Business Opportunities in Afghanistan

Afghanistan is transitioning from a state-based model to a free market economy as it continues to rebuild from nearly 30 years of conflict. According to the International Monetary Fund (IMF), Afghanistan?s real GDP growth during 2013 slowed from 14 percent in 2012 to an estimated 3.6 percent. After accelerating to double digits during 2011, inflation moderated during 2012, reaching 5.9 percent year on year, though accelerated slightly in 2013 to an estimated 7.2 percent. At the end of 2013, net international reserves stood at US$6.4 billion (approximately 7 months of imports). The exchange rate depreciated by 8 percent over 2013 and has depreciated by another 3 percent since the beginning of 2014. The loan-to-deposit ratio has stagnated at about 20?25 percent of GDP since 2011, and both deposits and loans remain highly dollarized (between 70 and 80 percent), reflecting a continued lack of confidence. Credit to the private sector has remained steady since 2011 at approx. 28 percent of GDP, mostly for lack of sound lending opportunities and the general economic and political uncertainty. Illicit opium production remains a major activity, and the total farm-gate value of opium production alone accounted for four percent of GDP in 2012. The Government of Afghanistan (GIRoA), with significant donor support, is improving the country?s physical infrastructure and is committed to providing more basic services and humanitarian assistance to its growing population. The international community remains committed to Afghanistan's development, pledging more than $67 billion at nine donors conferences between 2003 and 2010. In July 2012, donors at the Tokyo Conference pledged an additional $16 billion in civilian aid through 2015, and sustaining support, through 2017, at or near levels of the past decade to respond to the fiscal gap as estimated by the World Bank and the Afghan Government. Despite this assistance, GIRoA will need to overcome a number of challenges, including low revenue collection, anemic job creation, high levels of corruption, weak government capacity, and poor public infrastructure.