Afghanistan is rated as one of the poorest countries in the world. This is because the country has faced wars in the previous decades. However, it should be noted that the economy of the country grew in the previous years regardless of the uncertainties in the economy. In 2015, the economy is expected to grow at a rate of 2.5% while in 2016, the country is expected to grow at the rate of 3.5%. This can only hold if the new government assures security to the investors in the economy. The GDP of the country was 20.72billion US dollars in the year 2013, but the value have increased in the recent years to $35.1Billion in 2014. The inflation of the Afghanistan economy remains at 5% and is expected to remain the same even in the year 2016. This means that inflation is not a major problem in the country.
The unemployment rate stands at 8.5%, which is a high value and the government expects to deal with the situation. The rate of corruption in Afghanistan is very high and this is why freedom from corruption is rated to be at 8%. Labor freedom stands at 67% while business freedom is 61%. Though the country is doing well in some economic aspects, there are certain areas it needs to correct in order to perform well. The most important sectors in the country are agriculture and construction which contributed about 10% of the country GDP each.
As already noted, the economy of Afghanistan is not doing well. There are several factors that have facilitated this. First, insecurity is a major challenge. The wars that the country has engaged in have led to destruction of major economic activities and people have been forced to leave their home hence not engage in economic activities. The foreign aid to support such people has never been enough. The terrorism threats in the country scare away many investors who would play a great role in creating jobs for many people as well as facilitating an improvement in the GDP of the economy.
Less developed judicial system is also another factor that has hindered the development of the country. With the poor system, trade deals cannot be completed by people and this fear discourages people from engaging in trade deals. Investing in such a country also becomes a challenge because people fear that their property is not protected by law.
The poorly developed financial sector is also another challenge in the country. Though there are three government banks as well as several commercial banks, the private sector finds it very difficult to access finances. This makes import and export of goods difficult for traders as well as any potential investors in the economy.
The poor governance in the country also has curtailed development. First, the high corruption levels in the government scares funding by the international organizations. Additionally, the government does not have the appropriate strategies of collecting revenues and financing development projects that can encourage investments. The high tariff rates fixed by the government also hinders trade which is an important aspect of economic development.
The future projects of Afghanistan are that the country has cohesion and integration initiative that aims at bringing the people in the country together. Such an arrangement is expected to enhance security and trust between citizens, and this can give them the confidence to trade with each other both locally and internationally. The government also intends to use the cohesion process to finance communal projects, and this can be helpful in stimulating demand in the economy that is crucial in attracting investment.
The Afghanistan government also intends to diversify its economy through continuously reducing the production of opium which is an illegal drug while on the other hand encouraging investment in the other sectors that are legal. This will help increase the legal trade in the country which will help transform the economy positively.
There are various recommendations that Afghanistan government should implement to realize economic growth. First, the country should value trade, both locally and internationally. The government should eliminate trade barriers to encourage people to produce more and sell the surplus. This will help people accumulate wealth and invest even more.
The government should also provide incentives to the major sectors such as agriculture. The government should aim at reducing costs of agricultural production. This is possible through improving infrastructure to the farms as well as subsidizing agricultural inputs. This sector is crucial in facilitating the industrial development as it provides the necessary raw materials.
Another important sector that needs reforms is the service sector. The government should create reforms in this sector, and ensure that there are readily available qualified laborers. This requires investing in institutions of learning to equip the citizens with the much needed skills. Other changes should involve efforts to reduce corruption through proper judicial system. The government should work towards bringing changes in the provision of government services because this can influence the development of the private sector.
In conclusion, Afghanistan government has faced challenges over time that has influenced their economic development. The country has suffered because of the insecurity in the region as social challenges such as corruption. The government has to invest in peace, bring people together and come up with development policies that encourage local investment as well as local and international trade.
USAID. (2013). Community Cohesion Initiative (CCI) | Afghanistan Fact Sheet | U.S. Agency for International Development. Retrieved from http://www.usaid.gov/afghanistan/fact-sheets/community-cohesion-initiative-cci
USAID. (2015). Afghanistan | Economic Growth | U.S. Agency for International Development. Retrieved from http://www.usaid.gov/afghanistan/economic-growth
World Bank. (2008). AFGHANISTAN ECONOMIC INCENTIVES AND DEVELOPMENT INITIATIVES TO REDUCE OPIUM PRODUCTION. Retrieved from http://siteresources.worldbank.org/SOUTHASIAEXT/Resources/223546-1202156192201/4638255-1202156207051/fullreportAfghanistanOpiumIncentives.pdf
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