Afghanistan’s economic growth has been stale, because from the outside, Afghanistan still appears to be very risky. Many uncertainties politically has resulted in diminishing confidence of the private sector, and lessened activity. This has lead to marginal growth over the past couple years and economic turbulence for much of Afghanistan. Kabul being one of the fastest growing cities in the world has felt the brunt of these lessened economic activities and in turn resulted in more violence and unrest. Agriculture which has been the biggest contributor to Afghanistan’s GDP historically is down from previous years and the growing population is feeling the effects of this, especially in poorer areas reliant on agriculture. Growth is expected to be slow over the next few years and much of the financial future is thought to be contingent on Afghanistan creating political and security stability which will help bolster private sector confidence.
There is much uncertainty in Kabul and throughout Afghanistan and the global political system works heavily off speculation and confidence. Despite attempts at improving local and national political situations, Afghanistan as a whole is seen as unstable and thus not suitable for the sizable capital needed to turn the economy around. Investors need to have faith in the local political system to defend and honor their investments, because without that faith, the risk is simply too large. There are many suitable markets for investors these days, and Afghanistan must do what’s in their power to be competitive globally and earn the investment of the private sector. If not, Kabul and the rest of the country will live in isolation of global investment, and simply rely on organizations like the world bank and IMF to provide loans in order to stimulate the national economy. And these loans are unsustainable if there are not accompanied with other flows of investment into the country. Afghanistan long term needs to create more opportunities for trade that are net positive for the country, which can be through an increase in agriculture, manufacturing, labor and more.
Security in general needs to improve in order for commerce to continue to rise domestically and to establish confidence with outside investors. Nobody wants to throw their money into uncertainty, and currently Afghanistan is demonstrating overall uncertainty.
22 Jul 2016