In April 2025, the World Bank released its Afghanistan Development Update, revealing that Afghanistan’s economy expanded for a second consecutive year despite extensive foreign aid cuts, sanctions, and diplomatic isolation.
Aid Withdrawals: Severing Old Lifelines
Afghanistan’s path to economic recovery has been paved with unprecedented challenges. Following the collapse of the previous Western-backed administration in August 2021, international donors dramatically scaled back assistance. By 2024, external grants had fallen to $2.9 billion (14% of GDP), a 17.5% decrease from the previous year, compounding a 24.4% contraction in 2023 (World Bank, 2025, p. 12).
Development financing from Western nations and multilateral agencies such as the International Monetary Fund dwindled. Reconstruction initiatives were halted, and technical assistance projects suspended. Humanitarian aid persisted but has been gradually declining alongside mounting operational constraints.
This substantial withdrawal of external financial support has increased fiscal pressures on the Interim Taliban Administration (ITA) and heightened the economy’s vulnerability (World Bank, 2025, p. 12).
Engines of Growth: How Recovery Is Possible
Despite adverse conditions, Afghanistan’s economy grew by an estimated 2.5% in 2024 (World Bank, 2025, p. viii).
1. Agricultural Revival
Agriculture expanded by 6% in 2024, aided by favourable weather. Wheat production rose by 16%, and rice output surpassed historical averages (World Bank, 2025, p. 4).
2. Private Consumption
Private consumption grew by 5% in 2024, fuelled by better agricultural yields, lower food prices, and sustained remittance inflows (World Bank, 2025, p. 5).
3. Real Estate and Construction Investment
Real estate investment provided a vital stimulus. Construction activity in Kabul surged by 15%, as Afghans channelled savings into property amidst a fragile banking sector (World Bank, 2025, p. 4).
4. Revenue Mobilisation
Domestic revenues rose by 14.4%, reaching AFN 241 billion (16.6% of GDP), driven by customs duties and taxes on goods and services (World Bank, 2025, p. 12).
5. Currency Stability and Remittances
The Afghani remained relatively stable after significant appreciation in 2023 (World Bank, 2025, p. 17). Remittance inflows from Iran, Pakistan, and Gulf countries continued to support household incomes (World Bank, 2025, p. 5).
Structural Challenges: Fragile Foundations
Afghanistan’s economic recovery remains fragile. The services sector contracted by 0.3% in 2024, while manufacturing remained sluggish (World Bank, 2025, p. 4-5).
Exports declined by 3%, and imports rose by 8%, exacerbating the trade imbalance. Although exact figures are uncertain, the World Bank notes a widening trade deficit (World Bank, 2025, p. 17).
Poverty and food insecurity remain acute challenges. Approximately 14.8 million Afghans are food insecure, and 4.7 million women and children suffer from malnutrition (World Bank, 2025, p. 9).
Although domestic revenues improved, fiscal pressures persist. The interim government of Afghanistan faces limited borrowing capacity and growing expenditure needs, with declining external grants straining its ability to finance development (World Bank, 2025, p. 12).
Data reliability remains a challenge. Afghanistan’s constrained banking sector and limited statistical transparency necessitate cautious interpretation of economic indicators.
Looking Forward: Resilient but Vulnerable
Afghanistan’s economic resilience in 2024-2025 highlights the country’s capacity to adapt under duress. Yet, the recovery remains narrow and vulnerable to shocks.
To build on current gains, the report suggests that the interim government must foster private sector growth, expand export markets, enhance financial intermediation, and support women’s and youth employment. Without systemic reforms, modest growth may prove unsustainable.
Afghanistan’s economy stands at a crossroads—showing that survival is possible, but true stability demands investment in human capital, infrastructure, and economic diversification.