Afghanistan’s Economy Struggles Amidst Global Fertilizer Price Fluctuations

Afghanistan is grappling with economic challenges as it marks its third consecutive year of contraction in the wake of ongoing humanitarian crises. Despite a slight easing from a 20.7% decline in 2022 to 6.2% in 2023, the country’s real GDP continues to face uncertainties.

The return of over half a million Afghan refugees has added pressure to the already strained employment market and food demand, particularly in eastern and southern provinces, further impacting the economy.

Amid this economic struggle, global fertilizer prices have seen fluctuations, influenced heavily by key players such as China, Morocco, Saudi Arabia, and the USA. Despite disruptions from Russia‘s invasion of Ukraine in 2022, Russia managed to increase fertilizer exports in 2023, affecting import-dependent countries.

Following a surge in inflation post the August 2021 political changes, Afghanistan experienced a downturn into deflation, with food inflation decreasing significantly. The consistent deflationary trend, while supporting low food prices, has implications for household purchasing power due to limited job opportunities and low wages.

On the exchange rate front, the Afghan Afghani has shown relative stability against the USD, hovering around AFN 70-74 per USD since November 2023. This stability offers some level of predictability amidst the economic challenges.