Afghanistan’s exports shrink to $891m in 2018, says Pentagon

WASHINGTON: Afgha­nistan’s exports — by both ground and air — totalled only $891 million in 2018 compared to $7.4 billion in imports, says the US Department of Defence’s latest report on the situation in the war-torn country.

Estimates of the Afghan economy — based on the data provided by the International Monetary Fund (IMF) and the World Bank — are included in the report that covers the first quarter of 2019.

The Pentagon notes that Afghanistan’s trade deficit increased to 35.9 per cent of GDP in 2018 and this deficit was almost entirely financed by international assistance.

The report points out that Afghanistan’s projected economic growth of 3pc for 2019 does not match Afghanistan’s population growth, especially among youth who are in need of employment.

The Pentagon notes Afghan exporters faced an additional hurdle during the quarter when Pakistan closed its airspace on Feb 27, following escalating tensions with India, causing Afghanistan and India to seek other routes for the export and import of products.

As a result, trade transaction costs increased, affecting the economies of both countries. Pakistan reopened its airspace for most flights on March 27.

Another official US report — by the Special Inspector General for Afghanistan Reco­nstruction (SIGAR) — also assesses how Kabul’s decision to avoid using the land routes that go through Pakistan has impacted the country’s economy.

SIGAR notes that while the United States reimposed sanctions on Iran earlier this year, it granted a waiver under the Iran Freedom and Counter-Proliferation Act of 2012 (IFCA) to allow Afghanistan to use an alternative Iranian route. The waiver exempts the development of the Chabahar Port, including the construction of an associated railway.

On Feb 24, Afghanistan sent its first exports through Chabahar in a convoy of 23 trucks carrying 570-tonne of dried fruit, textiles, carpets, and mineral products.

The State Department said that using the route from Zaranj (Nimroz Province), the departure point of the convoy, to Chabahar allows Afghan goods to reach India without crossing Pakistani territory.

Pakistan is regularly criticised by Afghan media and government officials for predatory economic practices, such as product dumping and nontariff barriers to trade.

Even with the waiver for Chabahar and a separate exemption that allows Afghanistan to continue importing petroleum from Iran, reimposed sanctions may be having an overall negative effect on Afghanistan.

SIGAR points out that the sanctions resulted in substantial depreciation of the Iranian rial and lower demand for labour in the informal sector, where Afghans in Iran generally work. Largely because of the effects of the sanctions, 773,125 Afghans returned to Afghanistan from Iran in 2018, according to the UN’s International Organisation for Migration, cutting remittances from Iran to Afghanistan to “almost zero.”

The loss of remittance incomes to families already stressed by a multi-year drought and heavy conflict, including some 250,000 internally displaced persons (IDPs) in western Afghanistan, “will continue to provide significant challenges to those communities,” the report warns.

Both SIGAR and Pentagon reports warn that the repatriation of Afghan refugees from Pakistan and Iran will also have an adverse impact the Afghan economy.

As of March 23, the International Organization of Migration (IOM) reported that 88,516 undocumented Afghans returned from Iran and 4,182 undocumented Afghans returned from Pakistan in 2019.

So far, 92,698 undocumented Afghans have returned in 2019. For 2019, IOM is projecting over 570,000 returnees from Iran and a minimum of 50,000 returns from Pakistan. Additionally, IOM says more than 1,000,000 Afghans may face deportation from Pakistan in 2019.