Figuring out Afghanistan

This economy is already in the stone age

Bibek Debroy

Isn’t it infinitely amazing that in all this talk about infinite justice for Afghanistan, almost no information is available about the state of its economy? Data are not available. Hence, Afghanistan does not figure in the United Nations or World Bank systems of data collection and the Human Development Report or the World Development Report will provide few clues. All one has is fragmentary information.
Consequently, economic data that are routine for other countries are completely missing. Try searching the Net, the best site will be the CIA’s.

Consider something as basic as gross domestic product. For 1990, a per capita GDP figure of $714 was available. Today, per capita GDP is believed to be $158, with a purchasing power parity per capita figure of $800. If the 1990 and 2001 GDP figures are accurate, imagine the GDP reduction that has taken place in the 1990s, a large chunk of which is naturally due to exchange rate changes. Overall PPP GDP is $21 billion. In 1990, 53 per cent of GDP originated in agriculture, 28.5 per cent in industry and 18.5 per cent in services. Today, we simply don’t know. And no figures are available on the percentage of population below the poverty line or income distribution.

The population is 26.8 million, with an annual growth rate of 3.48 per cent. But this growth rate is significantly affected by the return of refugees from Iran. At the height of the conflict, one-third of the population fled, chiefly to Iran and Pakistan, which together accounted for almost six million refugees. Now, there are around 1.5 million refugees in Iran and another two million in Pakistan. One million refugees have been internally displaced. The birth rate is 41.42 per thousand, the death rate is 17.72, the net migration rate is 11.11 and the total fertility rate (children born) per woman is 5.79. Life expectancy is 46.24 years and the infant mortality rate per thousand is 147.02. (There are other infant mortality rate figures of 257 per thousand.) The literacy rate is 31.5 per cent, not 25 per cent as has sometimes been reported — 47.2 per cent for males and 15 per cent for females. Education is free and elementary education is officially compulsory. Women can no longer become doctors and neither can they go to male doctors.

The total labour force is about 10.9 million. 70 per cent is employed in agriculture and animal husbandry, industry and services having been disrupted by war. Agriculture and animal husbandry means self-employment, as does employment in domestic or cross-border trade. Casual labour in Iran and Pakistan also exists. But the army (of assorted varieties) is probably the second most important source of employment, after agriculture and animal husbandry.

Given such an economy, the unemployment rate is a meaningless concept. But for what it is worth, the unemployment rate is eight per cent. The inflation rate (consumer prices) is estimated to be 240 per cent. This is an estimate for Kabul and Kabul, Herat, Jalalabad and Kandahar are better off than the backward and poorer provinces like Badakhshan, Bamyan, Parwan and Kapisa. Here is another estimate from Kabul. A family of seven can earn $1.14 a day if the head of the family can find a job. But the family has to spend 63 cents a day to buy 21 loaves of bread. 50 per cent of individual income is thus spent on bread alone.

It is difficult to figure out the exchange rate. One afghani is divided into 100 puls and the official exchange rate was 50.6 afghanis to a dollar from 1981 to 1996. In 1996, the exchange rate was first devalued to 2,262.65 afghanis to $1 and then devalued again to 3,000 afghanis to $1. But market exchange rates have differed widely from official exchange rates, especially before 1996. There are estimates of 850 afghanis to a dollar for 1991, 1,019 for 1993, 1,900 for 1994, 7,000 for 1995, 17,000 for 1996, 4,750 for 1999 and 4,700 for 2000. These are conservative estimates. There are also reports of market exchange rates of between 36,000 and 45,000 afghanis to a dollar.

It is also difficult to get a fix on trade figures. Exports (fruits and nuts, hand-woven carpets, wool, cotton, hides and pelts, precious and semi-precious stones) are around $150 mn. Oil, natural gas, lapis lazuli, copper and iron deposits have still not been exploited. Export destinations are primarily the former Soviet Union, Pakistan, Iran, Germany, India, the United Kingdom, Belgium, Luxembourg and the Czech Republic. There are two reasons why it is difficult to obtain firm export figures. First, there are no firm figures on drug exports, Afghanistan being the second largest producer of opium in the world, after Myanmar. Hashish is also produced.

Second, there is significant cross-border trade with Pakistan and Turkmenistan, with the latter becoming particularly important after relationships with Iran, Uzbekistan and Tajikistan deteriorated. There is an agreement with Pakistan on Afghan Transit Trade. Since goods imported through ATT (electronics, consumer goods, artificial silk fibres, garments, tires) have sometimes been smuggled back into Pakistan, Pakistan has tried to restrict imports that can be allowed through the ATT agreement.

Imports (food, consumer goods, petroleum products) are around $600 mn. In 1998, agreements were signed with Turkmenistan for imports of petrol, diesel, jet fuel and liquefied natural gas, in an attempt to reduce dependence on Iran. Imported food is also essential, not just food that is paid for (imported mostly through Pakistan), but also that distributed as international aid. The Food and Agriculture Organisation estimates that imported food requirements are 740,000 tonnes a year, of which, around 140,000 tonnes comes through aid. The main sources of import are the former Soviet Union, Pakistan, Iran, Japan, Singapore, India, South Korea and Germany.

Out of the population of 26.8 million, seven million are believed to be in need of relief aid, with an estimated cost of $580 mn. This is the economy that will be dispatched to the stone age. No wonder people have commented that Afghanistan is already in the stone age. What further dispatch is needed?