-2020)
gains during the two decades before
2021. Their enrolments in schools
8.0 7.6
and universities, and their work
Afghanistan
as teachers, health professionals, 7.5

journalists, media presenters, civil 7.0

society representatives, judges, 6.5 6.7
prosecutors, defense attorneys,
6.0
police and army personnel,
entrepreneurs, increased at 5.5 4.8

high rates. Their literacy and 5.0 Low-income countries

life expectancy increased, while
4.5 4.7
maternal mortality decreased
together with a substantial decline in 4.0

the fertility rate, which had increased 1980 1990 2000 2010 2020

during Taliban rule in the late 1990s.

This near 40 percent drop in the fertility rate in just 20 years can be compared
with the global decline in fertility over 40 to 50 years.

Soon after the political change, the Taliban stated: “We assure the international
community there will be no discrimination against women, but, of course,
within the frameworks we have.” Within a month, the Taliban had completely
excluded women from any position in the first formation of the DFA and:

1. Abolished the Ministry of Women’s Affairs (17 September 2021) and

reestablished the Ministry for Propagation of Virtue and Prevention of Vice
2. Announced that secondary schools will not reopen for girls, while boys
were allowed to enroll, effectively turning girls’ education into a crime (also
on 17 September 2021) and
3. Told female civil servants to stay at home until officials prepare a “new
plan” (19 September 2021).

These early actions against girls and women have since been followed by
sweeping new bans and restrictions on women, effectively reversing two
decades of hard-won gains in gender equality. An indicative timeline of the
additional measures includes the following:

4. Women barred from parks and amusement parks without a mahram

(11 November 2021)
5. Women barred from travelling more than 72 kilometers without a mahram
(26 December 2021)
6. Strict dress code for women introduced: The hijab (head covering) has
become compulsory, including either the chadori or black Iranian-style
chador as the preferred attire (10 January 2022)
7. Universities became gender-segregated (26 February 2022)
8. Reversal of promise to reopen girls’ high schools (23 March 2022)
9. Gender segregation of parks (28 March 2022)

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AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

10. Women barred from driving (3 May 2022)

11. Women required to cover their faces in public (7 May 2022)
12. The Afghanistan Independent Human Rights Commission (AIHRC)
abolished (17 May 2022)
13. Female TV presenters told to cover their faces on air (21 May 2022)
14. Female students barred from selecting civil engineering, journalism,
veterinary studies, agriculture, and geology in annual university entry
exams (14 October 2022)
15. Women barred from parks, gyms, and public baths (13 November 2022)
16. First official flogging of three women for moral crimes after full
implementation of sharia law (14 November 2022)
17. Women barred from universities and education centers (20 December
2022)
18. Women banned from working for NGOs (24 December 2022)
19. Taliban authorities reportedly outlawed contraception medicines
(February 2023)
20. Afghan women who are UN staff members also barred from continuing
to work (4 April 2023)

Sources: UNDP staff compilation from reports of international and national organizations
and local reports

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 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

INTRODUCTION
August 15, 2021 was a seminal point in Afghanistan’s long history: a takeover of the
state that unleashed overnight an economic and social catastrophe. In the upheaval,
girls and women – half of the country’s 40 million people – have been dispossessed of
basic rights and freedoms, stifling their agency and participation in economic activities.
The massive collapse of the economy immediately after the takeover, combined with
the adverse effects of an unusually severe drought, have accelerated Afghanistan’s
decade-long slide into poverty, and turned it into one of the poorest countries in the
world.

The vast majority of ordinary Afghans, with few coping mechanisms at their disposal,
have been plunged into crisis. Beyond the headlines, poor Afghans are being forced
to beg, borrow heavily, and resort to desperate measures to survive. Some sell their
homes, land, or income-generating assets; others end up commodifying their own
family members, turning children into laborers and young daughters into brides.

After the takeover, Afghanistan’s GDP immediately contracted by 20.7 percent.

Since that time, there have been signs of economic stabilization, albeit at a much-
reduced level of activity. The exchange rate stabilized, and inflation muted. With large
amounts of UN and international aid, the economy stabilized somewhat, and GDP is
estimated to have contracted by 3.6 percent in 2022. When coupled with a population
increase of more than 2 percent, average real per capita income of ordinary Afghans
by the end of 2022 was estimated to have declined to 28 percent of 2020 levels.
The restrictions and bans on women’s employment and presence in public life are
making the situation worse. Depriving girls from attending secondary schools and
universities is limiting the prospects for recovery for generations to come. The need
for humanitarian assistance and livelihood support remains urgent.

This report traces the economic and social developments in Afghanistan since August
2021. It is part of a series that annually reviews and updates the situation on the
ground that is evolving at a fast pace.

The report has six chapters. First, it provides a snapshot of the latest state of the
macroeconomy and the likely path of the economy in the short run. Second, based
on the drop in GDP and survey results, it evaluates how many Afghans in late 2022
had expenditure levels below the national poverty thresholds adopted in 2020. Third,
it examines the impact of recent shocks (such as economic and environmental ones,
and those arising from conflict and the pandemic) on the social conditions of ordinary
Afghans and, in chapter four, the coping mechanisms available to households. The
fifth chapter reviews the impact of international assistance.

The sixth chapter offers a menu of policies that, if adopted, can lay the foundation for
economic stabilization and recovery, as well as the phasing in of livelihood support
that could reduce the need for humanitarian assistance. The process will be long and
may take much of the coming decade, if not longer, underscoring the urgency of its
implementation.

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AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

ECONOMIC COLLAPSE AND

FUTURE PROSPECTS

22
 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Introduction
The Afghan economy has since August 2021 experienced shocks of great magnitude.
With cuts in official development assistance, the freezing of Afghanistan’s official
reserves held abroad, sanctions, and banking and financial system paralysis, the
economy has been stagnating. These developments, together with the policies
adopted by the Taliban, especially restrictions on women, have affected the level and
nature of economic activity. The economy has contracted, and per capita incomes
have declined sharply, with profound implications for human development.

Recent improvements in security and international assistance have helped stabilize

the economy to some extent, albeit still far from its pre-August 2021 position.
Humanitarian assistance from the UN and other donors, some delivered through
NGOs, has helped avert even deeper economic collapse and humanitarian losses.
But these gains are now being jeopardized by recent restrictions on women working
for NGOs, which undermines the architecture of humanitarian aid delivery and puts at
risk the humanitarian aid provided by the international community.

Pre-existing Conditions in Afghanistan

The country had suffered from prolonged
conflict, fragility of state and non-state Afghanistan was a fragile
institutions, corruption, the Covid-19 pandemic, state even before August
a drought in 2021, and widespread poverty. The 2021. Conditions were already
economy, small, mainly agricultural and service- arduous. The country had
oriented, had been shaped by two decades of suffered from prolonged
foreign presence and heavy foreign transfers conflict, fragility of state
for both security and civilian purposes. Some of and non-state institutions,
those transfers went through the Afghan budget corruption, the Covid-19
while others were spent directly by the foreign pandemic, a drought in 2021,
presence operating in the country. Those and widespread poverty.
transfers, amounting in recent years to about
40 percent of GDP, played an important role in
shaping economic incentives and structures.

Afghanistan received considerable financial support from the international financial and
development institutions, especially the Asian Development Bank, the International
Monetary Fund, and the World Bank. A host of NGOs provided social and humanitarian
services.

There was also a large illicit economy, mainly around opium cultivation and exports.
The financial system was small and played a negligible role in financing the private
sector.

While gains were being made in some respects, including women’s education and
participation in the labor force, a significant number of Afghans emigrated or were
displaced over the decades. On the eve of the advent of the Taliban, the country was
struggling with the dual challenges of the COVID-19 pandemic and a severe drought.

23
AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

The Critical Moment: August 15, 2021

The seismic shift in Afghanistan’s political and economic landscape in August 2021
thrust its 20 million women and girls into a perilous future, with fundamental rights
and public involvement jeopardized. The global community has refrained from
acknowledging the Taliban’s rule, considering them de facto authorities. This stance
prompted an abrupt halt to foreign financial support, thereby causing a drastic decline
in the nation’s economic activity.

Real GDP shrank by 20.7 percent in 2021 and it

The takeover in August 15, is estimated to have contracted by 3.6 percent
2021, fundamentally altered in 2022 (Table 1, Figure 1).1 Much of the decline
the politics and economics was due to the cutback in international financial
of Afghanistan. support, political uncertainty, a freeze on foreign
reserves, and a banking crisis, including the
severing of international banking relations. In
addition, the drought caused a large decline in
agricultural output. The services sector, which had benefited the most from international
aid, shrank by 30.1 percent in 2021. Industry declined by 12.8 percent, due mostly to a
35.4 percent decline in construction activities previously driven by public expenditures
and international activities in Afghanistan. The decline in agriculture was 9.8 percent,
contributing to the increase in poverty. Nominal per capita income declined from
US$512 in 2020 to US$356 in 2021.i Unemployment rose for both skilled and unskilled
workers, with lower nominal and real wages for both groups.

Table 1: Macroeconomic indicators and projections, 2019-24

(Fiscal years, April-March)

2019 2020 2021 2022 2023 2024

Est. Proj. Proj.
GDP nominal (AFN billions) 1,506 1,535 1,251 1,314 1,377 1,456
GDP nominal (US$ billions) 19.3 20.0 14.3 14.8 14.9 15.0
GDP real (AFN billions) 1,419 1,390 1,101 1,062 1,076 1,080
Real GDP growth rate (%) 3.9 -2.1 -20.7 -3.6 1.3 0.5
Population (millions) 37.8 39.0 40.1 41.1 42.2 43.4
Per Capita Income (Current US$) 510 512 356 359 352 345
Average CPI Inflation (%) 3.0 5.8 7.8 11.2 3.5 5.3
Trade Balance (US$ billions) -5.8 -5.5 -4.9 -5.0 -5.0 -5.0
Exports of goods & services (US$ billions) 1.5 1.5 1.3 2.2 2.2 2.2
Imports of goods & services (US$ billions) 7.4 7.0 6.2 7.2 7.2 7.2

Notes: (1) All variables are for Afghan fiscal years covering March to March periods, except for trade
figures which cover January to December.
(2) In the absence of population consensus, the National Statistic and Information Authority (NSIA) and
the UN provide different population estimates: The NSIA Afghanistan population estimate for 2021 is
33.6 million, but the UN estimate is 40.1 million. This report uses UN population estimates.

Sources: NSIA GDP data, UNDP estimates and projections

i. When the NSIA population estimates are used instead of the UN population estimate, per capita income
declined to $425 in 2021 from $607 in 2020.

24
 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

The government, deprived of foreign Figure 1: GDP growth rates, overall and by
receipts and reserves, has little fiscal sector, 2021 (in percent)
space to support economic activity and

Agriculture
address humanitarian needs. It has

Services
Industry
been forced to compress development

GDP
spending significantly. At the same time,
0%
with the freeze on its foreign assets and a
prolonged inability to issue new currency, -5%

the central bank (DAB) lost most of its -10%

-9.8
wherewithal to affect economic events. -15% -12.8

-20%
The government, deprived of its -25%
-20.7

foreign receipts and reserves, has -30%

lost much fiscal space to support -30.1
-35%
economic activity and address
humanitarian needs.
Source: National Statistic and Information
Authority (NSIA)

The banking system has fallen into a severe liquidity crisis, necessitating restrictions on
deposit withdrawals and other financial transactions. These developments, reinforced
by capital flight, led, in the months after August 2021, to considerable pressures on
the foreign exchange rate, which together with increases in global food prices pushed
up consumer prices.

The confluence of crises has had a detrimental effect on human development,

significantly heightening the urgency for humanitarian support. Poverty was expected
to reach near-universal levels in 2022, but international support, which reached
US$3.7 billion, including US$3.2 billion from the UN, helped avert this outcome. Aid
has worked through two channels. First, it has directly targeted the poorest segment
of society through cash and in-kind supports. Second, it has provided liquidity,
supporting economic activity, the exchange rate, and financial stability. Still, according
to this report, more than 90 percent of Afghans were below the 2020 food poverty
line as of the second half of 2022, prompting a new wave of Afghans, including skilled
workers, to emigrate.

Above all, the restrictions on women’s work and education have inflicted severe
pain on the population, undercutting social and economic conditions and prospects,
as well as the government’s administrative capacities. These restrictions have hurt
foreign assistance and normalization of international financial and economic relations.
The Sustainable Development Goals for Afghanistan, already elusive, are now further
out of reach.2

Regarding unemployment, there is no updated official data. In the Income, Expenditure,

Labor Force Survey conducted by the National Statistic and Information Authority
(NSIA) in 2019-2020, total unemployment rate was reported as 18.6 percent, 15.2
percent for men and 32 percent for women.3 However, the Private Sector Rapid
Survey conducted by the World Bank for small, medium, and large firms reports
the employment declined 61 percent in October 2021 relative to pre-August 2021
period. The decline in men’s employment was 48 percent, and the decline in women’s
employment was 75 percent, broadly consistent with the significant decline in
economic activity since August 2021. The data clearly show that women were affected
much worse by the crisis. However, according to a survey conducted in June 2022, in
line with the (feeble) economic recovery, employment has improved slightly.4 Similarly,

25
AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

ILO reports a weak improvement in employment in 2022 relative to end of 2021.

There have been some recent signs of economic stabilization in 2022, albeit at a
much lower level than before. Demand for labor has risen slightly. The exchange rate
has been stable since February 2022. This exchange rate stability has muted inflation
pressures. However, the banking sector continues to atrophy.

Yet, the economy remains

in a deep recession and There have been some improvements in
vulnerable to significant risks, economic conditions in 2022. Demand for
including inflation of imported labor has risen slightly. The exchange rate
goods, especially food and has been stable since February 2022. This
fuel; economic difficulties in exchange rate stability has muted inflation
neighboring countries, which pressures. However, the banking sector
could spill over to Afghanistan, continues to atrophy.
including through a return of
some Afghan migrants; and
pressures in the foreign currency
market.

Exchange Rate and Balance of Payments

With the political change, the cutoff in budget support and development aid, the
freeze on DAB foreign reserves by the U.S., capital flight and the paralysis of the
Afghan financial system, the Afghani (AFN) has depreciated sharply (Figure 2). It fell by
54 percent in the first four months after August 15, subsequently appreciated, and has
been stable since February 2022. This stability has been due to crisis management
measures taken by DAB, such as restrictions on withdrawals from bank deposits,
capital outflows, and imports; UN cash delivery for humanitarian programs; and
a recovery in exports. While the nominal exchange rate has been stable, the real
effective exchange rate of the AFN has likely appreciated in recent months because
of currency depreciations among major trade partners.

Figure 2: Exchange rate (AFN per US$, monthly averages)

104.6
105

100

95
89.8
90

85

80 77.3
75
2021-02

2021-11
2021-03

2021-04

2021-05

2021-06

2021-07

2021-08

2021-09

2021-10

2021-12

2021-01

2022-03

2022-05
2022-02

2022-04

2022-06

2022-07

2022-08

2022-08

2022-09

2022-09

2022-10

2022-11

2022-12

2023-02
2023-01

Sources: NSIA and UNDP calculations

26
 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Available data on the balance of payments shows that imports of goods fell in 2021
but recovered in 2022 (Figure 3). Exports of goods increased slightly in 2021 then
rose sharply in 2022, including exports of coal to Pakistan. According to preliminary
data, while exports of goods increased to US$1.8 billion, imports of goods increased
to US$6.5 billion in 2022. The trade deficit is estimated to have reached about US$5
billion in 2022.
It should be noted that available trade data must be used with caution. In particular,
the increase in imports may be due in part to a decline in corruption and better border
control from 2021, which likely allowed more comprehensive data on imports. The
sizable trade deficit, which reached about US$5 billion in 2022, is likely financed by
illicit revenues and remittances, in addition to strong international aid.
Figure 3: International trade in goods (in billions of US$)

2020 2021 2022

8 6.5 6.5
6 5.3

4
1.8
2 0.9
0.8 Trade deficit
0
Exports Imports
-2

-4
-4.4 -4.7
-6 -5.7

Sources: Data from NSIA and ASYCUDA. UNDP calculations

In an important development that could ease

Afghanistan’s foreign exchange liquidity difficulties, In an important
the U.S. has released US$3.5 billion of Afghanistan’s development that could
official reserves to a new vehicle, the Afghan Fund, ease Afghanistan’s
which would allow targeted disbursements to foreign exchange liquidity
safeguard Afghanistan’s reserves and help stabilize the difficulties, the U.S. has
economy the Afghan economy. The Fund maintains an released US$3.5 billion
account at the Bank for International Settlement (BIS) of Afghanistan’s official
based in Switzerland, outside the reach of the Taliban. reserves to a new vehicle,
The Fund could be used to make disbursements for the Afghan Fund, which
would allow targeted
critical imports such as electricity, payment of arrears
disbursements to help
to international financial institutions, and essential
stabilize the Afghan
banking services such as SWIFT payments. The Fund
economy.
can also be used to receive and disburse DAB reserves
frozen in other countries.5

Inflation Dynamics
Exchange rate stability has helped keep inflation down, averting an even more widespread
slide into poverty. Nonetheless, overall inflation rose considerably following the events of
August 2021, reflecting the depreciation of the exchange rate and the rise in global food
and fuel prices due to the war in Ukraine.

More recently, inflation has fallen from 18.3 percent in July 2022 to 5.2 percent in December
2022, reflecting a decline in world prices of food and energy (Figure 4 and Figure 5).

27
AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Figure 4: Price index (2015=100) Figure 5: Inflation rate (y/y percentage

change)

Overall Food Non-food Overall Food Non-food

170 30%
160
160 25%

150 20%
145
140 15%

130 131 10%

120 5%

110 0%

-5%
2021-01

2021-03

2021-05

2021-07

2021-11
2021-09

2022-01

2022-03

2022-05

2022-09
2022-07

2022-11

2021-01

2021-03

2021-05

2022-09
2021-07

2021-11
2021-09

2022-01

2022-03

2022-05

2022-07

2022-11
Sources: NSIA data and UNDP staff calculations

Public Finance Challenges

Prior to August 15, 2021, Afghanistan’s public finances suffered from heavy reliance on
external support. Non-aid revenues were stymied by weak administrative capacity, and
corruption. Expenditure management was also weak. Furthermore, the absence of a
domestic bond market limited the government’s scope for domestic borrowing.
Since August 15, Afghanistan has been in a fiscal
Since August 15, Afghanistan crisis. The cutoff in foreign assistance created a
has been in a fiscal crisis. sizable decline in government operations. This
According to World Bank, shrinkage will have a lasting impact on the ability
revenue collection between of the public sector to undertake investment and
end-December 2021 and end- provide services. The extent to which the private
October 2022 exceeded that sector and the international community can cover
in 2020 and 2021. the shortfall in public services remains an open
question.

The DFA initially issued a budget for the first quarter of 2022, followed by one for
the 2022 fiscal year (March 21, 2022 - March 20, 2023). This is a break from past
practice, in which the Afghan authorities would prepare a three-year policy framework
detailing policy priorities and macroeconomic management. The DFA’s policy priorities
therefore remain unclear.6

Moreover, data collection has waned. For example, there is no public information on
the performance of state-owned enterprises.7 The 2022 budget deficit is estimated
to be 27.7 percent larger than in 2020 (Table 2). With the reduction of aid, revenues
forecast in 2022 were less than half of those in 2020. However, domestic revenues,
historically small, are projected to be up by 8 percent, due to better collection (perhaps
due to lower corruption) at customs and the levying of domestic taxes on businesses
such as small vendors. According to the World Bank, revenue collection between end-
December 2021 and end-October 2022 exceeded that in 2020 and 2021.8

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 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Table 2. Public finances, 2019-22 (in billions of Afghanis)

2019 2020 2021 2022 2022

Budget Change over 2020 (%)
Revenues and grants 396 398 359 187 -53.0
Domestic revenues 207 173 140 187 7.9
Grants to operating budget 80 83 107 0 -100
Grants to development 109 142 112 0 -100
budget
Total expenditures 411 432 473 231 -46.6
Operating expenditures 272 285 311 203 -28.9
Development expenditures 139 147 162 28 -80.9
Overall budget deficit 15 34 38 44 27.7
including grants

Source: DFA data and UNDP calculations

Deprived of foreign assistance, the DFA has had to compress spending. Development
outlays were 80 percent lower in the 2022 budget compared with 2020. This will limit
the ability of the public sector to undertake infrastructure projects and provide public
services, which in turn will hamper the development of transit trade and mining, thereby
weakening the prospects for private sector development. The sources of financing of the
budget deficit are not identified.9

The DFA has not been servicing Afghanistan’s external debt, estimated at about US$1.7
billion in 2022.10 Afghanistan has obligations to both multilateral institutions and bilateral
creditors. It had gained some temporary relief under the G-20 Debt Service Suspension
Initiative (DSSI), but with the expiry of that initiative in December 2021, debt service
payments are coming due. The World Bank has reported that Afghanistan has already
failed to make debt service payments to the multilateral agencies over late 2021 and early
2022.11 Continued failure to service those obligations would further compromise external
relations, including the ability to borrow from multilateral institutions.

Financial Sector Crisis

Afghanistan’s financial sector has been historically underdeveloped, and primarily
oriented toward handling foreign transfers and public sector wages and salaries. Bank
lending for working capital has been low.

Since the Taliban takeover, the banking sector

Since the Taliban takeover, has been in a deep liquidity crisis. With pervasive
the banking sector has been uncertainty raising demand for currency and capital
in a deep liquidity crisis. Bank flight, the freeze on banks’ foreign reserves held
transfers have become harder with the central bank, and cuts in correspondence
and more expensive, hindering banking relations due to sanctions and anti-money
not only private sector activity laundering/counterterrorism issues, banks have
but also humanitarian and been facing liquidity shortages.12 They have faced
basic human needs support runs on deposits, requiring deposit limits. These
activities. limits have been relaxed over time, but there is
anecdotal evidence that because of continuing liquidity

29
AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

problems, not all banks allow withdrawals in line with those limits. Bank transfers have
become harder and more expensive, hindering not only private sector activity but also
humanitarian support activities. Several banks have lost technical expertise and staff.

Lending has come to a halt due to banks’ inability to collect outstanding loans and a
decline in the value of loan collateral (mainly real estate). There is also a lack of clarity
on new and prospective regulations, including the transition to Islamic banking. AFN
and foreign currency loans dropped, by 9.8 percent and 6.1 percent, respectively, over
the period July - December 2021. DAB is unable to supply adequate liquidity to banks
because of an inability to print currency (see below) and the freeze on its foreign
assets. Broad and reserve money have fallen considerably.13

The microfinance sector, which once relied heavily on

donor grants, has experienced a significant contraction of
The microfinance nearly 50 percent since August 2021, adversely affecting
sector, previously the prospects of micro-enterprises. This downturn poses
dependent on donor a considerable threat in a country where local economies
grants, has also have long been sustained by the dynamism of micro and
shrunk by about small businesses. The number of microfinance institutions
half since August has declined from 10 to six as of June 2022, and their loan
2021, harming the portfolio has contracted from AFN9.5 billion to AFN4.4
prospects for micro billion. Importantly, the proportion of women clients has also
enterprises and the dropped, from 56 percent to 29 percent. These institutions
poor. have had difficulties collecting interest and principal
payments

On a positive note, the hawala system has proven resilient. A UNDP survey conducted in
June 2022 shows that the number of hawala transactions has risen, facilitating remittances,
import financing, NGO transactions, and perhaps capital flight.14

DAB’s capital controls and deposit withdrawal limits have prevented the complete collapse
of the banking system, but the crisis is far from over. The banking system will likely need to
be restructured. Some banks have recently improved liquidity by strengthening collection
efforts and placing a moratorium on lending. Nonperforming loans (NPLs) have risen
sharply. Based on UNDP interviews with major banks, NPLs now range from 10 to 65
percent, depending on the type of bank and loan. To manage the banking crisis, after
August 2021, DAB encouraged banks to extend credit maturities and provided flexibility
regarding loan provisioning, first through June 2022, and then until February 2023. NPLs
are likely to rise further as this regulatory forbearance is terminated.

With deteriorating balance sheets and an inability to

Over the medium term,
facilitate transactions related to foreign assistance, the
restructurings, mergers,
banking system appears set to shrink. Restructurings,
consolidations, and even
mergers, consolidations, and even some closures
some bank closures may be
may be needed. Any recapitalizations will likely be
needed.
constrained by the paucity of fiscal space.

30
 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Monetary Policy Dilemmas

Prior to August 2021, DAB’s monetary policy
Prior to the August 2021, DAB’s
was geared toward achieving low inflation.
monetary policy was geared
However, its ability to affect macroeconomic
toward achieving low inflation.
developments was limited by the country’s low
Since August 15, DAB’s monetary
level of financial development and the absence
policy objectives and framework
of adequate instruments, such as a developed
have been unclear.
bond market.

Since August 2021, DAB’s monetary policy objectives and framework have been unclear.
Its key objective has been to stabilize the foreign exchange market through controls.
It has been using the foreign and domestic currencies in its vaults to affect dollar and
Afghani liquidity conditions. But DAB’s ability to expand liquidity is hampered by its lack
of access to international reserves, as well as by its inability to print money and act as the
banking system’s lender of last resort. This has reinforced banks’ unwillingness to lend,
further constraining liquidity. According to World Bank data, monetary aggregates shrank
in 2021: broad money by 6.1 percent and reserve money by 1.4 percent.15

Further complicating the situation is the need to print new currency to replace worn-
out notes, as DAB has recently done. While helpful to swap out old currency, if currency
printing is done in amounts much larger than that needed to replace old currency, there
is considerable risk that the government will rely on seigniorage to finance its operations,
resulting in the loss of value of the Afghani and higher inflation.

Impediments to private sector development

The economic outlook presented above underscores the need for measures to generate
economic recovery in Afghanistan. Prior to the Taliban takeover, arguably the biggest
constraints to private sector activity included, in order of priority:

• Domestic conflict and insecurity. These diverted many

resources to defense and security, hindering private Since August 15,
capital formation. while corruption has
• Governance failures. These include a short political decreased, the other
and policy horizon among authorities and donors; constraints have all
corruption and the limited application of rule of law to likely become more
build confidence for longer-term investment; corruption; binding and has set
risks of macroeconomic instability; and a failure to take Afghanistan on a
actions that would increase returns on investment (e.g., much more difficult
better infrastructure, energy supply, and human capital trajectory.
formation).
• High cost of finance. Low domestic finance and a weak and corrupt banking system.

Since August 2021, while corruption has reportedly decreased, other constraints have
become more binding. The Taliban’s social and economic policies, weak business
confidence, the exodus of skilled labor from the public and private sectors, international
sanctions, and the freeze on most financial assistance from international financial
institutions have ushered in a difficult period of social, humanitarian, and economic crisis
that seems set to last. In the absence of international financial support, the Afghan private
sector will need to play a greater role in resuming growth and arresting the decline in
humanitarian conditions.

31
AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Key short-term constraints to be alleviated include:

• Addressing urgent governance issues, especially regarding the rights and roles of
women. Restrictions on women’s education and work, including the recent ban on
women working for NGOs, not only directly hurts immediate and future growth by
limiting female labor force participation and aid delivery, but also will likely curtail the
inflow of international financial support and normalization of global economic relations.

• Lack of fiscal space. Unblocking humanitarian assistance and development spending

will require both better domestic revenue mobilization and external assistance.

• Shortage of bank liquidity and lending, and restrictions on domestic and

international bank transfers. Central bank capacities must be upgraded,
correspondence banking relations resumed, digital banking expanded, and
MSME financing encouraged. Interruptions in financial services have also affected
NGOs’ access to financial services. Immediate steps are needed to clarify
and extend any transition to Islamic finance to reduce regulatory uncertainty.

• Tight foreign exchange constraint. This could be alleviated by releasing some

of Afghanistan’s frozen assets and by upgrading AML/CFT measures to improve
correspondent banking relations. Foreign exchange could also be stimulated
through measures to encourage international trade such as better financing,
improved connectivity, and better infrastructure for agriculture and mining.

• Energy supply problems. Difficulties include rising global fuel prices; risks due to
Afghanistan’s heavy dependence on electricity imports, due to foreign exchange
shortages; and the deteriorating finances of the state-owned monopoly utility
company. There are also weaknesses in the regulatory framework.16

Recent Stabilization Signs but Grim Near-term Outlook

Afghanistan’s economic outlook remains grim, especially if the new restrictions on women’s
employment in NGOs continue to depress international assistance in Afghanistan’s aid-
dependent economy. To the extent that donors cut back support further, Afghans will
experience much greater difficulties. Direct aid, going to the poorest segments of the
population, will be curtailed. Lower foreign assistance will also exacerbate the pressures
on the exchange rate and inflation, especially of imported food items. The drop in imports
that could result from lower growth and exchange rate depreciation would lower the DFA’s
revenues from customs, a major source of government income. Acquiring raw materials
for manufacturing will become more difficult. Bank liquidity will become more scarce and
international transactions could become harder,
Afghanistan’s economic especially if the sanctions on Afghanistan are tightened
outlook remains grim, and the scope for the Afghan Fund is curtailed. Energy
especially if the new imports will also be hindered. In short, incomes will
restrictions on women’s very likely fall, unemployment will increase, and
employment in NGOs lead poverty will deteriorate. All these could exacerbate the
to a significant drop in already dismal social and political conditions, resulting
international assistance. in more refugees and internally displaced persons, and
perhaps civil conflict. Moreover, Afghanistan will fall
further behind in reaching the SDG goals.

32
 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Assessing current conditions and making future projections can be difficult. In addition
to persistent uncertainty regarding economic policies and political developments, the
DFA has left unpublished some critical macroeconomic and financial data. Compounding
the unpredictability is the country’s largely agrarian economy, which relies on uncertain
weather conditions and government development expenditures.
Against this backdrop, UNDP has prepared baseline
There are also significant projections for key economic indicators for 2023
uncertainties about and 2024, based on available data (Table 1). These
economic policies and projections assume that international support for
political developments. Afghanistan will remain at US$3.7 billion per year in
2023 and 2024. With this key assumption, GDP is
projected to grow by 1.3 percent in 2023, and 0.4 percent in 2024, well below the
population growth rate that exceeds 2 percent. Under this scenario, real GDP in 2023
and 2024 will be about 23 percent lower than level of 2020 (Figure 6). The average
CPI inflation is expected to be 3.5 percent in 2023 and 5.3 percent in 2024. GDP per
capita is expected to decline from US$359 in 2022 to US$352 in 2023 and US$345 in
2024 (Figure 7). Under this baseline scenario, there will be no improvement in per capita
income, and per capita income will be significantly lower than the US$512 in 2020.

However, there is a chance that the international community may lower aid levels in
response to the Taliban’s restrictions on women, including those working in NGOs.
Such a drop would have important implications for exchange rate stability, inflation,
economic activity, and the country’s humanitarian outlook. For example, if international aid
were to fall by 30 percent to US$2.6 billion in 2023
A drop in aid will have and 2024, GDP could contract by 0.4 percent in
important implications for 2023, and grow by 0.5 percent in 2024. Under this
exchange rate stability, scenario, average CPI inflation could increase to high
inflation, economic single digits in 2023 and about 10 percent in 2024.
activity, and the country’s In such a case, GDP per capita would decline from
humanitarian outlook. US$512 in 2020 to US$332 in 2023 and US$306 in
2024, indicating increased hardship for Afghans.

Figure 6: Real GDP level (2019=100) Figure 7: Per capita income (in current US$)

105
100 650
100 594
600
95
550
512
90 500
85 450
80 78
76 400
75 345
75 350
356
70 306
300
2020

2022

2023

2024

2020

2022

2023

2024
2019

2021

2015

2016

2019

2021
2018
2017

30% aid shock Baseline 30% aid shock Baseline

Sources: NSIA data. UNDP projections

In addition to risks to the flow of international aid, there are risks to the outlook due
to possible economic difficulties in neighboring countries, adverse weather conditions,
higher world food and fuel prices, and a deterioration in security conditions in Afghanistan.

33
AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Conclusions
Afghanistan has been on a very difficult trajectory of economic recovery and human
development progress well before August 2021, and these trends have only exacerbated
since August 2021. The DFA’s social and economic policies, weak business confidence,
the exodus of skilled labor from the public and private sectors, international sanctions,
and the freeze on most financial assistance from the international financial institutions
have entailed multiple social, humanitarian, and economic crises.

The immediate economic outlook for 2023 and 2024 is severely challenged. Although
security and corruption problems have attenuated somewhat and there are signs of
intermittent economic recovery in some sectors, such as with the pick-up of cross border
trade, the country’s overall development prospects remain dire and are likely to endure
without significant policy shifts and investments.

Looking further ahead, the longer-term outlook for Afghanistan has become more
challenging and poses a considerable threat to human development, as various pre-
existing constraints have intensified alongside the emergence of new obstacles. The
ban on women, alongside other governance issues, the insufficient fiscal capacity, the
disruptions to banking and international finance, and the complications on the energy
front will all reduce the ability of the country to deliver non-inflationary growth over the
longer term and create a conducive backdrop for human development.

34
 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

KEY FINDINGS AND MESSAGES

• Afghanistan’s 2021 economic collapse triggered a staggering

30 percent drop in per capita incomes. Output shrank by
20.7 percent in 2021 and is estimated to have declined by 3.6
percent in 2022, accompanied by a notable shift in production
from services towards agriculture. Considering a population
growth rate of more than 2 percent, GDP per capita is estimated
to have plunged from US$512 in 2020 to US$359 in 2022.

• In the aftermath of the Taliban takeover, international aid

has proven crucial in averting even more dire humanitarian
and economic conditions. The provision of aid has supported
essential services and facilitated the delivery of vital resources to
the most vulnerable segments of the population. The magnitude
of international aid will remain a critical factor in preventing
increased poverty levels and maintaining macroeconomic stability.

• Recent indicators suggest a degree of economic stabilization,

albeit occurring at a significantly reduced level of activity.
Demand for labor has risen slightly, in line with a weak economic
recovery. The exchange rate has been stable since February 2022,
which has muted inflation and lowered the pressures on poverty
conditions. However, the banking sector continues to atrophy. The
DFA’s very small fiscal space is starving development spending.

• UNDP foresees a distressing and continuous decline in per capita

incomes during 2023 and 2024, further deteriorating human
development outcomes. While the economy is stabilizing, the outlook
remains difficult, with growth returning at low rates. UNDP baseline
projections indicate that real GDP will grow by 1.3 percent in 2023 and
0.4 percent in 2024 assuming that international support for Afghanistan
will remain at the 2022 level of US$3.7 billion (US$3.2 billion from the
UN, and US$500 million in other international aid). Annual average
Inflation is projected to fall to mid-single digits in 2023 and 2024, due
mainly to global food and fuel prices declining from the highs following
the start of the war in Ukraine and exchange rate stability. However, with
more than 2 percent increase in population, GDP per capita is projected
to fall from US$512 in 2020 to US$352 in 2023 and US$345 in 2024.

GDP (actual 2020/21 and projected 2022/24)

2020 2021 2022 2023 2024
Aid at US$3.7 billion
GDP growth -2.1% -20.7% -3.6% 1.3% 0.4%
GDP per capita $512 $356 $359 $352 $345
Aid at US$2.6 billion
GDP growth -0.4% 0.5%
GDP per capita $332 $306

35
AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

• Considerable downside risks surround the near-term economic outlook.

The continued flow of international aid and aid delivery are at risk because
of the Taliban’s restrictions on women working for NGOs. If international
aid were to fall by 30 percent (to US$2.6 billion in 2023 and 2024), the
impact in per capita incomes is projected to be even greater while it would
have important implications for exchange rate stability, inflation, economic
activity, and the humanitarian outlook of Afghanistan. The outlook may
also be subject to adverse geopolitical factors and economic difficulties
in the neighboring countries, which could spill over into Afghanistan.

• Afghanistan’s longer-term future now faces a more demanding

landscape, as various pre-existing constraints have intensified
alongside the emergence of fresh obstacles. The ban on women,
alongside other governance issues, the lack of fiscal space, disruptions
to banking and international finance, and energy-related impediments,
will all limit the country’s capacity to sustain non-inflationary growth in
the long term.

36
 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

TEXTBOX 2: Noticeable economic trends since August 15, 2021

Amid the ongoing polycrisis in the country, there have been several positive
economic trends since 2021:

1. Exchange Rate Stability

The capital control measures such as limitations on cash
withdrawals, prevention of cash smuggling, controlling imports
in addition to regular dollar auctions in the financial market
have played a critical role in maintaining exchange rate stability.

2. Mining Sector Investments

The de facto Ministry of Mines and Petroleum has been issuing
several contracts including the Amu Darya oil contract a Chinese
company. A 25-year long contract with an undertaking of China
National Petroleum Corporation (CNPC) in January 2023 to
extract oil from the Amu Darya basin in the north of the country.

3. Infrastructure Development
On the capital projects, the de facto authorities have expressed
willingness to allocate resources to several infrastructural projects
such as the national ring road, water dams, agriculture, and
irrigation projects such as Qoshtepa canal in the northwest of the
country which will bolster agricultural production and livelihoods.

4. Reduced Corruption
The reduction in level of corruption as reported by the Transparency
International’s Corruption Perception Index CPI 2022, is an encouraging
positive development.

37
AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

THE DECLINE IN INCOMES

HAS BROUGHT MILLIONS
BELOW THE 2020 POVERTY
LINE
38
 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Introduction
Household incomes have been low and declining over time. The decline has been
almost linear over the years, with the exception of the sudden drop in 2021 (Figure
8). Of the 45 percent drop in per capita incomes since 2012, two-thirds of the decline
took place in 2021.
Figure 8: Per capita GDP in US$ adjusted by the exchange rate

800 780

750

700

650 607

600
587
550

500
Pre-COVID19
425
450

400

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Source: NSIA for both GDP and population

According to the Survey, average monthly household income was only AFN6,489 (
US$75) in the 30 days prior to August/September 2022, or AFN978 ( US$11.2) per
person per month. Median incomes were AFN6,000 ( US$69) for households and
AFN833 ( US$9.6) per person17. Some 4 percent of households reported that they had
no income, while a large share of households (55 percent) had expenditures in excess
of what they earn, the deficit on average being AFN4,217 ( US$48) per household per
month.

The Income Expenditure and Labor Force

Household incomes have Survey 2019-20 (IE&LFS2020) set the poverty
been low and declining line at monthly expenditure per person per
during the decade before month of AFN2,268 ( US$26). ii By September
2021 with two-thirds of 2022 84 percent of Afghans had nominal
the decline taking place in expenditures below the nominal poverty line
2021. of 2020 (Figure 9). Taking into account the
inflation rate between these two years and also
the regional price variation and expenditure on
edurables, raises the percentage of those below the 2020 poverty threshold to 87
percent (Figure 12).18

ii. The Income Expenditure and Labor Force Survey 2019-2020 was primarily conducted during 2020
(from October 2019 to September 2020). For brevity, this report refers to it as IE&LFS2020.

39
AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Figure 9: The per capita distribution of expenditures (August/September 2020)

40% 37% 84% < 2,268

35%

30% 27%

25%

20%

15%
11%
10% 9%
5%
5% 4%
2% 2%
1% 1%
0%

(1701,2268)

(2268,2760)
(0,567)

(2760,3500)

(3500,4500)

(10500, +)
(4500,6500)
(1134,1701)

(6500,10500)
(567,1134)

Note: 84% applying the 2020 AFN2,268 poverty line – see Figure 12
Source: WoAA2022

These broad comparisons are used below in the absence of any recent estimates for
poverty. Poverty estimates have been infrequently reported and are based on varying
methodologies and data. However, practically all surveys suggest that poverty is very
high and has been rising over time.

The following section presents in more detail the poverty changes over the last 10 years,
and then focuses on developments since 2020. This is followed by a presentation
of differences between the 2020 and 2022 surveys to establish the comparability
between them. The next two sections benchmark expenditures in 2022 to the overall
poverty level and the food poverty level in 2020, and then present how much the
expenditures should increase to reach these thresholds in an attempt to estimate the
depth of poverty (the poverty gap).

Per capita incomes and poverty in the last 10 years

The last 10 years have seen a continuous decline in Afghanistan’s per capita income
in current US dollars as measured by the NSIA (top line in Figure 10). During the same
period, the annual inflation rate (CPI) averaged around 5 percent and the population
increased annually at a rate of around 2.5 percent19.

According to national estimates, the poverty rate increased by 45 percent (from 38

percent to 55 percent) during the first half of 2010s20. However, in the second half of
2010s the official poverty rate is reported to have decreased by 15 percent (from 55
percent to 47 percent), notwithstanding the fact that per capita incomes also declined
by 14 percent during the same period.21 This apparent inconsistency is examined
below.

40
 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Figure 10: GDP per capita and poverty rate (right axis)

800 NSIA $ Poverty rate 100%

700
748 80%
600
700

500 599
60%

400 443

40%
300 55%
47%
200 38%
20%
100

0 0%

NRVA 2011-12 ALCS 2016-17 IE&LFS 2020 NSIA 2021e

Sources: Respective surveys for poverty; NSIA for GDP

Poverty estimates since 2020

Other, mainly ad hoc surveys conducted alongside or after the IE&LFS2020 suggest
that poverty increased soon afterward, partly because of the lingering impact of
COVID-19. The World Bank quoted a rate of 50 percent for the partially overlapping
six-month period from April to September 2020.22 After the onset of the COVID-19
pandemic, the World Bank estimated that poverty might increase up to 72 percent.23
UNDP reported a slightly lower but effectively similar estimate of 68 percent.24

For 2021, the World Bank reported Figure 11: Food inflation
that “economic hardship”, meaning the (September 2020 = 100)
percentage of households that could not Figure 11: Food Price Index (September 2020 = 100)

cover basic expenses, could be as high

as 70 percent.25 And in less than a month 135 129
after the political change on 15 August
2021, UNDP conducted a rapid appraisal 125

that took into account the adverse effect

115
on poverty from the expected drop in GDP,
the sudden stop in aid, the interruption to 105
100
105
trade with Afghanistan’s major partners,
the lingering effects of the pandemic, 95
and the prolonged drought. Using a 2020-09 2021-08 2022-09

computable general equilibrium (CGE)

model tailored to Afghanistan, UNDP
estimated a worst-case scenario under Source: NSIA
which the poverty rate might increase up
to 97 percent.26
Looking at the 2020 – 2022
period, food prices increased by
Looking at the 2020-2022 period, food
almost 30 percent amid declining
prices increased by almost 30 percent
household incomes, and food
(Figure 11), and food accounted for more
accounted for more than half of
than half of household expenditures.
household expenditures.
Though there are no updated estimates
for economic growth, both the national
authorities and international organizations

41
AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

are in broad agreement that total GDP dropped to about US$15 billion in 2022
from US$20 billion in 2020, a 25 percent decline compared with the increase in the
population by more than 5 percent during the same period.

Alternative estimates confirm that the decline in GDP has been of similar magnitude.
GDP per capita valued at PPP constant local currency units fell from AFN1,968 in 2020
to AFN1,516 in 2021, a 23 percent decline, reverting Afghanistan to 2006 levels. The
World Bank reports that in current US$, GDP per capita now stands at US$369, or
almost US$1/day.27 Though Afghanistan’s national authorities estimate the current per
capita income to be higher, at US$443 (due to using a smaller population size), this
level corresponds to a 28 percent drop compared to its level in 2020 ( US$612).28
Focusing on the decline in GDP in 2021 may understate the extent of the impact
on households: according to NSIA, the 21 percent decrease in GDP in 2021 was
associated with a drop in household consumption by 25 percent.29

Though the results of the IE&LFS2020 need to be better understood, it is the most recent
nationally produced basis for anchoring developments since 2020. Nevertheless,
the IE&LFS2020 reported an increase in the urban poverty rate by nearly 10 percent
(from 42 percent to 46 percent) between 2016-17 and 2019-20. With some caveats, its
results are presented and extensively discussed below in comparison to the results of
the September 2022, which concluded in September 2022, as a general indicator of
the change in welfare over the two-year period.

IE&LFS2020 and WoAA2022: A comparison

Both surveys were designed to be nationally representative covering the 34 provinces.30
They were similar in coverage: the IE&LFS2020 sampled 20,400 households and the
WoAA2022 just over 17,200 households (An ANNEX is available upon request about
the scopes of the surveys).

The IE&LFS2020 survey recorded household expenditures throughout a period of

12 months, from October 2019 till September 2020. Its expenditure estimates were
based on the 2007-08 consumption bundle by households adjusted for prices as
of end 2019 using the national consumer price index (CPI). The IE&LFS2020 did not
directly report average expenditure per household.31 This can be inferred indirectly
from other information in the survey and comes to AFN18,523.32 Given that the
average household size was 7.3, the per capita expenditure comes to AFN2,537.
The poverty line was set 11 percent below that average at AFN2,268. That survey
additionally included 600 households among the nomadic Kuchi population (based
on their distribution in 2003-04). For the Kuchis poverty line was set at AFN1,943 that
is 14 percent lower than the then national line.

The WoAA2022 recorded household expenditures 30 days prior to the survey. It

reported the average monthly household expenditure to be AFN10,706 in August/
September 2022. The corresponding per capita expenditure was AFN1,614. This
average slightly overestimates the level of expenditures as the survey did not sample
the Kuchi population that has lower expenditures. Another difference is that the 2020
survey included expenditures for durable goods that were omitted from the 2022
survey. Conversely, the 2022 survey included expenditures on health.

According to the NSIA and assuming a population size of 40 million, GDP per capita
income declined from US$607 in 2020 to US$425 in 2021, a drop of 30 percent.
There are no actual data for 2022 but according to the World Bank, Afghanistan’s
GDP has “fallen by one-third after the events of August 2021 [and] Afghanistan’s per

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 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

According to the NSIA, capita income could now rank among the bottom two
GDP per capita income or three in the world”33 (see Table 3). The per capita
declined from US$607 in nominal expenditures as reported above by the two
2020 to US$425 in 2021, surveys confirm the decline has been of the order of
a drop of 30 percent. 30 percent.34

Table 3: Countries with the lowest per capita income in the world (in US$)

IMF World Bank UN

Country Income Year Income Year Income Year
Yemen 874 2022 702 2018 302 2021
Burundi 293 2022 222 2021 311 2021
Afghanistan 611 2020 369 2021 356 2021
South Sudan 328 2022 1072 2015 400 2021
Afghanistan’s rank 3rd lowest 2nd lowest 3rd lowest

Sources: Respective organizations

In distributional terms, the NSIA reported that “inequality narrowed from 2016-17 to
2019-20, with the Gini index falling from 0.312 to 0.301”. This is a small decline that
can be compared with an earlier NSIA estimate for 2007, which put the value of the
Gini at 0.28 in 2007, suggesting a slight increase in inequality over time.35 However,
data from 2022 indicate a much higher value of the Gini index at 0.411 for households
and 0.396 for the population.36 There is no difference in inequality with respect to
expenditures between urban and rural households.

How many Afghans in 2022 were below the 2020 poverty line of
AFN2,268?
The IE&LFS estimated the food poverty line and a non-food threshold. The former
was derived from “the cost of consuming a food bundle corresponding to a minimum
caloric requirement of 2,100 kilocalories”.37 The food expenditure component
averaged AFN1,330 ( US$17) per person per month. The non-food requirement to
satisfy a minimum standard of living was set at AFN937 ( US$12) per person per month,
implying a national poverty line of AFN2,268 ( US$29) per person per month. As prices
differ across Afghanistan’s eight regions and between urban and rural areas, different
poverty lines were adopted for each region and urban/rural location – in all 14 of
them (as South and West-Central were taken to have only rural regions).38 Per capita
monthly expenditure was calculated by dividing the total household expenditure by
the total number of household members. If the per capita expenditure fell below the
poverty threshold applied to a person located in a specific region, then the person was
deemed to be poor. Based on the above considerations, the poverty rate was found to
be 47.5 percent of all Afghans, or just over 15 million of the NSIA-estimated population
of 32.2 million. The same approach can be used for estimating the percentage of
persons below the 2020 national poverty line using the results for 2022.

By 2022, 81 percent of households and 84 percent

According to the WoAA, in of Afghans reported per capita expenditures
August/September 2022, 84 below AFN2,268, the national poverty line in
percent of Afghans had per capita 2020.39 Adjusting that figure for expenditure
expenditures below AFN2,268, on durables, which were not taken into account
the national poverty line in 2020. in 2022, as well as for the regional/urban/rural
price variation and inflation (22.4 percent),

43
AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

respectively.iii It should be noted that the WoAA2022 included health expenditures

that at 13.8 percent of expenditures were significantly higher than the expenditure
on durables in 2020 (4.4 percent of household expenditures). If anything, this should
increase the reported rates (Figure 12).
The level of per capita expenditure deemed
The level of per capita expenditure to be the minimum to avoid food poverty
deemed to be the minimum to was AFN1,330 in 2020. At that nominal level,
avoid food poverty was AFN1,330 89 percent of households and 91 percent
in 2020. At that level 91 percent of of Afghans were below it in 2022.40 Taking
Afghans were below it in 2022. into account the food inflation since 2020
brings both percentages to the mid-90s 41
Figure 12: % of households and persons below selected levels of monthly
per capita expenditure, September 2022 (in Afghanis)*

Households Persons

96%
95%
91%
89%
87%
84% 84%
81%

[1] < 2,268 [2] < 2,760 (NPL 2020 adj. [3] < 1,330 [4] < 1,717
(NPL in 2020) for durables, location and (food poverty (1,330 adj. for
inflation) line 2020 adj. location and
for location) food inflation)

* According to the data reported in the WoAA2022 shown in [3], 89 percent of households and 91 percent
of Afghans had food expenditure lower than the nominal food poverty line of 2020 (AFN1,330). This is in
line with the 91 percent of households who listed food as their top priority, and around three-quarters of
households stated they “struggle to obtain food”, “did not have enough money to obtain food”, and “prices
are too high to afford food items at the market”. The share of Afghans below AFN1,717 (the food poverty
line in 2020 adjusted for food inflation) was 96 percent.
Notes: [1] These percentages are below AFN2,268 (the national poverty line in 2020).
[2] As in [1] correcting for the under-reporting of durables in 2022 and adjusting for regional/urban/rural
price variation according to the NSIA’s regional poverty lines in 2020, and for the overall inflation rate
between 2020 and 2022 (22.4 percent).
[3] These percentages are for those who in 2022 had nominal food expenditure below AFN1,330 (the
food poverty line in 2020) after adjusting for regional/urban/rural price variation according to the NSIA’s
regional poverty lines in 2020.
[4] As in [3] adjusted for the 2020 to 2022 food inflation (29.1 percent).
Sources: WoAA2022. The thresholds were selected from IE&LFS2020

Funding the gap to bring per capita expenditures in 2022 to the

2020 poverty line
The IE&LFS2020 estimated “the poverty gap”, i.e., the mean shortfall from the poverty
line in the population, to be 13.5 percent.42 This translates to an average expenditure
of those below the then poverty line of AFN1,962 ( US$25) compared to the 2020
poverty line of AFN2,268 a difference of AFN306 (US$3.9) per person per month.
Using the UN population estimate of around 40 million and the then poverty rate of
47.5 percent, the number of poor in 2020 was 19 million. To bring all those below the
poverty line to the level of the poverty line would have required paying them in total
almost US$900 million (5 percent of the then GDP), assuming perfect targeting and
no implementation costs.43
iii. For brevity, this report refers to the percentage of poor being 85 percent – this being between the
percentage of poor households and poor people.

44
 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

According to the 2022 data, the shortfall

Using the UN population figure of among those persons whose expenditures
40 million and the share of those are below the 2020 poverty line comes to
below the 2020 poverty line of AFN1,145 ( US$13). Using the UN population
around 85 percent suggests, figure of 40 million and 85 percent population
first, that 34 million Afghans have share of those with expenditures below
monthly per capita expenditures the 2020 poverty line implies, first, that the
below the poverty line of 2020 number of poor has increased to 34 million
and, second, that the expenditure by end 2022 (from 19 million in 2020) and,
shortfall has risen to US$5.3 second, that their expenditure shortfall has
billion. risen to US$5.3 billion (35 percent of the
US$15 billion GDP in 2022). If so, the funding
gap exceeds the total amount of US$3.7 billion that the international community gave
to Afghanistan in 2022, and also the US$4.6 billion that the UN and partners are
seeking to assist the Afghan population in 2023.44

Conclusions
The cumulative decline in per capita GDP since 2020 is likely to have lowered the level
of spending households can afford. Price increases have been significant, especially
for food. Even in local currency units and in PPP terms, per capita incomes declined
by around 25 percent. The Word Food Programme (WFP), which assisted 23 million
Afghans by distributing more than 1 million metric tons of unconditional, fortified, and
nutritionally balanced food in 2022, estimates that 20 million will face acute food
insecurity in 2023, with malnutrition being above emergency thresholds in 25 out of
34 provinces, and that the situation is expected to worsen.45 For 2023, both WFP and
UNICEF estimate that more than 28 million Afghans might require assistance.46

By September 2022, 15 million more Afghans were likely to have fallen below the 2020
poverty line – an increase to 34 million from just under 19 million. The expenditure
shortfall among those Afghans has increased from US$900 million (5 percent of GDP)
in 2020 to US$5.3 billion (35 percent of GDP) in 2022. The latter figure is more than
40 percent the UN humanitarian assistance given to Afghanistan in 2022.

The estimates presented above clearly indicate that Afghanistan faces an imminent
basic needs crisis. The crisis can further deteriorate if international aid for humanitarian
purposes is curtailed in response to increasingly severe bans imposed on girls’
education and women working in NGOs. Numerical estimates aside, there are several
qualitative indicators on the conditions households are currently facing. A most telling
and comprehensive finding is that 91 percent of households identified food as their
most pressing priority. This is in line with numerical estimate presented in this chapter,
which shows that for 96 percent of Afghans the real expenditure on food in 2022 is
below the food poverty line in 2020.

45
AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

KEY FINDINGS AND MESSAGES

• In September 2021, UNDP estimated the massive economic shock
post-August 2021 might increase poverty by 25 percentage points
from the then projected 72 percent estimate as its base, cautioning
this is the worst case scenario – something that did not materialize
in great part because of massive international assistance that
swiftly flew into the country to avoid a massive humanitarian crisis.

• In December 2021, UNDP estimated that the number of

Afghans below the poverty line was 19 million with an implied
poverty gap of US$900 million, or 5 percent of the then GDP.

• The estimates presented in this chapter do not correspond to the

conventional “poverty rate” but suggest that around 85 percent
of Afghans have expenditures below the minimum set in the
IE&LFS2020 and as many as 95 percent may be facing food insecurity.

• These estimates suggest that 34 million Afghans have monthly per

capita expenditures below the poverty line of 2020 (an increase of 15
million since 2020), and the expenditure shortfall has risen to US$5.3
billion (from US$900 million in 2020) or nearly 35 percent of GDP in
late 2022.

46
 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

TEXTBOX 3: Demographic and employment differences between

MHHs and FHHs:
The importance of female work for poverty reduction cannot be overstated
On average, male headed households (MHHs) have 6.9 members, compared to
5.5 members in female headed households (FHHs). MHHs have one adult and
0.3 children more. However, as a share of all family members, FHHs cater for
more children (52 percent of their members are children versus 44 percent). The
male heads are older than the female heads (46 years compared to 42.5 years
for women). Despite their younger age, most female headed households are led
by widows – nearly two-thirds of them. The remaining are married (26 percent)
or divorced (2 percent) with another 8 percent leading their households in the
absence of their husbands/mahrams who have migrated internally (3 percent) or
abroad (5 percent). Male heads are much more homogenous, with nearly all of
them being married (97 percent), 2 percent single and 1 percent widowed.
Marital status of head of household by gender

97% Male Female

63%

26%

3% 3% 2% 2% 1%
0% 0% 0% 0%

Married Married, but Married, but Single Divorced Widowed

spouse living spouse living in
elsewhere in a different
Afghanistan country

Female headed households have both more adults and more children working. In
male headed households only 40 percent of adult members work, partly because
too few women work. In female headed households this share rises to 50 percent
– a difference of 25 percent. The difference is bigger by 50 percent with respect to
working children.
Shares of workers in male or female headed household
(% of all household members)

Male HH Female HH

28%
19% 23%
18%
12%
7%
1% 3% 1%
0%

Men Women Boys Girls All

MHHs had incomes (and also expenditures) that are 25 percent higher than in FHHs.
Accounting for the smaller household size in the latter, the difference is reduced to 7
percent. This lower figure is, however, due to the fact that FHHs have proportionately
more working members, especially women workers and girls who are practically
absent in MHHs.

Source: UNDP staff estimates from the WoAA2022

47
AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

FOOD, JOBS, RESTRICTIONS

ON WOMEN’S WORK:
THE MANY SHOCKS
HOUSEHOLDS FACE
48
 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Introduction
This chapter presents the latest information available on the shocks suffered by Afghan
households over the reporting period, conditions as of August/September 2022, and
the coping mechanisms available to them. It covers issues pertaining to incomes, food
insecurity, health, shelter, water and sanitation, energy, and education. The evidence
is presented at the national level, ignoring for now the substantial differences between
female-headed household and male-headed households.47

The survey asked households whether they have been affected by four specific events
in the middle six months of 2022: economic crises, COVID-19, conflict, and natural
disasters (droughts, floods, earthquakes, avalanches, and heavy snowfall). According
to the survey, only 12 percent of households reported they have not experienced any
of these events which corresponds to only 740,000 households.iv However, many
households experienced more than one event, on average 1.6 events, and among
them the prominent was drought followed by economic shock (Figure 13).

Figure 13: Households affected by major adverse event in the last 6 months (in millions)

3.9

3.3

1.2

0.6
0.3 0.3
0.1

Drought Economic Flood COVID-19 Conflict/ Earthquake Other

violence

Note: “Other” includes avalanches and heavy snowfall.

Source: WoAA2022

These responses confirm that Afghanistan remains one of the low-income countries
most affected by natural disasters, being second only to Haiti in the number of fatalities
in the last four decades48, the fourth most at-risk country for humanitarian crises and
disasters, the eighth most vulnerable to climate change and the least prepared to
adapt.49 It also has a higher warming rate than the global average.50
The effects of COVID-19 appear to be enduring Afghanistan remains one of the
among 600,000 households. Another 300,000 two most affected low-income
households (5 percent nationally) reported countries by natural disasters
being affected by conflict, which corresponds and is ranked the 4th most at risk
to 2 million Afghans of all ages. As many as country for humanitarian crises
3.3 million households (54 percent nationally) and disasters worldwide.
reported experiencing economic shocks.
Overall, loss of income, limited access to food, and being forced to borrow have been
the three most significant impacts on households (Figure 14).51

iv. The average household size is 6.6 members (of whom 1.5 are children 6-12 years and 0.99 are between
13 and 17). It is assumed the population is 40 million and these numbers are used to convert household
incidence to persons.

49
AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Figure 14: Type of impact of specific events on households (in millions)

Loss of income Limited access to food Taking on dept

3.3 3.3
2.9
2.6
2.4
2.0

0.3
0.2 0.2 0.2 0.2
0.1

Economic Natural Conflict COVID-19

Source: WoAA2022

Other impacts were more specific to a particular event. For example, 62 percent of
those impacted by COVID-19 reported an unmet need for water and sanitation, and
11 percent had a recent death in the family. Among those households affected by
conflict, 32 percent reported loss of shelter, 27 percent lost basic services, 19 percent
lost health care, and 11 percent experienced an injury or death among their members.
However, the loss of shelter from conflict has affected fewer households (96,000)
than those for natural disasters (677,000) (see Table 4).

Other than loss of income, access to food, and taking on debt, the most significant
impact of natural disasters has been on education (Figure 15). The results of the survey
suggest that 25 percent of affected households incurred education losses. This
corresponds to more than 1.5 million households, a significant number as households
have on average 2.5 children of school age.

The dire economic situation is not fully reflected in the numbers shown in the table,
as lost income was not included under the umbrella of economic events considered
by survey respondents (Figure 13). Still, 3.4 million answers provided related to taking
on debt.

Figure 15: % and number of households that experienced at least one shock
by type of impact

4.8 % Millions
4.1

3.4

1.5

79% 67%
1.0
56%
0.8%
0.6
25%
16% 13% 10%

Diminished limited Taking on Loss of or loss f or Loss of or Loss of or

or lost access to dept diminished severe diminished severely
source of food access to damage to access to diminished
income education shelter health care access to
basic
services

Source: WoAA2022

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 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Priority Needs
The gravity of the situation is more clearly shown in Table 4. Column 1 shows the
percentage of all households who reported experiencing an impact from an event,
while Column 2 across households that experienced the event. Column 3 shows the
number of households affected, and Column 4 shows the resulting number of Afghans
affected.

It is obvious most households are in great need

of incomes and food. While the data presented Most households are in great
above relates to the first six months of 2022, the need of food and income
survey also asked whether monthly household but in 2022, only 3 percent
income had changed in the past 30 days. Only of households reported that
3 percent of households responded that their their income had risen, 20
income had risen, while 77 percent stated it was percent said their income had
lower, with 20 percent saying it had stayed at the stayed the same and as many
same level. It is therefore not surprising that most as 77 percent stated that their
households are concerned about food security income had declined.
and their livelihoods (Figure 16).

This finding is consistent with the observation that high acute food insecurity persists
across Afghanistan. It has been reported that the combination of a collapsing
economy and drought deprived nearly 20 million Afghans of food, classified in Crisis
or Emergency (IPC Phases 3 or 4), between March and May 2022 (the lean season).
Among these are about 6.6 million people in Emergency (IPC Phase 4) and 13 million in
Crisis (IPC Phase 3).52 The UN World Food Programme estimates the number of people
facing acute food insecurity at 22.8 million.53 And the most recent estimate reported
by the World Bank suggests that the share of the population with insufficient food has
stayed above 90 percent. This is despite the fact that food items are reportedly widely
available.54

51
AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Table 4: % of households potentially affected by various events and their impact

on the population*

Event Impact Reporting Affected HH Population

(1) (2) (3) (4)
Natural Diminished or lost source of income 55.0% 79.5% 3,335,216 22,012,428
Econ Diminished or lost source of income 54.2% 100%** 3,284,907 21,680,385
Econ Limited access to food 48.2% 88.2% 2,920,482 19,275,183
Natural Limited access to food 43.5% 62.9% 2,637,978 17,410,654
Econ Taking on debt 39.9% 73.1% 2,419,295 15,967,349
Natural Taking on debt 33.4% 48.2% 2,023,417 13,354,552
Natural Loss of or diminished access to education 21.8% 31.5% 1,319,722 3,286,109
Natural Loss of or severe damage to shelter 11.2% 16.2% 677,448 4,471,157
Econ Loss of or diminished access to health care 8.3% 15.1% 500,960 3,306,338
Econ Loss of or diminished access to education 8.1% 14.8% 489,065 1,217,773
Econ Loss of or severely diminished access to basic services 6.1% 11.2% 372,284 2,457,075
Econ Loss of shelter 5.9% 10.8% 358,680 2,367,285
COVID Increased unmet need for clean water and sanitation 5.9% 61.6% 355,290 2,344,914
Natural Loss of or diminished access to health care 4.8% 6.9% 291,384 1,923,137
COVID Diminished or lost source of income 4.2% 44.3% 255,452 1,685,983
Natural Loss of or severely diminished access to basic services 3.9% 5.7% 238,018 1,570,920
Natural Loss of or diminished access to clean water and sanitation 3.5% 5.1% 212,133 1,400,076
Conflict Diminished or lost source of income 3.4% 67.4% 203,375 1,342,274
COVID Limited access to food 3.2% 33.8% 195,204 1,288,345
COVID Taking on debt 3.2% 33.1% 191,231 1,262,123
Conflict Limited access to food 2.5% 51.1% 154,256 1,018,089
Econ Increased unmet need for clean water and sanitation 2.4% 4.4% 145,533 960,516
Conflict Taking on debt 1.9% 38.2% 115,211 760,390
Econ Loss of or severely diminished access to heating source 1.8% 3.3% 108,626 716,931
Conflict Loss of or severe damage to shelter 1.6% 31.9% 96,285 635,479
Conflict Loss of or severely diminished access to basic services 1.3% 26.8% 80,847 533,591
COVID Loss of or diminished access to health care 1.3% 13.6% 78,618 518,878
COVID Death of household members 1.0% 10.9% 62,972 415,614
COVID Loss of or severely diminished access to basic services 1.0% 10.6% 61,151 403,598
Conflict Loss of or diminished access to health care 0.9% 18.8% 56,852 375,221
Conflict Injury or death of household members 0.5% 10.9% 33,018 217,921
COVID Children required to work 0.4% 4.3% 24,562 61,160
Natural Injury or death of household members 0.4% 0.5% 22,827 150,660
COVID Loss of or diminished access to education 0.4% 3.9% 22,430 55,851
Conflict Loss of or diminished access to clean water and sanitation 0.3% 5.1% 15,396 101,613
Conflict New presence of mines, ERWs, PPIEDs in the community 0.2% 3.6% 10,767 71,060
Conflict Loss of or diminished access to education 0.2% 3.5% 10,476 26,085
COVID Additional family members forced to work 0.2% 1.8% 10,436 68,879
COVID Loss of shelter 0.1% 0.9% 5,468 36,092

* The population estimate is based on the number of households reporting multiplied by the average household
size but for education it is multiplied by the average number of children in the household aged 6 to 17 years.
** Loss of income was not included in the WoAA2022 questionnaire as an impact due to an economic event and is
assumed that it has affected all those who selected an economic event.
Source: WoAA2022

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 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

When households were asked to list their three most pressing needs, food topped the
list by a great margin, at 91 percent of responses. Livelihood support and employment
came second, at 55 percent. Healthcare, listed by just under half of households, was
third at 47 percent. The fourth most common priority was the need to repay debts
– another indicator of the dire situation of households that had to incur debt in the
absence of opportunities for productive livelihoods.

Figure 16: Listed priorities by households (% of households)

Psychosocial support 2%

Access to energy 3%
Hygiene NFIs and sanitation/protection services 3%
Education for children under 18 6%
Seeds or other agricultural inputs 9%
Shelter or housing 20%

Water for drinking/hygiene /other 23%

Need to repay debt 30%

Healthcare 47%

Livelihoods support or employment 55%

Food 91%

Source: WoAA2022

Regarding social conditions, drinking When households were asked to list

water and sanitation as well as hygiene their three more pressing priority
products came to 26 percent (23 and 3 needs, food topped the list by a great
percent respectively) with concerns for margin, at 91 percent of responses,
shelter and housing being not far behind followed by livelihood support and
at 20 percent. employment, and health care.

Households face a plethora of problems related to water and sanitation (Figure 17).
Four in five households lack piped water for drinking, 40 percent do not have water
storage containers, and nearly 30 percent do not have enough containers to fetch
water. With respect to cooking, more than half of households lack heating devices and
16 percent have no cooking items.

53
AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Figure 17: Share of households with water, cooking and sanitation issues

No cooking items 16%

Share sanitation facilities with other HHs 22%

No soap 26%
Not enough containers fetch water 27%
Lack of water supply 30%
No water storage containers 40%

Handwashing facility only with water 42%

No heating devices 54%

No piped water for drinking 80%

Source: WoAA2022

The energy situation is precarious55. Ninety-six percent of households use electricity,

with 37 percent being connected to the national grid and 43 percent using solar
power (Figure 18). Households use electricity for nine hours daily which is less than
the length of night – and in some provinces the use of electricity extends no more
than a couple of hours a day. It is likely that the energy supply, when available, is too
weak to support more than a few light bulbs or a telephone charger.

The lack of electricity supply is also suggested

by the sources of heating material households While 96 percent of
use. Only 1 percent of households use electricity households use electricity, the
to this effect and just 2 percent use liquid daily use of electricity averages
petroleum gas (LPG) (Figure 19). only nine hours, which is less
than the length of night, and
The majority of households report not having too weak to support much
adequate winter clothing for all their members. other than a couple of light
The average number of blankets per household bulbs or a telephone charger.
nationally is one per person, with the average Only 1 percent of households
in some provinces being only 0.8 per person. use electricity for heating
Deaths from the cold are common in Afghanistan and just 2 percent use liquid
because of the scarcity of infrastructure and petroleum gas (LPG).
basic services, as well as the low quality of
housing, especially for the country’s poorest,
many of whom live in tents.56
Figure 18: Access to electricity (% of households)

No electricity at all 4%

Battery 14%

Main electricity network /grid 37%

Solar panels is the main source 43%

Source: WoAA2022

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 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Figure 19: Use of heating sources (% of households)

Electricity 1%

Use LPG (liquid petroleum gas) 2%

Use coal/charcoal/archa wood 18%

Use dung, paper/carton, plastics 30%

Use wood as main source for heating 48%

Have no winter clothing 55%

Source: WoAA2022

In addition to water and energy, many households

face several issues regarding shelter and housing Almost two-thirds of
(Figure 20). Almost two-thirds of households live households live in mud
in mud houses and one in five households live houses and nearly as many
in shelters that have been severely damaged. in partially damaged ones.
Nearly half experience leaks during heavy rain, More than half experience
and nearly 30 percent even during light rain. Over leaks when it rains.
40 percent cannot afford repairs and one in three
cannot raise funds to this effect.
Figure 20: Share of households with shelter issues

Shelter has significant damage 19%

Have leaks during light rain 28%

Unable to raise funds for repairs 32%

Unable to afford repairs 41%

Have leaks during heavy rain 45%

Live in partially damaged shelter 58%

Live in mud houses 61%

Source: WoAA2022

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AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Conclusions
Afghanistan is known to be affected by natural disasters and seasonal effects. Their
impact has persisted throughout the decades, as the country has been unable to
develop infrastructure and basic services that could reduce or mitigate the risks
arising from environmental effects.

Today the vast majority of Afghans face a wide range of basic needs that are practically
impossible to satisfy, even partially, without assistance. They are exposed to a wide
range of significant adversities. Some cannot be prevented (such as natural disasters)
and require consistent infrastructure development spending and the introduction of
climate adaptation measures over many years. The effects of others can be mitigated
with humanitarian assistance in the near term while setting the foundation for the
development of social protection in the longer term.

Fundamental causes of many social concerns are the lack of economic opportunities
and the deterioration of economic conditions in the recent past, several of them
inflicted by the increasing restrictions imposed on women’s work. As the next
chapter shows, the people of Afghanistan have few coping mechanisms to counter
the calamities they face, leading to extensive borrowing for securing food.

56
 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

KEY FINDINGS AND MESSAGES

• Afghanistan is one of the most natural disaster prone and climate-
risk countries in the world. The country’s climate risk is ranked fifth
worldwide, with a higher warming rate than the global average.

• The findings suggest that adverse natural shocks, mainly from droughts
and floods, have led to more hardship than that arising from other
sources. These two events combined are contributing to the poor
quality of shelter and inability of households to finance improvements.

• These shocks have resulted in high rates of debt, reduced school

attendance (in addition to those affecting girls due to recent
restrictions regarding attending secondary education), limited
access to health care services and more generally to basic services.

• The share of those affected by conflict is 5 percent

though the uncertainty and fear it may create remains
unknown. The impact of the pandemic seems to be waning.

• Among top priorities, most households list food first (91 percent)
followed by livelihoods and employment (55 percent) and health
care (47 percent). This suggests that most Afghans are in a battle
for survival, facing tight economic and labour market conditions.

• Debt repayment came a rather distant 4th priority (30 percent)

compared to the more immediate pressures of food and health care.

• Water issues remain a priority, with 80 percent of households

lacking access to piped water, 40 percent do not have water storage
containers, and nearly 30 percent do not have enough water containers
to fetch water. Sanitation facilities and soap availability are wanting.

• Electricity, heating and winter clothing are all in very short

supply. More than half of households reported not having winter
clothing while blankets average one per person nationwide.

• Nearly two-thirds of shelters are made of mud (61 percent) and as many
are partially damaged. Leaks during rain are common under both heavy
rain (45 percent) and light rain (28 percent). Predictably, households are
unable to afford repairs – most are indebted for the sake of securing food.

• Together, these factors paint a bleak picture of extreme deprivation.

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AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

TEXTBOX 4: Gender differences in perceived needs and education

FHHs have more workers and are poorer than MHHs. Women’s household
priority needs also differ from those of men. Of the 11 categories of need asked
in the WoAA, the importance of needs in FHHs exceeded those in MHHs for 7
of them: food, health care, debt repayment, education for children, hygiene and
sanitation, psychosocial support and access to energy. The male priorities are
more in accordance with the traditional breadwinner and provider roles, such
as to ensure the livelihoods of their families, being themselves employed and
having shelter for their household members.

Priority needs of households by gender (% of HHs, multiple answers)

Female headed households Male headed households

3%
Access to energy
2%

3%
Psychosocial support
1%

Hygiene NFIs and sanitaion services / protective gear 7%

3%

9%
Seeds or other agricultural inputs
9%

9%
Education for children under 18
5%

14%
Shelter or housing
20%

Water for drinking or hygiene / other purposes 19%

24%

Need to repay debt 31%

29%

48%
Livelihoods support or employment
56%

Healthcare 51%
48%

93%
Food
90%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Having lower incomes, FHHs consider girls’ education to be more expensive and
more frequently resort to making use of their daughters’ work or marrying them
earlier than MHHs. However, both types of households agree that the social,
cultural and Taliban-imposed restrictions are the main factor for the low school
enrolment rates of girls.

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 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Reasons for girls (6-17) not attending school in the past six months
(% of HHs, multiple answers)

Female HH Male HH

Security concerns due to explosive, mines, EFW, PPIEDs 0%

0%
2%
Girl married
1%

Involunarily removed due to conflict or natural disaster 0%

1%

Closed due to COVID-19 1%

1%

Security concerns of the girl traveling or being at school 2%

1%

Girl had to earn money instead 6%

2%

Interruption of education due to conflict 5%

3%

Lacked documentation to enroll the girl 5%

4%

Lack of teachers, equipment, school too crowded 6%

5%

Education is too expensive 19%

13%

No school in the area or school is too far 37%

41%
New bans, restrictions against female children attending school, 42%
cultural reasons (and/or no female techers) 43%

0% 10% 20% 30% 40% 50%

Yet, school enrolment and attendance rates of girls in FHHs exceed those in
MHHs by 20 percent. And more FHHs consider that children feel unsafe “going
to or when in school” because of harassment (38 percent) and child abuse (25
percent) than MHHs (27 percent and 8 percent respectively).
Source: UNDP staff estimates from the WoAA2022

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AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

CRIPPLING DEBT AND

CHILD BRIDES: COPING
MECHANISMS

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 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Introduction
Other than food, the most important priorities among households relate to livelihoods
and employment and debt repayment. However, deteriorating economic conditions,
especially during the last two years, have eliminated many employment opportunities.

This situation has only worsened with the recent

This situation has only restrictions on women’s employment. Though
worsened with the recent Afghan women are marginalized in public life,
restrictions on women’s those who work make a substantial contribution
employment. A complete to household incomes. Using the information on
ban on women working in the sources of household incomes from August/
formal employment would September 2022, a total ban on all women’s
reduce the incomes of the work will reduce household incomes nationwide
households in which they by 6 percent. This is a significant figure given
live by nearly 50 percent. the exceptionally high poverty rate. Yet, school
enrolment and attendance rates of girls in FHHs
exceed those in MHHs

The above figures may not fully capture the additional side effects of the recent
restrictions imposed on women. For example, the requirement that women be
accompanied by their mahram while in public, whether for work or travel, imposes
additional barriers on women that may not easily have a mahram, and taxes the time
of men and diverts them from productive activities

Below is a comparison between the coping mechanisms deployed by households in

2020 and 2022, followed by an examination of the coping mechanisms available to
households, including the role of debt and income from employment.

How do households cope with the current situation

compared to 2020?
During the last decade, all but one survey shows that poverty has been widespread
and increasing. The most recent survey used in this chapter, shows that around 95
percent of Afghans are below the food poverty line established in 2020 adjusted for
inflation and location. Were the poverty line and the food poverty line set too low
in the IE&LFS2020? A positive answer might explain the rather paradoxical decline
in poverty since 2016-17. In any case, survey estimates should be compared and
checked with information from other sources57. However, it is more likely than not
that the welfare of households has declined considerably between 2020 and 2022,
as even the lowest estimate in Figure 12 shows. This is confirmed by the qualitative
answers provided by the households as summarized below in Table 5.

Several questions in 2022 were similar to those asked in the IE&LFS in 2020. A
common catch-all question was whether households needed to deploy a coping
strategy to compensate for the food insecurity they face. In 2020, as many as 41
percent of households stated that they needed no such strategy throughout the
year, compared to only 7.8 percent during the 30 days prior to the 2022 survey. As
expected, households in urban areas faced more food insecurity than those in rural
areas.

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AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Table 5: Coping strategies of households to mitigate shocks against food insecurity:

National comparisons between 2020 and 2022

IE&LFS (October 2019-September 2020) WoAA

(30 days prior to August/September 2022)
“Did not need to do anything to 41% 7.8% “No need to use any coping strategy”*
compensate”
Urban 25% 6.1% Urban
Rural 45% 8.4% Rural
"Sold house or female reproductive 4% 5% “Sold house or land”
livestock” 18% “Sold last female animals”
“Sold assets” 25% “Sold household assets”
(asked, not reported) 10% “Sold income generating equipment
or means of transport”
“Took loan” 5% 78% “Does the household currently have
“Purchased food on credit from 6% debt?”
traders”
57% “What is your household’s main
reason behind taking on debt?”
Answer “Food”**
“Decreased expenditures” 21% 39% “Decreased expenditures on health,
education etc.”
“Received help from others in the 7% 75% “Borrowed for food or rely on help
community” from a relative or friend”***
“Sold labour in advance or rented 26% “Spent savings”
out or mortgaged out farmland”
(asked, not reported)
“Children who were not working 14% “Sent children to work outside home”
started working” (asked, not
reported)
(not asked) 12% “Engaged in extreme or high-risk
activities”
(asked, not reported) 8% “Begging or relying on charity”
“Reduced quality of diet” 15% 94% “Relied on less preferred and less
expensive food”***
“Reduced the amount of food or 3% 63% “Limited portion size of meals”***
skipping meals” 50% Reduce number of meals in a day”***

* Any of the coping strategies asked – see Figure 21 and Table 6.

** Overall, 88 percent of households experienced one or more shocks in the last six months. The percentages
who took debt for specific shocks (among those who cited a specific impact) are: 73 percent due to an
economic shock (of 54 percent total population affected), 48 percent due to a natural disaster (of 64 percent
affected by drought; 20 percent by floods; and 4 percent by earthquakes), 38 percent due to conflict (of 5
percent affected), and 33 percent for COVID-19 (of 9 percent affected).
*** In the last 7 days.
Notes:
1/ The IE&LFS2020 included additional answers (not reported separately): (i) reduced quality of diet/ amount
of food/ skipped meals; (ii) children taken out of school; (iii) marriage of a child; (iv) decreased farm gate
prices; and (v) members of HH went elsewhere to find work.
2/ Both surveys allowed multiple answers.

Sources: IE&LFS2020, Table 6.9 and Questionnaire Section 10; WoAA2022

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 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Certain figures in the table stand out, especially those indicating the high percentages
of households that borrowed for food, consumed less preferred and less expensive
food, and reduced the size and numbers of meals. Most notable is the share of
households who borrowed for food or relied on help from a relative or friend to reduce
food insecurity (75 percent).

Many households have run out of coping mechanisms

The percentages in Table 5 are estimated over the total number of households. This
is for comparability purposes between the two surveys. The households were also
asked to identify the coping strategies available to them (Figure 21). For example,
more than one-third of households could not use savings, as they either never had
savings or had depleted them. Others did not have (or no longer had) land or female
animals, were unable to further lower expenditures on health and education, or had
no avenues for borrowing.

Figure 21: % of households who cannot use a specific coping strategy for securing food
(Strategy used and exhausted previously, or unavailable to the household)

Exhausted Unavailable

Borrow food or money to buy food 2% 5% 7%

Decrease expenditures on health, education etc 2% 13% 15%

Engage in extreme or high-risk activities 2% 17% 19%

Beg or rely on charity 2% 19% 21%

Marry daughters 2% 21% 23%

Migrate 7% 19% 26%

Sell household assets 8% 18% 26%

Sell house or land 4% 27% 31%

Sell female animals 4% 27% 31%

Send children to work outside home 1% 32% 33%

Sell income generating equipment or means of transport 5% 30% 35%

Use savings 12% 24% 36%

Source: WoAA2022

Table 5 shows that 26 percent of all households drew

upon their savings in the last 30 days (and probably more A most telling finding
during the year). However, 36 percent of households is that more than 4.3
could not use any savings, either because they had none million households
(24 percent) or because they had exhausted them before have borrowed simply
the survey (12 percent) (Figure 21). If expressed as a share for securing food.
of the 64 percent that could have used savings as a
coping strategy, the percentage of those who used their savings during the 30 days
prior to the survey rises from 26 percent to 41 percent.

Strikingly, more than 4.3 million households have borrowed simply for securing food
(Table 6). Many households have mortgaged their future, having sold productive assets
such as their last female animals (1.1 million) or other income-generating equipment or
means of transport (over 0.6 million), and even their houses or land (over 0.3 million).
In many cases, households were forced to mortgage their children’s future by seeking

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AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

recourse to child labor (more than 850,000)58 or marrying their daughters earlier than
intended (nearly 80,000), to combat extreme food insecurityv.

Table 6: % of households who were able to use a strategy and number of households that
used a food coping strategy in the last 30 days

Coping strategy % who used it Number of HHs

Borrowed food or money to buy food 77% 4,364,421
Decreased expenditures on health, education etc. 45% 2,363,904
Spent savings 41% 1,578,884
Sold household assets 34% 1,528,924
Sold last female animals 27% 1,111,782
Sent children to work outside home 21% 859,562
Engage in extreme or high-risk activities 14% 706,535
Sold income generating equipment or means of transport 16% 631,239
Begging or relying on charity 10% 466,432
Sold house or land 8% 319,580
Entire household migrated 4% 161,618
Marriage of daughters earlier than intended 2% 79,467

Source: WoAA2022

As Figure 21 shows, more than one-third of households either have no savings to

draw from or have exhausted them. Many households also reported having no assets.
Under such circumstances, borrowing becomes the first line of defense.

The data from 2022 indicates that the debt-to-expenditure ratio is highest among
the poorest households (lowest decile) and declines continuously across the other
deciles, reaching its lowest value among those in the top decile (Figure 22). It is likely
that only around 10 percent of households feel any semblance of economic security
regarding their future.

Figure 22: Ratio of debt to expenditures of indebted households, by decile

1.0 1.0

0.8

0.6

0.4
0.3
0.2

0.0
1 2 3 4 5 6 7 8 9 10
lowest highest

Source: WoAA2022

v. The numbers of children impacted may be higher than the reported numbers of households, as a
household may have used this strategy to more than one boy or daughter.

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 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Some households are in a better position than others

Most households live under conditions that give rise to concerns. Table 7 shows that
with respect to responses that relate to issues that can vary from month to month,
only 8 percent of households did not need a coping strategy during the 30 days
prior to the survey. Other responses related to short-term well-being generally ranged
from 10 percent to around 20 percent of households, such as those regarding food
consumption, access to health care, barriers to markets and availability of seasonal
clothing. In terms of more permanent issues, about one in five households live in
shelters that are not damaged though only 6 percent live in shelters with robust
materials. Only one in five can use piped water for drinking.
Table 7: Selected indicators among better off households

6% live in permanent shelter with robust materials

8% did not need to use a coping strategy in the last 30 days
11% do not face barriers to access markets
12% did not experience a major adverse event in the last six months
16% have no enclosure problems with shelter
18% have winter clothing for all children in the household
20% have no barrier to accessing health care
20% use public piped water for drinking
21% have acceptable food consumption
23% live in no damaged shelter

Source: WoAA2022

Based on these responses, it may be inferred that around 8 percent of households

live under overall adequate conditions. This relatively low number may reflect the fact
that only 12 percent of households reported experiencing no major adverse event
in the last six months, such as conflict, COVID-19, natural disaster, and/or economic
shock. Some households also may have answered one question positively and
another negatively.

The limited role of income from employment

For the less well off, one way to bridge the gap
Only 12 percent of households
between basic needs and the expenditures
stated that they did not
required to meet them is through income from
experience a major adverse
work. However, few members of households
event in the last six months, such
work. One reason is that many members are
as conflict, COVID-19, natural
children, as 88 percent of households have
disaster, and/or an economic
children. The average household size is 6.6
shock, and more than 80 percent
comprising 3.21 adults (18-59), 0.26 elderly
do not have winter clothing for
(60+) and 3.13 children (below 18). In the
all children in the household. On
average household, only 1.6 members work
average, there is only one blanket
outside the home: 1.19 men, 0.15 women, 0.23
per person and in some provinces
boys and 0.03 girls.
lower than that.

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AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

It is notable that households rely more on work from

One way to bridge children (almost all being boys) than from adult women
the gap between (Figure 23). As household size increases, the share of
basic needs and working male members remains relatively constant at
needed expenditures approximately three-quarters. The converse is true with
is through income respect to women workers, whose share decreases from
from work. However, nearly one in six to practically zero (2 percent). Disturbingly,
few household children’s share increases as household size increases,
members work, from a low 2 percent to nearly 25 percent. Though not
among them more shown, both female-headed households and male-headed
boys than adult households have the same share of working men among
women. their employed members, but the share of working women
in female-headed households is 10 times higher than
that in male-headed
households (more than 40 percent compared to 4 percent).
Figure 23: Distribution of workers within HHs by gender and age
(men - left axis, women and children - right axis)
Figure 23: Distribution of workers within HHs by gender and age
(men - left axis, women and children - right axis)

Men Women Children

1.00 0.50

0.90 0.45
0.83
0.74
0.80 0.40

0.70 0.35

0.60 0.30

0.50 0.25
0.24
0.40 0.20

0.30 0.15 0.15

0.20 0.10

0.10 0.02 0.02 0.05

0.00 0.00
2 3 4 5 6 7 8 9 10 11 12 13 14 15

Source: WoAA2022

As might be expected, the number of workers increases with the size of the household,
if not by much. For example, among households with two members, one member
works, but this number rises to only 2.8 in households with 15 members (Figure 24).

Figure 24: Workers by size of households with at least one man/woman working
in last 30 days (number - left axis, and as share of total HH members - right axis)
Figure 24: Workers by size of households with at least one man/woman working
in last 30 days (number - left axis, and as share of total HH members - right axis)

Working Share
3.0 2.8 0.8
0.8
0.7
2.5
0.6
2.0 0.5

1.5 0.4
0.3
1.0 0.8 0.2 0.2
0.5 0.1

0.0 0.0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Source: WoAA2022

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 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

While it is true that households typically face adverse environmental and seasonal
events, the current dire employment situation is driven by recent political and
economic changes (Figure 25). And while the low work output of households is partly
attributed to the high number of children, the limited engagement of women in the
labour market impacts significantly on households’ ability to raise income.

Figure 25: Reasons for lower incomes in the past 30 days compared to usual income

COVID-19 1%
Reduced remittances 3%

More competition for jobs due to returnees or IDPs 4%

Migration or displacement 7%

Death or illness of family member 8%

Season-related issues 34%

Change in economic/political context 52%

Reduced employment opportunities 77%

Source: WoAA2022

When at work, the problems household members face differ significantly between
women and men (Figure 26). By far the most important reported problem for women’s
employment in female-headed households are social and cultural restrictions as well
as new bans. Like men, a large percentage of women have low or no profits and
face delays in getting paid. They also face transportation issues when they need to
travel due to restrictions on movement. Working men’s problems are more uniformly
distributed across all reported categories.

Figure 26: Problems women and men face at work

(% of households with at least one man/woman working in last 30 days)

Insecurity 3%
2%
Lack of job security 10%
2%

Lack of access to the internet 5%

3%

Transportation difficulity 14%

7%

Not receiving salary/payment on time 15%

13%

Minimum or no profit in (day-to-day) business 32%

17%
12%
Social and cultural restrictions or new bans 71%

Men Women

Note: As reported for men by male heads of households and for women by female heads of households.

Source: WoAA2022

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AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Overall, around 30 percent of households reported

There are effectively no that the activities of their male working members, often
shortages of either food the only adult working member, fetch low or no profits
or non-food items, but on a daily basis, while 14 percent face transportation
households are too poor difficulties. It is therefore unsurprising that the most
to buy them. important barrier reported by households is high food
prices (77 percent). Not much lower, at 68 percent, was
the share of households stating that prices are too high
on non-food items (NFIs). The inability of households to buy needed items can be
compared with the results of a survey conducted by the World Bank in December
2022, which suggested that the availability of food and non-food items stood at 98
percent for the former and 99 percent for the latter.59

These comparisons suggest that there are effectively no shortages of either food
or NFIs, but rather an inability among households to buy them due to low incomes
and widespread indebtedness (78 percent)60. The four most important reasons for
borrowing are food (57 percent), healthcare (18 percent), weddings and celebrations
(10 percent) and shelter repairs (5 percent).

Conclusions
Between 2020 and 2022, households have exhausted their coping strategies while
their economic situation has sharply deteriorated. Though structural factors account
for much of the low income and high indebtedness reported, the restrictions on
women’s ability to work and an extensive reliance on child labor contribute to reduced
work output among households. The situation has been made worse by additional
recent restrictions placed on women’s work. Nearly half of women in salaried work
have lost their employment and female unemployment may have now reached 40
percent.61 This results in a dual loss – loss in production and loss in investment in
education. The situation for many households is unlikely to improve in the short-term
without assistance, discussed in the next chapter.

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 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

KEY FINDINGS AND MESSAGES

• The systemic environmental and economic factors leading to poor
social conditions in Afghanistan make it difficult for households to
cope with the many challenges of everyday life, and the situation has
significantly worsened between 2020 and 2022.

• Lack of work and the change in the economic and political situation
accounted for the top two reported reasons for loss of income in
2022. Seasonal-related issues came a distant third as an answer to
this question.

• While in 2020 as many as 40 percent of households did not have to

use a coping strategy, this share had dwindled to 8 percent by 2022.

• By September 2022, nearly 80 percent of households have had to

incur debt in order to secure food.

• The poorer the household, the higher the debt burden. Debt as a
percentage of annual expenditure increases as household expenditure
declines: it is 100 percent among those in the poorest decile (10
percent of households) but declines to reach only 30 percent in the
top decile.

• Many lack or have exhausted their options: savings, selling income

generating equipment, land, houses, or other assets; using child labor;
or marrying off their daughters early. Decreasing food expenditure,
having fewer and smaller meals per day, cutting back on health care,
and resorting to begging remain among the few options available to
them.

• Traditional households headed by men have few women workers

– in fact, more boys than women work in these households. Both
female-headed households and male-headed households have the
same share of working men among their employed members, but the
share of working women in female-headed households is 10 times
higher than that in male-headed households (more than 40 percent
compared to 4 percent).

• Women’s employment faces many restrictions fueled by strong views

regarding gender roles in society, exacerbated by the recent bans.
More than 70 percent of female-headed households cited social and
cultural restrictions as the main barrier to women’s employment, as
well as the bans introduced since August 2021.

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AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

TEXTBOX 5: The implications of restrictions on women’s work

The restrictions imposed by the Taliban on women’s employment is bound to have
an effect on current production (GDP level), future economic growth and household
incomes.
Earlier estimates by UNDP (December 2021) suggested that the economic impact of
restrictions on female employment could be a reduction in GDP between US$600
million and US$1 billion, equivalent to between 3 and 5 percent of the country’s
GDP at the time (US$20 billion), with a similar reduction in household consumption.
More recently, UNICEF has estimated that the loss from girls missing education for
just the current year could translate to a loss of US$500 million (3.3 percent of the
current GDP of US$15 billion). However, taking into account the lifetime losses from
underinvestment in education, the total lost income to the economy can reach US$1.3
billion.
The results from the WoAA2022 analyzed in this report show the importance of the
contribution of women workers to household incomes. Households with at least one
female worker have on average higher incomes than those that do not have any working
women, and the difference is significant no matter the type of work women do.

The restrictions on female work, including the ban on women’s employment in NGOs,
are bound to adversely affect household incomes, among households that rely on
female earnings – especially those that have women in formal employment. Since
August 2021, the number of women in salaried jobs is estimated to have been reduced
by half.

If women in formal employment are prevented from working, the per capita incomes of
their households will be reduced on average by almost half (48 percent from AFN2,066
to AFN1,080). If women working in small businesses are prevented and included in
the above group, the decrease will be almost similar (41 percent). Additional losses
can be inflicted from restrictions on the work of female daily laborers (likely to be the
lowest paid workers in the private sector), which could reduce household incomes to
13 percent – still a significant figure given the exceptionally high poverty rate.
Per capita incomes of households that have women workers by type of work
(AFN/month)

Per capita income in HHs % reduction in income if women

Type of work with female if no such are banned from work by type
worker(s) worker(s) of work
Formal 2,066 1,080 48%
As above plus in 1,833 1,076 41%
small business
As above plus 1,247 1,080 13%
daily work*
* Includes daily workers in agriculture, livestock, small business and all other types of
daily work.
Source: WoAA2022

There can be additional side effects of the restrictions imposed on women not
captured by the above figures. For example, the requirement of women to be
accompanied by their mahram when they are in public places, whether for work or
travel, is bound to tax the time of men and divert them from productive activities.

Source: UNDP staff compilation from UNDP (2021c), UNICEF (2022), World Bank (2022a, 2023)

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 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

WHAT CAN AND

DOES HUMANITARIAN
ASSISTANCE PROVIDE?
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AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Introduction
This chapter examines the impact of such assistance to livelihoods, especially with
respect to food security and poverty.

The extent and characteristics of humanitarian assistance

In the 30 days prior to the 2022 survey, 30 percent of households received
humanitarian assistance. Nearly 40 percent of female-headed households received
assistance, compared to 28 percent of male-headed households. Most assistance was
in the form of food, with cash a distant second. Fewer than 3 percent nationwide have
received non-food items: almost none have received assistance through vouchers, or
cash through cards, banks or mobile money (Figure 27). Among all households, less
than 1 percent stated that they do not want to receive humanitarian assistance.

Figure 27: Percentage of households that received humanitarian assistance in the last
month by type of assistance and gender of household head

Male Female
34.2%

23.0%

6.9%

4.9%
2.7%
2.2% 0.8%
0.7%

Food Cash NFI Other

Note: “Other” includes vouchers, services, and cash via cards, banks or mobile money.
Source: WoAA2022

Cash is the most preferred type of humanitarian assistance.

The most preferred
More than two-thirds of households (69 percent) stated
type of humanitarian
that they would prefer to receive cash assistance, while
assistance is in cash.
only a quarter of households (26 percent) preferred
assistance in the form of food. The remaining 5 percent
consisted of in-kind NFIs, vouchers, services, cash via bank transfer, prepaid cards
and mobile money, each accounting for around 1 percent or less.

Women in need have an even stronger preference for cash assistance. Three-
quarters of female members of male-headed households (74 percent) state that they
would prefer to get assistance in the form of physical cash, 22 percent as food, and
2 percent in-kind NFIs. Other forms of assistance combined barely amounted to 2
percent. This reinforces the case, on the one hand, for introducing a benefit in the
form of cash assistance and, on the other hand, to prioritize as beneficiaries women
whose position is economically inferior compared to men’s. Humanitarian assistance
constituted the main source of income in 5 percent of male-headed households, but
more than double that percentage among female-headed households (12 percent).

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 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Not all households were aware of how to contact aid providers to learn what assistance
was available or to report misbehavior or misconduct among aid workers. Among those
who were aware (one in three households), a significant majority indicated that they
were aware of NGOs and UN agencies (73 percent). Considerably fewer households
reported being aware of local aid and specific organizations or government and
community agencies (Figure 28).
Figure 28: Awareness of households regarding from where to obtain information
about assistance

Community committees/shuras 0.0%

Community leader 0.0%

Feedback complaint committees 0.4%
Other 0.7%
Helpdesk 2.3%
Complaints/suggestions box 3.8%

Government contact numbers 11.1%

Awaaz telephone hotline 12.6%

Local government offices/facilities 14.2%

Local aid organizations offices 16.2%

Specific organization contact numbers 20.9%

NGO or UN feedback focal points 72.6%

Source: WoAA2022
The most accessible channels of assistance for female members of male-headed
households are face-to-face interactions (33 percent) and community groups (31
percent) (Figure 29). Some 26 percent cited gender-specific providers, such as
female humanitarian staff (19 percent) and local women’s civil society organizations (7
percent). Unsurprisingly, the top query among households related to food assistance
(Figure 30).

Figure 29: Information channels that Figure 30: Assistance queries among
women use to access assistance households

Women’s CSO 7% Food/local crop/livestock prices 14%

Nutrition 17%
Phone 19%
WASH 18%

Female humanitarian staff 19% Education 23%

Health services 38%
Community group 31%
How to get assistance 59%

Face to face 33% Food 83%

Source: WoAA2022

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AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Impact of humanitarian assistance

Humanitarian assistance is well targeted. Among households classified as poor on the
basis of per capita income (i.e., the 96 percent of households with monthly per capita
income of AFN2,77862 or less), those receiving humanitarian assistance had per capita
incomes that were 5.3 percent lower than those not receiving assistance.

Despite having lower incomes even after receiving assistance, the recipient households
are better able to cope with adversities or avoid hunger compared to higher-income
households that do not receive assistance. The value of the Coping Strategy Index is
higher by nearly one-quarter (22 percent) in the former households compared to the
latter. The difference is expectedly smaller (10 percent) when measured in the Hunger
Scale as both types of households prioritize food.63

Whether social conditions will deteriorate further in the immediate future will very
much depend on the amount and delivery modalities of humanitarian assistance.
Humanitarian aid since 2021 has helped avert a deeper economic collapse and further
deterioration in social conditions.

Much of the humanitarian assistance has been delivered

through NGOs. The recently introduced ban on women Humanitarian assistance
working for NGOs and international organizations not is well targeted. Since
only risks a reduction in the amount of aid that can 2021, it has prevented
keep the economy from contracting further, but also will further deterioration in
deprive Afghan women in need of critical interaction social conditions while
with women workers. As many as 94 per cent of 127 it helped avert a deeper
national organizations surveyed either fully or partially economic collapse.
ceased operations immediately after the ban was
imposed in December 2022, and 150 NGOs and aid
agencies have suspended all or part of their work.
The lost support from these national organizations across 17 provinces is estimated to
adversely affect more than one million Afghan women and girls in need of assistance.64

Table 8: Households that receive humanitarian assistance

cope better and face less hunger than those that do not receive such assistance,
though they have lower incomes and spend equally on food

Received1 Did not receive1

Monthly income per capita (AFN) 941 991
2
Reduced Coping Strategy Index (rCSI) 11.26 13.76
3
Household Hunger Scale (HHS) 1.03 1.13
Food share of expenditure 50.2% 49.8%
4
Food Consumption Score (FCS) 32.23 32.12
Notes:
1/ The sample sizes were 4,715 for those that received assistance and 10,561 for those that did not.
2/ The lower the reduced coping strategy index the better off is the household.
3/ The lower the household hunger scale the better off is the household.
4/ The higher the food consumption score the better off is the household.
Source: WoAA2022

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Conclusions
Humanitarian assistance is widespread, well targeted, enhances the coping ability of
low-income households, and reduces the incidence of hunger among the households
below the poverty line who seem to fair better in this respect than households with
higher incomes that do not receive assistance.

Many households do not know where to seek assistance. Of those who do know,
most are aware of the assistance offered by UN organizations, NGOs and local aid
organizations. Female household members strongly prefer interacting with female
humanitarian workers. To the extent that humanitarian assistance is provided through
NGOs or international organizations, the recent ban on women working in NGOs can
severely reduce outreach.

Despite the stabilization of the economy, the analysis of this report suggests that
around 32 million Afghans lived in households that reported diminished or lost
sources of income in the six months prior to the 2022 survey. Reducing the amount or
outreach of humanitarian assistance can significantly curtail the ability of households
to cope with adversity and can increase the incidence of hunger. Other estimates
suggest that as many as 28 million Afghans, nearly half of them children (15 million),
will need humanitarian assistance in 202365. To avoid a deepening humanitarian crisis,
Afghanistan will need more than the annual aid it has received in the past.66 The UN
considers the 2023 aid appeal for US$4.6 billion to be the “largest single country aid
appeal ever”. Still, that amount would be lower than the US$5.3 billion estimated in
this report that would be required to bring those with very low levels of expenditure to
the 2020 national poverty line.

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KEY FINDINGS AND MESSAGES

• Humanitarian assistance has been widespread and provides Afghans
with significant support in terms of food, livelihood support and
employment, and health services – preventing the worsening of
humanitarian conditions.

• This assistance has been well targeted and effective, allowing poorer
Afghans to avoid deploying coping strategies as often and to better
address hunger than those who did not receive such assistance.

• Many households seek assistance from UN organizations, NGOs, and

local community leaders. Women clearly prefer to access aid through
women aid workers. The ban on women’s work in NGOs can severely
reduce outreach and result in devastating consequences for the most
vulnerable - women and children.

• Overall, cutting assistance would put millions of lives at risk. UNDP

projects that nearly 85 percent of the population – or 34 million people
– cannot spend as much as what was considered to be the poverty
threshold in 2020.

• Food prices have increased, incomes decreased, and livelihoods

have disappeared because of the change in the economic and
political context in addition to the deliberate restrictions on female
employment. Poverty in Afghanistan is pervasive and deep, taking toll
on virtually every household.

• The UN considers the 2023 aid appeal for US$4.6 billion to be the
“largest single country aid appeal ever”. Still, that amount would be
lower than the US$5.3 billion estimated in this report that would be
required to bring those with very low current expenditures to the
2020 national poverty line.

• Humanitarian assistance has played a critical role in preventing the

worsening of humanitarian conditions. It has also provided liquidity
and supported economic activity, the exchange rate, financial stability
and prevented poverty from rising further.

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TEXTBOX 6: Women are affected differently by shocks compared to men,

and much depends on their household arrangements

The same percentage of female headed households (FHH) and male headed
households (MHH) reported that they did not experience any major shock in the
last six months (11 percent). However, a higher share of male headed households
reported that they were affected by natural disasters such as drought, floods and
earthquakes. The converse is true with respect to economic shocks, COVID-19
and conflict.
% of households affected by adverse events by gender of the head of household

MHH FHH
80%
67%

60% 59% 57%

53%
40%
22%
20% 12% 12%
9% 8%
5% 4% 2%
1% 1%
0%
Drought Economic Flood COVID-19 Conflict Earthquake Other

This “on average” gender comparison masks the fact that shocks affect different
groups of women differently. The WoAA2022 has three groups of women
responding: Those who head their households (FHH), those in male households
(likely to be wives) (F in MHH), and those in male headed households from
which male head is absent (F absent M). When the answers given by these
three groups of women are expressed as an index based on the percentage
of the answers given by male heads of households, they show considerable
variation. Importantly, very few FHHs appear to have not been affected by an
adverse event, while COVID-19, conflict and economic events have affected
them most. Generally, women in MHHs seem to be faring better with women
in households where the male head is absent, falling in the middle (with the
exception of earthquakes and floods, possibly because both events result in
damage to shelter, for which repairs require physical strength).

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AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

% difference in reporting adverse events (relative to the answers provide by MHHs)

by women with different household arrangements reporting the same event
% diference in reporting adverse events (relative to the answers provide by MHHs)
by women with diferent household arrangements reporting the same event

FHH F absent M F in MHH

171%

145%
133%
146%

139%
136%

114%
107%
106%

112%
98%
95%

95%

95%
88%

88%
76%

57%

44%

41%
37%
No adverse Drought Economic Flood COVID-19 Conflict Earthquake
event

Note: The comparison of “F in MHH” is with the male heads in the same household. The results for “F in
MHH” and “F absent M” are indicative as such households are not nationally representative.

It is obvious that Afghan women are not a homogenous group but are affected
differently by different shocks depending on their household arrangements. This
has implications for policies, especially those aiming to meet basic needs.

Source: WoAA2022

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 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

POLICY DIRECTIONS

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AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Introduction
The gravity of the enormous polycrisis is overwhelming the internationally supported
response, with 34 million people in dire need of assistance out of a total population
of approximately 40 million. The barely functional banking and financial system is
undergoing an undefined conversion to an Islamic banking system. Public institutions
are being restructured and overhauled by the new realities on the ground and by
priorities of the DFA. The suspension of the constitution and the ensuing legal vacuum
are eroding business confidence and stifling private sector recovery. Nonetheless, the
security situation and the level of corruption are reportedly improving, and exports
are slowly picking up while continued UN cash arrivals to the country are maintaining
the exchange rate stability. According to Transparency International’s Corruption
Perception Index (CPI), Afghanistan’s ranking improved by 24 scores from 174 in 2021
to 150 in 2022 out of 180 countries ranked67.

The multiple crises require a comprehensive, persistent, and well-sequenced policy

response involving public, private, and international actors. This chapter presents a
mix of thematic policy priorities for the country and for the international community to
respond to the polycrisis.

Policy Objective
The overarching objective of this policy matrix is to identify a set of priorities to
consider in addressing Afghanistan’s economic and developmental constraints, with
the aim of fostering a viable recovery that complements the ongoing humanitarian
basic needs response.

Macroeconomic Priorities
The top priorities include the restricted and isolated banking sector, frozen assets, and
the labor policy banning women from working with NGOs that may deter humanitarian
funding. The Central Bank has put restrictions on deposit withdrawals from individual
and corporate accounts and has completely stopped international transfers except
for small weekly or monthly withdrawals and transfers for imported goods such as
pharmaceuticals and consumables.

These issues call for concerted efforts to challenge restrictions on women’s rights
to work, rebuild trust in the banking system, and allow targeted disbursements from
the Afghan Fund to support trade transactions, private sector recovery, and overall
economic stability.

The UN can lead efforts to release disbursements from the Afghan Fund by rebuilding
trust in the banking sector, backing trade transactions, and paying key outstanding
arears, among other actions.

Private Sector
As the economy has shifted toward subsistence-based activities, the agriculture
sector should be at the core of any policy response. Agricultural value chains must
be developed and productivity enhanced to lead private sector recovery. Barriers

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 AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

emanating from trade restrictions, lack of infrastructure and financial services continue
to constrain agricultural and non-agricultural performance and growth. Above all,
women’s participation in the economy and their equitable access to opportunities
must be prioritized.

The DFA should prioritize mobilizing resources to develop agro-infrastructure, value

chains and markets, and to increase land under cultivation.

The UN and other development partners should focus on reducing post-harvest

waste, including through off-grid cold storage systems, and on facilitating the supply
of inputs, access to markets and financial services, and food processing to support
livelihoods and stimulate recovery.

Banking and Finance

Despite some positive developments, including the establishment of the new Afghan
Fund by the release of US$3.5 billion of frozen reserves by the United States, serious
problems and risks persist. The banking and finance sector’s institutional capacity has
been weakened by the post-August 2021 brain drain.

The international community and DFA should prioritize disbursements from the
Afghan Fund, including to their original private sector owners, revive and improve
DAB’s ability to conduct monetary policy, and incentivize or enforce recapitalization
of the weakened private banks and institutions to support the sector’s revival and
resilience.

The UN should focus on building sector capacity for long-term stabilization. Further,
the UN might play a role in providing guarantees for new deposits and loans, to restore
the eroded trust in the banking and financial system. Additionally, private banks’ ability
to facilitate international transfers should be strengthened to build confidence in
Afghanistan’s international trade and business partners.

Sanctions
The fall of the Islamic Republic in August 2021 was immediately followed by suspension
of Afghan banks’ correspondent banking relationships with foreign banks, which
paralyzed international transfers and severely impacted Afghanistan’s trade activities.
The international community and the DFA should prioritize, with UN facilitation,
reviving the correspondent banking relationships.

Energy
The energy challenge of Afghanistan is not the potential for hydro, thermal and
renewable energy. It is the planning, infrastructure needs, resources, and political will
to generate and manage energy supply. While the international community can help
with some technical and financial assistance, the DFA and the regional actors, public
and private, should focus on the larger problem of sustainable energy generation,
distribution, and management.

Targeted technical assistance to institutions, within the limits of the prevalent political
reality, such as DABS and the de facto ministry of energy and water, and partnering
with private investors to facilitate designing and implementing multi-stakeholder

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AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

partnerships for energy is critical for improving livelihoods and economic recovery.
Additionally, the UN may solarize essential service providers such as clinics, Technical
and Vocational Education and Training institutes, educational centers, and MSMEs.

Opium
The opium trade is estimated to have generated US$1.7 billion in 2022 income for
farmers – a 32 percent increase compared to a year before. However, in 2022 the
DFA imposed a ban on poppy cultivation, processing, and trading, the effects of which
remain to be seen.

The UN could provide expertise in facilitating the country’s institutional capacity to

execute and manage the National Drug Control Strategy and explore ways to develop
and promote alternative crops that are low maintenance and viable for the Afghan soil
and weather

Gender
Women in Afghanistan have been experiencing major backslides in their rights to
education and work. The restrictions on women’s participation in workforce and
the overall economy aggravate the humanitarian situation, strain the economy, and
increase vulnerabilities across the board.

The international community should continue to push for the reversal of decrees
banning women from secondary and tertiary education and from working with NGOs.
Further, the international community should continue funding important and impactful
programmatic interventions that support women’s socio-economic conditions,
including women’s economic empowerment.

The UN should continue supporting women’s enterprises and livelihoods by

increasingly focusing on the rural households and areas with greater vulnerabilities.

Governance and Institutions

In January 2022, the DFA announced a market-based economy, where growth would
be led by the country’s private sector. However, since that announcement, the de
facto authorities have taken little to no action to implement that vision. Worse, the
institutions, in particular economic entities such as the central bank (Da Afghanistan
Bank DAB), the de facto Ministry of Finance, and others have seen an exodus of
technical expertise. The result is a prolonged legal, regulative and policy ambiguity
which is hindering recovery.

Ideally, those institutions could play a pivotal role in ensuring sustainability and
ownership of the assistance, supported by the international community.

As permitted by the political context, the UN might consider exploring feasible options
of supporting institutional reforms intended for strengthening economic recovery.

The economy prior to the August 15 events was heavily dependent on foreign aid
where the public military and civilian expenditure predominated the GDP. With that
donor dependence and sizable aid inflows disappeared on August 15, economic
recovery needs to be bottom-up and based on the agriculture, extractives, and private

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sectors and will require an array of policy actions and facilitators to materialize and
last. Figure 31 and table 9 below discuss these policy priorities and recommendations
in detail.

Figure 31: An approach for economic recovery

Trickle-Up Economic Recovery

Humanitarian
Assistance

Aggregate
Demand
Stability
Facilitators

Private Banking & Opuim

Macro Gender Governance
Sector Finance Economy

Policy Priorities

Agriculture Services Industries Mining Others

Grassroots Level Economic Activity

Source: WoAA2022

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Conclusions
Bottoming out of an unprecedented and dramatic contraction since 2020, the economy
is bouncing back up toward stagnation. Further, economic activity is restructuring
toward agrarian output and an equilibrium which is not capable of sufficiently
providing for a growing and increasingly poor population. the stakeholders should
take an array of multi-sectoral policy actions in order to put the economy on a path to
recovery before growth and sustainable development can be aspired or strategized.
Continued humanitarian assistance, agricultural and private sector development,
export competitiveness and possible technical engagement to address institutional
barriers should be at the forefront of the roadmap to economic recovery.

The momentum needed to enable recovery will be impossible without international

community’s assistance for humanitarian response and essential services, women’s
full participation to the economy and social development as both producers and
consumers, revitalized banking and financial system and private sector.

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Table 9: Policy Recommendations

Policy Focus Area Priorities for Economic Recovery Recommendations
Macroeconomy
1. Addressing the • Address liquidity needs of the banks • Facilitate use of UN funds via multiple banks and/or
liquidity problems financial institutions
• Prepare a banking sector resolution strategy
2. Clarifying the role of • Determine the criteria for disbursements • Explore, with private sector entities, reasonable
Afghan Fund from the Afghan Fund for economic stability disbursement options for the consideration of the Afghan
Fund to support economic activities
3. Removing the • Rescind restrictions on women’s education • Lead technical interactions and engagement with DFAs to
restrictions on women’s and employment reverse restrictions on women’s rights
rights to work and
access to education to
achieve equitable and
sustainable growth
4. Improving Budget • Clarify budget processes and see if any new • Explore ways to technically engage the DFA ministry
Transparency currency issued can be used for budget of finance to improve budgeting and expenditure
financing (in small amounts) management
5. Enforcing AML/CFT • Enhance Anti-Money Laundry and Countering • Promote and possibly support efforts aimed at enhancing
safeguards the Financing of Terrorism safeguards at DAB AML/CFT safeguards for improved and increased business
to allow use of resources from the Afghan and financial transactions supporting economic recovery
Fund and ease banking restrictions
The Private Sector
6. Agricultural Value • Develop and expand export value chains • Promote post-harvest management to reduce waste
Chains • Increase land under cultivation • Promote food processing within value chains
• Improve productivity • Improve handling, transportation, loading/unloading,
• Mechanize agricultural sector washing, packing, and storing.
• Modernize farming and irrigation systems • Improve water use efficiency

7. Trade Facilitation • Revive the trade (air and land) corridors • Provide support for Afghan firms to resume presence at
• Pursue freer trade mechanisms regional and global trade fairs
• Diversify exports • Improve access to export markets
• Improve and increase trade finance • Improve access to inputs
• Diversify transportation channels • Improve TIR awareness
• Export guarantee funds to restore
international trust and confidence in Afghan
exports and exporters
8.Basic Infrastructure • Rehabilitate productive infrastructure • Improve basic market infrastructure (cold storage, cold
• Rehabilitate community and agricultural chain, packaging centers, marketplaces) Mini solar grids
infrastructure to small enterprises
• Construct new roads • Rehabilitate irrigation canals in export-oriented value
• Build Export Processing Facilities chains and production
• Provide support for Afghan firms to resume
presence at regional and global trade fairs
• Improve access to electricity
9. Financial Inclusion • Increase bankability • Support the transformation into Islamic Financing schemes
• Reduce costs of banking services (products, information)
• Develop financial and banking literacy and • Recapitalize financial institutions providing credit
awareness guarantees, supporting with capacity building programs

10. Manufacturing • Reform tax policies to incentivize private • Increase and facilitate access to affordable energy for
investments productive means (IPPs, Industrial Parks, Proposals etc.)
• Develop skills including renewables
• Undertake business enabling environment • Improve inter-industry linkages of manufacturing sector
reforms across Provinces
• Reform appropriate trade policies to • Support and advocate for the implementation of WTO
responsibly protect and grow domestic regulations, particularly those for low-income countries
production
11. Women-owned • Repeal gender-discriminatory policies to • Support women entrepreneurs affected by Mahram Laws.
MSMES allow women full participation in the economy • Improve access to markets (for example sales apps)
• Stimulate demand for women-owned MSMEs • Support with the logistics of international travel for trade
• Ensure access to finance for women-owned fairs
MSMEs • Support with attainment of collateral and other barriers for
women entrepreneurs to attain finance

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AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Banking
12. Frozen assets • Advocate for the release of frozen foreign • Work with the private sector entities to determine options
exchange reserves to the original owners for releasing funds from the frozen assets in support of
private sector efforts aimed job creation, livelihoods
development, trade activities that directly support recovery
13. New banknotes • Print and distribute new AFN Banknotes • Promote and possibly support mechanisms in support of
printing and distributing new banknotes to support market
confidence, foreign exchange stability
14. Diversifying channels • Distribute aid through different banks and • Explore different ways of cash assistance delivery including
of aid cash delivery and mechanisms digital payment systems for financial aid distribution to
management remote areas
15. Recapitalization of • Inject capital by owners (or intervention by • Identify and support recapitalization options for higher
the private banks DAB) to non-viable banks risk banks to restore trust and avert total collapse of the
banking system
16. Fiscal and monetary • Improve and ensure monetary and fiscal • Promote budget transparency
discipline discipline:
17. Insurance and • Provide deposit insurance and credit • Explore options for credit guarantee schemes supporting
guarantee schemes guarantees for banking system: credit to MSMEs, new deposits, private sector investments
18. Institutional • Provide capacity building in brain-drained • Identify ways and options for providing capacity support to
development institutions with economic development entities that support economic activity
mandates
Sanctions
19. Reestablishing • Revive the Correspondent Banking • Work with the concerned private sector entities to explore
Correspondent Banking Relationships specifically to support private ways of reviving banks’ linkages and partnerships with
Relationships sector transactions such as trade and foreign banks, particularly those in the region or in the
investment activities trade partner countries
20. Improving • Understand and explain the sanctions and • Support banks, particularly those that are supporting
due diligence and provide supervision and or guidelines to trade and business transactions, in their efforts to comply
compliance procedures commercial banks and financial institutions with the restrictions and take any possible actions that can
potentially encourage reduction in restrictions
Energy
21. Gap the energy • Boost energy generation • Invest in productive uses of clean energy enabled for
deficit by domestic • Develop fresh infrastructure, maintain communities
generation including existing infrastructure • Invest in clean energy technologies for MSMEs, industries
from hydro, solar and • Diversify sources of energy • Support innovative energy services’ delivery models for
thermal sources through • Export surplus energy to neighbors social, institutional, industrial and consumers
facilitation of private • Bolster private investment • Support institutional capacity to facilitate investment
investment and where • Improve energy consumption efficiency and environment for renewables
possible PPP models waste management
Opium
22. Clear Strategy • Develop the new National Drug Control • Develop and implement a clear national strategy for drug
towards the opiates in Strategy control
Afghanistan • Prepare and endorse the National Drug • Promote regional cooperation on drug control through
Action Plan creating alternative approaches to generate income and
• Provide multidimensional support and care livelihood
to drug addicts, particularly women, children, • Reduce drug demand
youth and girls
23. Providing alternative • Increase the agriculture productivity through • Increase farmers and agricultural industries’ access to
ways of livelihood and promoting sustainable irrigation, agriculture finance
income generating mechanization, improved agricultural inputs • Improve irrigation system by establishment of new canals
opportunities such as seeds, fertilizers, training and market and rehabilitation of existing canals
connections • Provide agricultural inputs such as seeds, fertilizers and
• Promote and possibly support a “guaranteed toolkit
purchase” system for agricultural produces • Provide training and awareness to farmers
• Create and expand market linkages for the • Support the producers of high value crops and
licit agricultural crops and products manufacturers of vegetable oil with machinery and
technical training
Gender
24. Economic and • Rescind discriminatory and restrictive • Advocate for and promote women’s rights
business opportunities policies against women’s work • Support developmental efforts aimed at women
for women owned • Provide multidimensional support and empowerment and gender equality
MSMEs services to women and girls • Support women-dominated sectors and industries such as
textiles, high value crops and carpets among others

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25. Social Protection for • • Return women’s access to education, work • Provide cash for work, for market, for production, for
vulnerable women and movement raising family, for food, for healthcare, for education and
for unpaid work
• Consider initiatives such as Temporary Basic Income (TBI)
(cash transfers to adult women in the country)
26. Jobs • Ensure gender equality and equitable • Create jobs, improve existing jobs, assist with placement
opportunities for women programs in partnership with NGOs, companies,
associations, service providers, traders
Governance and institutions
27. Institutions for • Ensure and increase capacity for the delivery • Facilitate technical and operational engagement with
Recovery of essential services and humanitarian economic entities of the DFAs such as MoF, DAB,
assistance MoIC, MoEW, MAIL and the donors’ from Afghanistan
• Reduce delivery costs and involve community Coordination Group (ACG) initiative to galvanize attention
and local social institutions in delivery and and support for ongoing crisis response efforts
management of humanitarian assistance • Involve and support local social entities such as
and basic human needs assistance community councils, women’s associations, private sector
including support to MSMEs, women-owned associations in humanitarian assistance delivery and
businesses, agricultural development etc monitoring
• Advocate for and promote increasing basic development
efforts such as market development, enhancement of
productive industries and sectors, exports and energy
generation, credit support to the private sector entities
among others.
28. Institutions for • Build capacity for macroeconomic policy • Advocate for and promote competence-based
Growth design, execution, and management appointments in the economic and planning entities of the
• Develop and implement a comprehensive public sector
private sector development strategy • Support private sector development initiatives and
• Improve service delivery priorities
• Support infrastructure development • Develop and implement a practical and contextualized
initiatives growth strategy
• Increase export competitiveness
29. Institutions for • Capacity for sustainable production, • Develop and implement guidelines and safeguards for
Sustainability consumption, and trade environmentally and socially responsible production and
• Develop a national development framework consumption across all sectors of the economy
to guide any development efforts • Provide capacity support and resources to the concerned
public entities
• Promote afforestation and greenery by incentivizing
plantations
30. Institutions for • Promotion of human rights • Develop simplified institutional policies, guidelines and
Inclusiveness • Promotion of civil participation regulations that aim at ensuring compliance with human
• Promotion of non-discrimination rights
• Establish channels of communication and participation
mechanisms for the public to monitor and support public
service delivery in urban and rural areas
• Ensure equitable access to opportunities, resources
and benefits for all strata’s of the society particularly the
poorest, women, girls, youth, drug addicts and other
vulnerable groups

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AFGHANISTAN SOCIO-ECONOMIC OUTLOOK 2023

Policy Directions
• Reverse the restrictions on women’s rights to work, education, and movement for
the economy to regain its strengths and recover in more equitable and sustainable
ways.

• Collaborate with domestic private sector entities to identify practical options for
disbursements from the Afghan Fund to enhance investments in basic economic
and social infrastructure, including for local food production and energy supply.
For example, for improved basic market infrastructure (cold storage, cold
chain, packaging centers, marketplaces), mini solar grids to small enterprises,
rehabilitating irrigation canals in export-oriented value chains and production.

• Enhance anti-money laundering and countering the financing of terrorism

safeguards at the Central Bank of Afghanistan (DAB) to ease domestic banking
and finance restrictions to restore confidence of investors.

• Explore efficient, accountable cash assistance delivery mechanisms, including

expanded use of tested digital payment systems for financial aid distribution and
temporary basic income to vulnerable households and remote areas.

• Invest in clean energy technologies for MSMEs as high priority, high return
investment to expand services and industry and lower cost of electricity and
power-generation. Include innovative renewable energy services’ delivery models
for social services, industrial and household needs.

• Promote increasing capabilities and systems to support market development,

enhancement of select productive sectors, and finance sector enhancements to
help grow local economic activity.

• Advocate for and promote learning and skills development, and equal opportunity
appointments for women and men, in the public sector, to regain and retain the
capabilities and trust in public services and administration.

• Establish mechanisms and channels for public to participate in monitoring and

supporting delivery of public services in the urban and rural areas

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only-hope

NSIA (2008). NRVA National Risk and Vulnerability Assessment 2007-08. Kabul.

NSIA (2012). NRVA National Risk and Vulnerability Assessment 2011-12. Kabul.

NSIA (2017). ALCS Afghanistan Living Conditions Survey 2016-2017. Kabul.

NSIA (2021). Income and Expenditure & Labor Force Surveys Report 2020. Kabul.

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face-extreme-risks-need-urgent-international-support

REUTERS (2022). U.N. pushes cash handouts to avert mass poverty in Afghanistan.
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https://news.un.org/en/story/2023/02/1134002

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January 11.
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https://news.un.org/en/story/2023/01/1132637

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UNDP (2021a). Peace Building, State Building and Market Building: Achieving
Afghanistan’s Long-Term Goals amid Short-Term Adversities. Kabul. April

UNDP (2021b). 97 percent of Afghans could plunge into poverty by mid-2022, says
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UNESCO/UNICEF (2021). Afghanistan Case Study: Situation Analysis on the Effects

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UNWOMEN (2023). Out of jobs, into poverty – the impact of the ban on Afghan
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ENDNOTES
1. The drop in real per capita incomes is estimated to have been 24 percent between 2020
and 2022.
2. UNDP (2021b).
3. This remains the latest estimate reported by NSIA in 2022. However, both UNAMA and
ILO report a female unemployment rate of around 40 percent as of mid-2022 (ILO 2022).
4. World Bank. 2022d.
5. For more details, including about the governance of the Fund, see https://www.state.
gov/the-united-states-and-partners-announce-establishment-of-fund-for-the-people-of-
afghanistan/
6. Some insight could be gained by examining the Taliban’s tax policies in the areas they
controlled prior to August 15, 2021. See Amiri and Jackson (2022).
7. The five largest nonbank state-owned entities are Da Afghanistan Breshna Sherkat,
Afghan Telecom, Ariana Airlines, Afghanistan Urban Water Supply, Afghan National
Insurance Company. See IMF (2021).
8. World Bank Afghanistan Economic Monitor, November 21, 2022.
9. Prior to the takeover of the Taliban, the Afghan government had planned to issue a
sukuk. The fate of that plan is unclear. To boost revenues, they also intended to adopt a
VAT in 2022.
10. World Bank (2022a).
11. Under the DSSI, Afghanistan received relief from the multilateral agencies, as well as
from Bulgaria, Kuwait, Russia, and Saudi Arabia. See World Bank (2022b).
12. Financial sector disruptions have also contributed to a decline in workers’ remittance
inflows. Remittances fell from about US$800 million in 2020 to US$300 million in 2021
but expected to have recovered in 2022 (World Bank KNOMAD database).
13. World Bank (2022b).
14. UNDP (2022).
15. World Bank (2022b).
16. Afghanistan’s long-standing and recent energy sector problems are discussed in UNDP
(2021a).
17. Per capita average and median incomes/expenditures are calculated using individual
(not household) weights and an exchange rate of 87AFN to 1US$.
18. See Figure 12.
19. World Bank Development Indicators:
https://data.worldbank.org/indicator/FP.CPI.TOTL.ZG?locations=AF
20. The respective surveys for these two years are the National Risk and Vulnerability
Assessment (NRVA2011-12) and the Afghanistan Living Conditions Survey (ALCS2016-17).
21. The decline was 6 percent according to the World Bank in constant 2015 US$. The
difference between the estimates by NSIA and World Bank arises from using different
population sizes and nominal versus constant dollars. According to the NSIA, between
2011 and 2020 the size of the population increased from 29 million to 32.2 million while
international estimates bring the latter estimate to around 40 million (and expected to
reach 48 million by 2030). The exchange rate rose from AFN48 to one US$ in 2011 to
AFN77 in 2020.
22. World Bank (2021).
23. Canchotejesh and Pradhan (2020).
24. UNDP (2020).
25. World Bank (2022a).
26. UNDP (2021b).
27. World Bank Development Indicators.
28. The NSIA estimates the current (2022) population to be 34.3 million and the latest annual
growth rate (2021 to 2022) at 2.1 percent. The United Nations estimates these two figures
to be 41 million and 2.6 percent. Also during the last 10 years, NSIA’s estimates for the
annual population growth rate averaged around 2.5 percent while according to the
World Bank the rate averaged 3.4 percent (until 2021) and is expected to increase at an
annual rate of 1.8 percent reaching 48 million by 2030
(see: https://data.worldbank.org/indicator/SP.POP.TOTL?locations=AF).

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29. NSIA estimates as of November 2022.

30. The WoAA2022 survey did not cover urban households in Kandahar.
31. Neither did it report, in its published form, incomes despite its title.
32. The IE&LFS2020 reports that household expenditure on durable goods was AFN815
“which accounts for about 4.4 percent of total nominal household expenditures in 2020”.
33. World Bank (2022b).
34. However, this do not take into account that, also according to NSIA, the overall inflation
rate has been 22.4 percent between these two years (September to September)
consisting of 29.1 percent of the food inflation and 15.7 percent of the non-food inflation
35. See https://www.helgilibrary.com/indicators/gini-index/afghanistan/
36. The estimates for the Gini are based on expenditures.
37. IE&LSF2020 p. 82. It goes on to say “The typical consumption pattern was defined
as the average food consumption of the population between the second and the fifth
consumption deciles in the NRVA 2007-08” p. 258.
38. For example, West-Central had the lowest poverty line at AFN1,762 (US$22.9) and the
urban Central region the highest at AFN3,290 (US$42.7).
39. Households that have more members tend to have lower per capita income and
expenditures.
40. These do not imply that only 10 percent of households have adequate food consumption.
In fact, as shown in Chapter 4, 21 percent of households stated that they had acceptable
food consumption. The difference can be explained by the fact that households may
consume home grown food not included in their responses, but this still leaves 80
percent of the households with inadequate food consumption.
41. With respect to urban/rural differences, when comparing expenditures below AFN2,760
(see Figure 12) the urban population share is 90 percent and the rural population share
is 86 percent. When comparing only food expenditures (AFN1,717), the urban population
share is 98 percent and the rural population share is 95 percent.
42. Though the IE&LFS2020 suggests that the percentage of those below the poverty line
is 47 percent, which still is a rather high number, the corresponding estimate was 55
percent only four years before (ALCS 2016-17). According to the latter survey, 81 percent
of the population was living on less than AFN57 (US$0.74) per day while the poorest
half of the population was living on less than AFN30 (US$0.39) per day, which indicates
an extreme level of deprivation. Even the 5 percent of the population at the top of the
distribution averaged only US$2/day per person (UNDP 2021a). Following the onset of
the pandemic, only 31 percent of those in the top 20 percent of the income distribution
were considered to be non-vulnerable (World Bank 2020).
43. Annex 1 in UNDP (2021c).
44. UN (2023a) for 2022 and OCHA (2023) for 2023.
45. WFP (2023a).
46. WFP (2023b), UNICEF (2023) and Kropf (2023).
47. For example, female–headed households are struggling the most and resort to drastic
crisis-coping measures more often than men (WFP 2022).
48. UNDP (2021a).
49. WFP (2023c).
50. World Bank (2022d).
51. Loss of income is assumed to have affected all households reporting that they were
affected by an economic event.
52. IPC (2022).
53. Reuters (2021).
54. World Bank (2023c).
55. World Bank (2019).
56. See https://www.laprensalatina.com/at-least-17-die-in-northeast-afghanistan-amid-cold-
snap/
57. For example, food availability is reported to have been 98 percent when the WoAA2022
was conducted (August-September). This was based on data in 48 markets in 21
provinces. See World Bank (2023).
58. According to Save the Children (2022), a fifth of starving families sent children to work as
incomes plummeted in past six months.

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59. The survey collected data from 48 markets in 21 provinces and its results “suggest that
most basic food and non-food items remain available” (World Bank 2023).
60. The monthly expenditures of households exceed their reported incomes on average by
AFN4,217 (US$48.5).
61. World Bank (2022a) and World Bank (2023).
62. This is the 2020 poverty line adjusted for inflation.
63. The Coping Strategies Index (CSI) aggregates in a simple numeric score several answers
to the question: “What do you do when you don’t have adequate food and don’t
have the money to buy any?” See https://www.spring-nutrition.org/publications/tool-
summaries/coping-strategies-index-field-methods-manual-2nd-edition#:~:text=Brief%20
Description%3A%20The%20Coping%20Strategies,in%20a%20simple%20numeric%20s-
core.
64. UNWOMEN (2023), OCHA (2023a).
65. See https://www.unicef.org/media/131871/file/2023-HAC-Afghanistan.pdf
66. See https://www.usip.org/publications/2022/08/one-year-later-taliban-unable-reverse-
afghanistans-economic-decline
67. See https://www.transparency.org/en/countries/afghanistan?redirected=1
68. OCHA (2022). The previous surveys are not comparable in coverage, sample
composition and purpose with the one used in this report that were obtained in mid-
December 2022.
69. There is no separate identification of the Kuchi population that comes to 1.5 million or 4.4
percent of the 34 million total population as per latest estimate by the NSIA.
70. The WoAA2022 is nationally representative (“weighted”) with respect to the number
of households by province and location (urban/rural). The share of male headed
households (including female representatives of male households) is 84.6 percent and
that for female headed households are 15.4 percent though in reality the share of female
headed households is lower though probably poorly accounted for. For example, the
IE&LFS2020 suggests a share of female-headed household of 1.6 percent but a more
recent survey raises that share to 4 percent (WFP 2022). The oversampling of female-
headed households by the WoAA provides more statistical accuracy to the results
presented in this report while it does not affect its national estimates.
71. The exchange rate used in Chapters 2 to 5 is taken to be 87AFN to 1US$.

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United Nations Development Programme in Afghanistan

UNDPaf undpafghanistan www.undp.org/afghanistan undpafghanistan.exposure.co/
96/undpafghanistan /people/undpafghanistan/ [email protected]