Asia Regional Integration Center

The economy suffered a series of shocks in 2021—drought, increased violence, COVID-19 infections, and restrictions. After the regime change on 15 August, international assistance and other financial inflows were suspended, including remittances and export revenues, slowing economic activity and suppressing domestic demand. More than half a million jobs were lost following the regime change. Real wages fell by 24% for skilled workers and 11% for unskilled workers. Headline inflation averaged 5.15% year-on-year in 2021. The afghani depreciated by 34.4% against the US dollar and the financial sector remains highly dollarized—as of 2020, 70% of deposits and half of loans outstanding were in foreign currency, mostly US dollars. Assuming a continuation of current political policies and a continued freeze of international development assistance, simulations show real GDP will contract by 30% over the medium term.