Afghanistan is one of the worlds poorest countries. Many years of war and political instability have left the country in ruins, and dependent on foreign aid. The main source of income in the country is agriculture, and during its good years, Afghanistan produces enough food and food products to provide for the people, as well as to create a surplus for export. The major food crops produced are: corn, rice, barley, wheat, vegetables, fruits and nuts. In Afghanistan, industry is also based on agriculture, and pastoral raw materials. The major industrial crops are: cotton, tobacco, madder, castor beans, and sugar beets. Sheep farming is also extremely valuable. The major sheep product exports are wool, and highly prized Karakul skins. Afghanistan is a land that is rich in natural resources. There are numerous mineral and precious stone deposits, as well as natural gas and yet untapped petroleum stores. Some of these resources have been exploited, while others have remained relatively unexploited. Agriculture is the main occupation, although less than 10% of the land is cultivated; a large percentage of the arable land was damaged by warfare during the 1980s and 90s. Largely subsistence crops include wheat and other grains, cotton, sugar beets, fruits, and nuts. The opium poppy, grown mainly for the international illegal drug trade, is the most important cash crop, and the country is the worlds largest producer of opium. Grazing is also of great importance in the economy. The fat-tailed sheep are a staple of Afghan life, supplying skins and wool for clothing and meat and fat for food; goats and cattle are also of economic significance. Mineral wealth is virtually undeveloped, except for natural gas. There are deposits of iron ore, coal, copper, talc, sulphur, emeralds, and lapis lazuli; oil fields are found in the north. Industry was still only in the beginning stages at the end of the 1970s and has suffered substantial damage since then. Some small-scale manufactures produce cotton and other fabrics, fertilizer, cement, and processed agricultural goods. Opium, fruits and nuts, lambskins (Karakul) and textiles, hand-woven carpets, and gemstones are the main exports; petroleum products, manufactured goods, and foodstuffs are the main imports. As a result of civil war, exports have dwindled to a minimum, except for the illegal trade in opium and hashish. The country is also becoming an important producer of heroin, which is derived from opium. Once a major trade hub, the city of Kabul was ravaged by fighting in the late 20th cent., and its industry largely disappeared. Road communications throughout the country are poor, although existing roads have undergone reconstruction since the end of Taliban rule; pack animals are the primary means of transport in the interior. A road and tunnel under the Salang pass, built (1964) by the Russians, provides a short, all-weather route between N and S Afghanistan. The few railway lines in the country are those that were constructed by the Soviets during their occupation of Afghanistan.

General overview

• The extent of destruction: Afghanistans economy has seen widespread destruction over the past two decades of war. Most of the major formal social, administrative and economic institutions of the country have fallen apart due to the Soviet occupation, population displacement, and continued heavy fighting among various mujahidden factions in 1992. The nations transportation and communication systems, heavy and small-scale industries, education and agricultural infrastructure are among the most seriously damaged sectors that need a tremendous amount of investment when peace and stability return to the country. At present, it would be difficult to expect significant improvement in the economic situation of the country.
• Deterioration of the situation: This economic decline has exacerbated the level of poverty and economic hardship throughout the country. Largely dependent on subsistence agriculture, the country has witnessed diminishing income levels, declining food security, reduced access to urgently needed services and an increasing population.
• Regional disparities: A wide range of disparities exists between different regions and within each region. While Herat, Jalalabad and Kandahar have largely benefited from cross-border trading with neighbouring countries, the northern provinces, in particular the isolated and chronic food deficit provinces of Badakhshan and Bamyan have been badly affected by natural disasters and heavy fighting that took place in August and September 1998.
• The changing state of the economy: Previously, the Government of Afghanistan controlled the economy and major investments were made in the public sector. The private sector was active in agriculture and trade activities. During the course of the past two decades, the reduced role of the central government has encouraged the private sector to play a prime role in the nations traditional economic activities. The potential for further improvement of the private sector is still high and a large number of Afghan businessmen and traders might be interested in investing in small-scale industries provided that security and stability exist. However, this depends on the decision of the future governments of the country and the economic policy they may chalk out.
• Vulnerability to outside forces: The Afghan economy has always remained vulnerable to policy decisions adopted by its neighbouring countries. In the past, even when peace and stability were in place, the countrys economy depended on economic relations with the former USSR. In recent years, the country has become vulnerable to policy decisions made in Pakistan. An obvious example of such a change can be seen in the markets: an increase in prices of essential commodities in Pakistan led to further increase in prices in Kabul, Jalalabad and Kandahar.

The current status of the economy

Despite continued destruction, blockades of some of the supply routes and fighting in various parts of the country, trade and agriculture remained active. The section below provides a more elaborate study of agriculture and trade activities and their role in sustaining the Afghan economy.

Agriculture

Increase in cereal production: Agriculture forms the largest sector of the economy and the source of livelihood for over 85% of the population. With the return of security to most parts of the country, agricultural production has increased over the past few years. Food imports/dependency: A large segment of the Afghan population still depends on food imported from abroad or that distributed by the aid community. Increase in livestock production: Livestock forms a main source of the household economy in rural areas. Many families in rural areas sell their livestock to purchase wheat during the spring months when they run out of stocks. While this sector has sustained enormous loss due to prolonged hostilities, there are indications that livestock production has improved over the past few years.

Labour market

A great majority of the Afghan labour force is self-employed, mostly in agriculture and domestic trade but also, to a smaller extent, in cross-border trade. Working as a casual labourer inside Afghanistan as well as in neighbouring Pakistan and Iran is another major source of employment for many Afghans. New outlook
Afghanistans economic outlook has improved significantly since the fall of the Taliban regime in 2001 because of the infusion of over $8 billion in international assistance, recovery of the agricultural sector and growth of the service sector, and the reestablishment of market institutions. Real GDP growth is estimated to have slowed in the last fiscal year primarily because adverse weather conditions cut agricultural production, but is expected to rebound over 2005-06 because of foreign donor reconstruction and service sector growth. Despite the progress of the past few years, Afghanistan remains extremely poor, landlocked, and highly dependent on foreign aid, farming, and trade with neighbouring countries. It will probably take the remainder of the decade and continuing donor aid and attention to significantly raise Afghanistans living standards from its current status, among the lowest in the world. Much of the population continues to suffer from shortages of housing; clean water, electricity, medical care, and jobs, but the Afghan government and international donors remain committed to improving access to these basic necessities by prioritizing infrastructure development, education, housing development, jobs programs, and economic reform over the next year. Growing political stability and continued international commitment to Afghan reconstruction create an optimistic outlook for continuing improvements in the Afghan economy in 2006. Expanding poppy cultivation and a growing opium trade may account for one-third of GDP and looms as one of Kabuls most serious policy challenges. Other long-term challenges include: boosting the supply of skilled labour, reducing vulnerability to severe natural disasters, expanding health services, and rebuilding a war torn infrastructure.

Economic Indicators:

GDP: $21. 5bil.
GDP: per capita: $800.
GDP: Agriculture: 38%, Industry: 24% and Service: 38%.
Labour Force: 15mil.Agri:80%, industry 10%, service 10%.
Unemployment: 40%
Agriculture: Opium, wheat, fruits, nuts, wool, mutton, sheepskins and lambskins.
Natural Gas proved reserves: 99.96 billion. Cubic m.
Export Partners: Pakistan 25.5%,US 8.7%,India8,5%,Germany 6.5%,Turkenistan 5.3%,Kenya n 24.%,India 21.3%,US 12.4%,
Import partners: Pakistan 4.7%, South Korea 4.2% Germany 5.5 % and Russia 4.2%.
Pipelines: Gas 387km.
Roadways: total: 34,789 km. paved: 823km, unpaved: 26,558km. 
Waterways: 1200km.Amu Darya.