Afghanistan Economic Monitor (September 23, 2022) – Afghanistan

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Global food and energy prices continue to put pressure on basic household prices in Afghanistan: rising inflation and slow recovery in nominal wages have decreased the affordability of basic consumer goods for households. Demand for skilled workers decreased marginally in August and remained stagnant for unskilled workers, owing largely to the end of the harvest season. Total revenue collection for the first eight months of the current fiscal year is slightly better than pre-August 2021 levels (noting a greater reliance on trade-related taxes and non-tax revenue sources). Since end-June 2022, the AFN has depreciated slightly against the US$ and Chinese yuan while gaining against the Euro, Pakistani rupee, and Indian rupee.

Prices of basic food and fuel items continued to exhibit an upward trend in July 2022. Increasing global prices for energy and food (encompassing about half of Afghanistan’s imports) and the impact of the ongoing drought in some parts of the country on agricultural production continue to drive inflation. Data for July 2022, published by the National Statistics and Information Authority (NSIA), show headline consumer price index (CPI) inflation at 18.3 percent, driven mainly by 25 percent year-on-year (yoy) inflation in the food segment. Yoy inflation in the non-food segment was 11.6 percent. World Food Program data for August show significant yoy increases in the prices of basic food and fuel items: (i) diesel (55 percent); (ii) high-quality rice (33 percent); (iii) sugar (31 percent); (iv) wheat (42 percent); (v) pulses (16 percent); and (vi) bread (28 percent). For August 2022, yoy inflation for the Basic Household Goods Index (composed of 11 items) stood at 31.5 percent—a slight drop 43 percent in July 2022. Basic food and non-food commodities remain available in the market, per the latest World Bank survey.

Despite the overall appreciation of the United States dollar (US$) against major currencies, the Afghani (AFN) remained relatively stable. The AFN has slightly depreciated against the US$ and Chinese yuan (by 0.6 percent and 1.9 percent, respectively, between endJune and September 8, 2022), but appreciated against the Euro (6.1 percent), Pakistan rupee (PR, 11.6 percent), and Indian rupee (0.2 percent). However, in the absence of central bank liquidity management (the last reported US$ auction by Da Afghanistan Bank (DAB) was held on March 23, 2022), money service providers (MSPs) continue to report some foreign exchange shortages in the open market . Nevertheless, the availability of US$ and PR improved slightly in August 2022. The Interim Taliban Administration (ITA) continues to exert more robust controls in the foreign exchange market, including regulating the MSP sector and prohibiting foreign currency-denominated domestic transactions.

Cash withdrawals of pre-August 2021 deposits from banks continue to be regulated for both firms and individuals. During August, individual withdrawals of both US$ and AFN and business withdrawals of US$ remained at about the same level as last month, although still below statutory limits. However, firms’ AFN withdrawals surged between July and August 2022. Firms still report that actual accessibility is much lower than allowed limits. It is important to note that there are no statutory withdrawal limits on deposits after August 28, 2021.

Demand for unskilled workers remains stagnant at July 2022 levels. In a relatively unchanged environment, seasonal work opportunities depend on agriculture. With the harvest season ending in most of the country, demand for non-skilled labor remained stagnant overall, with regional differences. While it declined in some provinces in the country’s northern, southern, and central regions (including Badakhshan, Balkh, Farah, Herat, and Khost), it increased in some central-northern provinces. Nominal wages are slowly recovering but remain lower than preAugust 2021 levels. Real wages are declining, however, due to high inflation, thereby decreasing the affordability of basic household consumer goods.

Revenue collection slightly surpassed last year’s performance in the first eight months of 2022. Overall revenue collection reached AFN104 billion between December 22, 2021 and end-August 2022, marginally exceeding collections over the same period in 2020 and 2021. Afghanistan continued to rely relatively heavily, however, on revenue collected at the border—as opposed to inland revenue collection. For example, taxes at borders reached 57 percent of the total revenue collected up to August 2022. Revenue from inland sources reached AFN43 ​​billion (43 percent of the total), of which revenue from non-tax sources remained the highest. Non-tax revenue, comprising mainly revenues from ministries in administration fees and royalties, contributes 54 percent of total inland revenues, compared to 30 percent in 2021. The increase in ministries’ revenue is likely driven by a rise in coal mining royalties and fees.

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