Overview | Government

This series of profiles of foreign nations is part of the Country Studies Program, formerly the Army Area Handbook Program. The profiles offer brief, summarized information on a country's historical background, geography, society, economy, transportation and telecommunications, government and politics, and national security. Derived from The Library of Congress.


May 2006


Formal Name: Islamic Republic of Afghanistan

(Dowlat-e Eslami-ye-Afghanestan).

Short Form: Afghanistan.

Term for Citizen(s): Afghan(s).

Capital: Kabul.

Major Cities: Herat (Hirat), Jalalabad, Kandahar (Qandahar),

Kondoz (Kunduz), and Mazar-e Sharif.

Independence: Afghanistan recognizes its independence day as August 19, the date in 1919 when the country became fully independent of British rule.

Public Holidays: The date of celebration of Afghanistan’s Muslim holidays varies because the Islamic calendar is 354 days rather than 365. The holidays in this category are the beginning of Ramadan, Eid al Adha (Feast of the Sacrifice, the end of Ramadan), Ashura (the martyrdom of Imam Hussein), and the birthday of the Prophet Muhammad. Holidays observed on fixed dates include Nawros (New Year’s, on the vernal equinox), Victory Day (April 28), and Independence Day (August 19).

Flag: The background of the Afghan flag is three equal vertical

sections of black, red, and green from left to right. In the center

of the flag in yellow is the national coat of arms, which portrays

a mosque with a banner and a sheaf of wheat on either side. In the

upper-middle part of the insignia are the lines “There is no God but

Allah and Muhammad is his prophet.” and “Allah is Great.” together with a rising sun. The word “Afghanistan” and the year 1298 (the Muslim calendar equivalent of the year of independence, 1919) are located in the lower part of the insignia.


The Pre-Islamic Period: Archaeological evidence indicates that urban civilization began in the region occupied by modern Afghanistan between 3000 and 2000 B.C. The first historical documents date from the early part of the Iranian Achaemenian Dynasty, which controlled the region from 550 B.C. until 331 B.C. Between 330 and 327 B.C., Alexander the Great defeated the Achaemenian emperor Darius III and subdued local resistance in the territory that is now Afghanistan. Alexander’s successors, the Seleucids, continued to infuse the region with Greek cultural influence. Shortly thereafter, the Mauryan Empire of India gained control of southern Afghanistan, bringing with it Buddhism. In the mid-third century B.C., nomadic Kushans established an empire that became a cultural and commercial center. From the end of the Kushan Empire in the third century A.D. until the seventh century, the region was fragmented and under the general protection of the Iranian Sassanian Empire.

The Islamic and Mongol Conquests: After defeating the Sassanians at the Battle of Qadisiya in 637, Arab Muslims began a 100-year process of conquering the Afghan tribes and introducing Islam. By the tenth century, the rule of the Arab Abbasid Dynasty and its successor in Central Asia, the Samanid dynasty, had crumbled. The Ghaznavid Dynasty, an offshoot of the Samanids, then became the first great Islamic dynasty to rule in Afghanistan. In 1220 all of Central Asia fell to the Mongol forces of Genghis Khan. Afghanistan remained fragmented until the 1380s, when Timur consolidated and expanded the existing Mongol Empire. Timur’s descendants ruled Afghanistan until the early sixteenth century.

The Pashtun Rulers: In 1504 the region fell under a new empire, the Mughals of northern India, who for the next two centuries contested Afghan territory with the Iranian Safavi Dynasty. With the death of the great Safavi leader Nadir Shah in 1747, indigenous Pashtuns, who became known as the Durrani, began a period of at least nominal rule in Afghanistan that lasted until 1978. The first Durrani ruler, Ahmad Shah, known as the founder of the Afghan nation, united the Pashtun tribes and by 1760 built an empire extending to Delhi and the Arabian Sea. The empire fragmented after Ahmad Shah’s death in 1772, but in 1826 Dost Mohammad, the leader of the Pashtun Muhammadzai tribe, restored order.

The Great Game: Dost Mohammad ruled at the beginning of the Great Game, a century-long contest for domination of Central Asia and Afghanistan between Russia, which was expanding to the south, and Britain, which was intent on protecting India. During this period, Afghan rulers were able to maintain virtual independence, although some compromises were necessary. In the First Anglo-Afghan War (1839–42), the British deposed Dost Mohammad, but they abandoned their Afghan garrisons in 1842. In the following decades, Russian forces approached the northern border of Afghanistan. In 1878 the British invaded and held most of Afghanistan in the Second Anglo-Afghan War. In 1880 Abdur Rahman, a Durrani, began a 21-year reign that saw the balancing of British and Russian interests, the consolidation of the Afghan tribes, and the reorganization of civil administration into what is considered the modern Afghan state. During this period, the British secured the Durand Line (1893), dividing Afghanistan from British colonial territory to the southeast and sowing the seeds of future tensions over the division of the Pashtun tribes. Abdur Rahman’s son Habibullah (ruled 1901–19) continued his father’s administrative reforms and maintained Afghanistan’s neutrality in World War I.

Full Independence and Soviet Occupation: In 1919 Afghanistan signed the Treaty of Rawalpindi, which ended the Third Anglo-Afghan War and marks Afghanistan’s official date of independence. In the interwar period, Afghanistan again was a balancing point between two world powers; Habibullah’s son Amanullah (ruled 1919–29) skillfully manipulated the new British-Soviet rivalry and established relations with major countries. Amanullah introduced his country’s first constitution in 1923. However, resistance to his domestic reform program forced his abdication in 1929. In 1933 Amanullah’s nephew Mohammad Zahir Shah, the last king of Afghanistan, began a 40-year reign.

After World War II, in which Afghanistan remained neutral, the long-standing division of the Pashtun tribes caused tension with the neighboring state of Pakistan, founded on the other side of the Durand Line in 1948. In response, Afghanistan shifted its foreign policy toward the Soviet Union. The prime ministership of the king’s cousin Mohammad Daoud (1953–63) was cautiously reformist, modernizing and centralizing the government while strengthening ties with the Soviet Union. However, in 1963 Zahir Shah dismissed Daoud because his anti-Pakistani policy had damaged Afghanistan’s economy.

A new constitution, ratified in 1964, liberalized somewhat the constitutional monarchy. However, in the ensuing decade economic and political conditions worsened. In 1973 Daoud overthrew the king and established a republic. When economic conditions did not improve and Daoud lost most of his political support, communist factions overthrew him in 1978. In 1979 the threat of tribal insurgency against the communist government triggered an invasion by 80,000 Soviet troops, who then endured a very effective decade-long guerrilla war. Between 1979 and 1989, two Soviet-sponsored regimes failed to defeat the loose federation of mujahideen guerrillas that opposed the occupation. In 1988 the Soviet Union agreed to create a neutral Afghan state, and the last Soviet troops left Afghanistan in 1989. The agreement ended a war that killed thousands, devastated industry and agriculture, and created 5 to 6 million refugees.

Civil War and the Taliban: The 1988 agreement did not settle differences between the government and the mujahideen, and in 1992 Afghanistan descended into a civil war that further ravaged the economy. Among the leaders of the warring factions were Ahmad Shah Massoud, an ethnic Tajik; Gulbuddin Hekmatyar, a Pashtun; and Abdul Rashid Dostum, an Uzbek. Despite several temporary alliances, struggles among the armed groups continued until one Islamic fundamentalist group, the Taliban, gained control of most of the country in 1996. The Taliban used an extremist interpretation of Islam to assert repressive control of society. The economy remained in ruins, and most government services ceased.

The Taliban granted the Arab terrorist organization al Qaeda the right to use Afghanistan as a base. As al Qaeda committed a series of international terrorist acts culminating in attacks on the United States on September 11, 2001, the Taliban rejected international pressure to surrender al Qaeda leader Osama bin Laden. When the United States and allies attacked Afghanistan in the fall of 2001, the Taliban government collapsed, but Taliban and al Qaeda leaders escaped. A United States-led International Security Assistance Force began an occupation that is still in place in 2006.

Rebuilding the Country: In December 2001, Afghan leaders in exile signed the Bonn Agreement, forming an interim government, the Afghan Interim Administration, under the leadership of the Pashtun moderate Hamid Karzai. In 2002 Karzai was selected president of the Transitional Islamic State of Afghanistan, whose ruling council included disparate leaders of the anti-Taliban Northern Alliance. A new constitution, written by a specially convened Loya Jirga, or constituent assembly of regional leaders, was ratified in early 2004. In October 2004, an overwhelming popular vote elected Karzai president of the Islamic Republic of Afghanistan. However, regional warlords and large areas of Afghanistan remained beyond the control of the Karzai government. Despite substantial international aid, the Afghan government, which included representatives from many factions, was unable to address numerous social and economic problems. The parliamentary elections of September 2005 gave regional warlords substantial power in both houses of the National Assembly, further jeopardizing Karzai’s ability to unite the country. The Bonn Agreement lapsed after the 2005 elections. The agreement’s successor, the Afghanistan Compact, went into effect in January 2006 to set forth goals for international assistance in economic development, security, protection of human rights, and the fight against corruption and drug trafficking through 2010. In the meantime, the Taliban intensified terrorist activities in areas beyond government control.


Location: Afghanistan is located in Central Asia, north and

west of Pakistan, east of Iran, and south of Turkmenistan,

Uzbekistan, and Tajikistan. The narrow Wakhan Corridor

extends from northeasternmost Afghanistan to meet with


Size: Afghanistan occupies approximately 647,500 square

kilometers, slightly less than Texas.

Land Boundaries: Afghanistan has borders with the following countries: China, 76 kilometers; Iran, 936 kilometers; Pakistan, 2,430 kilometers; Tajikistan, 1,206 kilometers; Turkmenistan, 744 kilometers; and Uzbekistan, 137 kilometers.

Disputed Territory: Afghanistan has no boundary disputes; ongoing incursions, smuggling, and terrorist movement across the Pakistan border are addressed in regular bilateral meetings.

Length of Coastline/Maritime Claims: Afghanistan is landlocked.

Topography: The terrain of Afghanistan is dominated by rugged mountain ranges, which generally run from the northeast to the southwest. Mountains occupy all but the north-central and southwestern regions of the country, which are dominated by plains. Nearly half the country has an elevation of 2,000 meters or more, and the highest peaks in the northeastern Hindu Kush range exceed 7,000 meters. Historically, mountain passes along the northeastern border with present-day Pakistan have been of great strategic importance. Significant parts of the southwestern plains region are desert.

Principal Rivers: The main rivers are the Amu Darya, 800 kilometers; the Harirud, 850 kilometers; the Helmand, 1,000 kilometers; and the Kabul, 460 kilometers. Afghanistan’s chief tributaries to the Amu Darya, which forms much of the country’s northern border, are the Koshk and the Qonduz.

Climate: Afghanistan’s climate generally is of the arid or semi-arid steppe type, featuring cold winters and dry, hot summers. The mountains of the northeast have subarctic winter conditions. Farther south, monsoon effects moderate the climate near the Pakistan border and increase rainfall as far inland as central Afghanistan. The highest precipitation occurs in the Kabul region of the northeast. The highest temperatures and lowest precipitation are in the southwestern plains region, where summer temperatures reach 49° C. Low temperatures in the northeastern mountains range from –15° C in winter to 0° C in summer. The climate of the north-central Turkistan Plain is increasingly arid closest to the northern borders with Turkmenistan, Uzbekistan, and Tajikistan.

Natural Resources: Agricultural resources are primarily grazing land; fertile crop-growing land is concentrated in Kondoz Province in the north and Helmand Province in the south. Afghanistan is known to have major deposits of chrome, coal, copper, iron, and salt, as well as lesser amounts of a wide variety of minerals including gold, silver, and uranium. Natural gas is the most abundant hydrocarbon resource. Substantial oil deposits are recognized but not yet quantified. Water for all purposes is in critically short supply.

Land Use: Some 12.1 percent of Afghanistan’s land is classified as arable; however, in the early 2000s a four-year drought cut that figure in half. In 2005 only 0.2 percent of the total was planted to permanent crops.

Environmental Factors: Although little studied before recent times, the environment of Afghanistan is assumed to have been spared large-scale disturbances until the Soviet invasion of 1979. Since that time, however, numerous events have caused severe damage. Afghanistan, which has no appreciable bodies of water, suffers from a limited freshwater supply that makes potable water unavailable to more than half the population. In recent years, groundwater quality has deteriorated because of agricultural and industrial runoff, and water quantity has been diminished by large-scale land clearing and desertification. Because of insufficient water treatment, the incidence of water-borne diseases is very high. Widespread overgrazing, soil erosion, salinization, and waterlogging have reduced agricultural productivity. Although Afghanistan has little industry, particulate pollutants from the Aral Sea and industrial complexes in Iran, Turkmenistan, and Uzbekistan contaminate the atmosphere in northern Afghanistan. Chemical use and physical destruction in recent military conflicts have damaged the environment, and landmines and unexploded shells are residual hazards endangering an estimated 4 million Afghanis in 32 provinces.

Time Zone: Afghanistan is four and one-half hours ahead of Greenwich Mean Time.


Population: In the early 2000s, population assessment has been difficult because many people have not had fixed residences. In 2006 the estimated population was 31.1 million. The population growth rate was 2.7 percent per year. The population is approximately 75 percent rural; in 2004 the six most populous cities accounted for less than 10 percent of the population. In 2006 net out-migration was 0.4 per 1,000 population. After heavy out-migration and internal displacement in the 1980s and 1990s, an estimated 2.5 million Afghans returned to Afghanistan in 2003–4 before the numbers began to decrease. In 2005 about 1.2 million Afghans were living in Pakistan and Iran, the main recipient countries for Afghan refugees. The United Nations Office of the High Commissioner for Refugees predicted that 400,000 Afghans would return to Afghanistan in 2006. In 2005 an estimated 200,000 to 300,000 were internally displaced within Afghanistan because of drought and instability.

Demography: In 2006 some 44.6 percent of the population was younger than 15 years of age and 2.4 percent was older than 64. The estimated birthrate was 46.6 per 1,000 population, and the estimated death rate was 20.3 per 1,000 population. The infant mortality rate was 160 deaths per 1,000 live births. Life expectancy was 43.1 years for males and 43.5 years for females. The fertility rate was 6.7 children born per woman.

Ethnic Groups: The main ethnic groups are Pashtun, 42 percent; Tajik, 27 percent; Hazara, 9 percent; Uzbek, 9 percent; Aimak (a Persian-speaking nomadic group), 4 percent; Turkmen, 3 percent; and Baloch, 2 percent. The largest remaining nomadic group is the Kuchis, a Pashtun group whose population has dwindled to about 1.5 million since 1979. The Pashtuns are the major ethnic group in the south and the east, the Tajiks in the northeast. The predominant groups in north-central Afghanistan are the Hazaras, Tajiks, and Uzbeks.

Languages: More than 30 languages are spoken in Afghanistan. The official languages are Dari (Afghan Persian) and Pashtu. Dari is spoken by 50 percent of the population, and Pashtu is spoken as a first language by 35 percent. Turkic languages (primarily Turkmen and Uzbek) are spoken by 11 percent of the population. Of the languages spoken by smaller segments of the population, the most important are Balochi and Pashai. Many Afghans speak more than one language; Dari is the most common second language.

Religion: Virtually the entire population is Muslim. Between 80 and 85 percent of Muslims are Sunni and 15 to 19 percent, Shia. The minority Shia are economically disadvantaged and frequently subjected to discrimination. Small numbers of Hindus and Sikhs live in urban centers. A Jewish population that numbered 5,000 in 1948 had left Afghanistan entirely by 2000.

Education and Literacy: Despite substantial improvements during the reign of Mohammad Zahir Shah (ruled 1933–73), in 1979 some 90 percent of Afghanistan’s population remained illiterate. Beginning with the Soviet invasion of 1979, successive wars virtually destroyed the education system. Most teachers fled the country during the Soviet occupation and the subsequent civil war. By 1996 only about 650 schools were functioning.

In 1996 the Taliban regime banned education for females, and the madrassa (mosque school) became the main source of primary and secondary education. After the overthrow of the Taliban in 2001, the interim government received substantial international aid to restore the education system. In 2003 some 7,000 schools were operating in 20 of the 34 provinces, and 27,000 teachers were teaching 4.2 million children (including 1.2 million girls). Of that number, about 3.9 million were in primary schools. In 2004 and 2005, informal community education programs began in nine provinces. When Kabul University reopened in 2002, some 24,000 students, male and female, enrolled. In the early 2000s, the rehabilitation of five other universities progressed very slowly. Since the end of the dogmatic Taliban era in 2001, public school curricula have included religious subjects, but detailed instruction is left to religious teachers. In 2003 an estimated 57 percent of men and 86 percent of women were illiterate, and the lack of skilled and educated workers was a major economic disadvantage.

Health: Beginning in 1979, military conflict destroyed Afghanistan’s health system. Most medical professionals left the country in the 1980s and 1990s, and all medical training programs ceased. In 2004 Afghanistan had one medical facility for every 27,000 people, and some centers were responsible for as many as 300,000 people. In 2004 international organizations provided a large share of medical care. An estimated one-quarter of the population had no access to health care. In 2003 there were 11 physicians and 18 nurses per 100,000 population, and the per capita health expenditure was US$28.

At the same time, the physical and psychological effects of war have substantially increased the need for medical care. Infant, child, and maternal mortality rates are among the highest in the world. In rural areas, one in five children dies before reaching age five. Because of poor sanitation and insufficient potable water supply, infectious and parasitic diseases such as malaria and diarrhea are very common. Malnutrition and poor nutrition also are pervasive. The drought of 1999–2002 exacerbated these conditions. An estimated 800,000 Afghans are disabled. No statistics are available on the prevalence of human immunodeficiency virus (HIV). However, in 2006 the United Nations Development Programme estimated that an HIV/acquired immune deficiency syndrome (AIDS) epidemic could occur in Afghanistan because of the high incidence of intravenous drug use, unsafe blood transfusion procedures, large numbers of refugees, poor health facilities, and illiteracy. In 2006 the government estimated that 200 to 300 citizens were currently infected. Despite large-scale international assistance, in 2004 the World Health Organization did not expect Afghanistan’s health indicators to improve substantially for at least a decade.

Welfare: Largely because of protracted military conflict, Afghanistan in 2004 had the highest proportion of widows and orphans in the world. Large numbers of disabled individuals and former members of regional militias also lack a means of support. In 2004 the World Bank estimated that 20 percent of families lacked a secure food supply and another 50 to 60 percent were on the verge of severe poverty. However, the government provides very little welfare protection. Most of the welfare activity in the country has been provided by international nongovernmental organizations (NGOs), such as the Afghan Health and Development Services, Afghan Women’s Education Center, and Humanitarian Assistance for the Women and Children of Afghanistan, and by United Nations organizations. Several NGOs also work with Afghan refugees in other countries, especially Pakistan.


Overview: Economic statistics for Afghanistan traditionally are inexact. Afghanistan’s economy, which always has been heavily agricultural and one of the poorest in the world, was shattered by the wars of the 1980s and the 1990s. Industry, much of which depended on agricultural output, suffered as well. After the wars, small-scale trade in urban centers and agriculture in some regions revived quickly. However, damage to the infrastructure will take much longer to repair. The 2004 International Conference on Afghanistan pledged US$8.3 billion for economic infrastructure reconstruction during the following three years. At the 2006 London Conference on Afghanistan, international donors pledged US$10.4 billion to the Afghanistan National Development Strategy, which includes economic and social components, during the ensuing five years. In 2006 some 22 provincial reconstruction teams led by Western civilian and military personnel were working to restore economic infrastructure and security in Afghanistan. A major economic problem is replacing the income generated by opium production, which in 2005 yielded an estimated 52 percent of the country’s gross domestic product (GDP). Smuggling, particularly across the Pakistan border, also was an important part of the “black economy.” In early 2005, a significant regional step was the establishment of an economic coordination council by the governors of four provinces in resource-rich and strategically vital eastern Afghanistan.

Gross Domestic Product (GDP): Excluding illegal poppy production, for fiscal year (FY) 2004–5 (March 21, 2004–March 20, 2005) Afghanistan’s GDP was estimated at US$5.22 billion or US$232 per capita. In that year, agriculture contributed an estimated 38 percent to the GDP, services 38 percent, and industry and mining 24 percent. Following the economic standstill of the late 1990s, GDP growth rates in the early 2000s have been very high: 28.6 percent in FY 2002–3, 16 percent in FY 2003–4, and 8 percent in FY 2004–5. However, the starting points upon which such figures are based were very low.

Government Budget: In the early 2000s, Afghanistan’s ratio of revenue to gross domestic product, 4 percent, was one of the lowest in the world, and domestic revenues were not expected to match the government’s operating costs until at least 2011. The proposed budget for fiscal year (FY) 2003–4 called for expenditures of US$693 million, excluding a separate national development budget of US$1.03 billion. For FY 2004–5 the government’s operational budget was US$561 million, and the revenue for that budget period was US$269 million.

Inflation: Under the pro-Soviet regimes of the 1980s, inflation was high but limited by government controls. Inflation reached 150 percent per year during the civil war of the early 1990s, and it is believed to have remained high under the Taliban. After the currency reform of 2002, inflation averaged about 10 percent per year for the first two years, but it rose to 16.3 percent in 2005.

Agriculture: Agriculture traditionally has been the foundation of Afghanistan’s economy, employing as much as 80 percent of the workforce and contributing at least half of the gross domestic product (GDP). Because of the poor quality of most agricultural land, subsistence agriculture predominates. Although many displaced Afghan farmers returned to their land in the early 2000s, land mines and the destruction of irrigation systems had made much agricultural land unusable. Livestock raising, a vital part of the agricultural economy, was similarly affected as grazing land disappeared. The drought of 1999–2002 and an infestation of locusts devastated the rural population and further reduced all types of agricultural output. The nomadic Kuchis were forced to find sedentary occupations. Because of limited water supplies, in the early 2000s half of Afghanistan’s arable land was uncultivated. Beginning in 2003, agricultural output increased because of international aid and increased rainfall, except in the south where the drought continued into 2004. The area under cultivation rose significantly in 2004: it decreased by 21 percent in 2005, but productivity increased. The main legal crops are wheat, vegetables, grapes, rice, barley, corn, fruits, and potatoes. The main types of livestock are cattle, sheep, and goats; cow’s milk is the most valuable product of livestock raising.

The internationally supported program to replace poppies with legal crops showed some progress in 2005. Reportedly, between 2004 and 2005 the area under poppy cultivation decreased by 21 percent, but production declined by only 2.4 percent. By contrast, between 2003 and 2004 the area under poppy cultivation had tripled, and the estimated value of the poppy crop more than doubled as output reached 4,200 tons. As the cultivation of poppies was discouraged in 2005, crop diversification increased somewhat, although poor transportation and irrigation infrastructure restricted the expansion of some perishable crops. In 2005 the government reported that wheat had begun to replace poppies in three major opium-producing provinces.

Forestry: Most of Afghanistan’s mountains are barren rather than forested. In the mid-1990s, an estimated 2.9 percent of the land was forested, but war, illegal exploitation, and the need for firewood have removed an estimated 50 percent of that resource. There is no program of forest preservation or commercial exploitation. In 2003 an estimated 3,150 tons of timber products were harvested, about half for fuel.

Fishing: Afghanistan has no appreciable fishing industry. In 2002 the catch totaled about 900 tons of fish.

Mining and Minerals: Most of Afghanistan’s mineral resources, which are believed to be substantial, remain unexploited. Among resources identified are bauxite, emeralds, gold, iron, lead, magnesium, mercury, silver, sulfur, tin, uranium, and zinc. Because of transportation problems and insufficient investment, however, only barites, chromium, coal, copper, natural gas, and salt have been extracted commercially. The largest coal mining operation is at Karkar Dodkash in north-central Afghanistan. In the early 2000s, mineral prospecting and surveying increased substantially.

Industry and Manufacturing: Before the wars of the late twentieth century, industry was based on the processing of local agricultural products, including textiles, sugar, and chemical fertilizers made from natural gas or coal. The main manufacturing center was the Kabul region. In 2004 all of Afghanistan’s industrial sector had stopped producing or was producing at a substantially reduced rate. The reasons for this reduction in productivity are war damage, shortages of raw materials and spare parts, and the postwar priority of rebuilding overall infrastructure before industry. In the early 2000s, foreign investment in the industrial sector focused on small and medium-sized enterprises, predominantly in telecommunications. Revival projects have concentrated on agricultural processing and carpet enterprises. Some small plants in Herat, Kabul, and Mazar-e Sharif produce textiles, leather goods, and processed foods. Because of war damage, the construction sector expanded rapidly in the early 2000s and was seen as an important economic driver for the ensuing decade. However, that sector of the economy suffers from substantial corruption.

Energy: War damage depleted Afghanistan’s energy generation infrastructure, particularly generators and power lines. In 2004 energy shortages were a critical obstacle in resuming economic activity, but in 2005 the electricity supply improved significantly under Minister of Water and Energy Ismail Khan. Given adequate extraction and distribution infrastructure, Afghanistan’s domestic coal, natural gas, and oil resources can meet its energy needs, and the Kunar River provides untapped hydroelectric potential. In 2002 Turkmenistan signed an agreement to provide natural gas and electric power to Afghanistan, and Tajikistan and Uzbekistan also send power to some northern regions. In 2004 an international consortium completed an evaluation of Afghanistan’s energy potential, focusing on natural gas and recommending future energy policy. Some natural gas wells and 31 oil wells that were active during the Soviet occupation have remained capped since that era. In 2004 natural gas reserves were estimated at 5 trillion cubic feet. Oil reserves were estimated at 95 million barrels and coal reserves at 73 million tons. Although Afghanistan is a natural pipeline route between Central Asian natural gas fields and the Arabian Sea and the often-discussed Trans-Afghan Pipeline clearly would be an economic boon, security issues have prevented construction. Afghanistan’s domestic pipelines connect gas fields only with local consumers.

Services: Afghanistan’s banking system, which collapsed during the civil war of the early 1990s, was limited to financial transactions supporting retail commerce. With the collapse, money-changers became the main source of financing, and opium and wheat became the primary forms of capital for the agricultural population. Elimination of poppy cultivation means destitution for farmers relying on opium for credit. Since 2002 the government has encouraged recovery of a formal banking system. A set of commercial banking laws was passed in 2003, and banks from Britain, India, and Pakistan have opened branches in Kabul. In mid-2004 the Afghanistan International Bank (AIB) began operating with the backing of the Asian Development Bank and 75 percent ownership by Afghan businessmen. The AIB began making corporate loans in 2004. Further development of business services requires a new legislative basis for activities such as insurance, mortgages, and property ownership.

The smuggling and other illegal economic activity that were pervasive during the war periods left a very strong residual black-market economy specializing in moving goods illegally into Pakistan and moving illegal drugs northward into Central Asia and ultimately Russia and Western Europe. The opium production supporting the latter activity remained very high in 2005 (accounting for between 75 and 87 percent of the world supply), despite government efforts to reduce it.

Because security conditions in Afghanistan have remained inadequate, especially outside Kabul, the formerly prosperous tourism industry had not revived as of 2005, despite a government program to establish 20 tourist sites by 2010. Meanwhile, dangerous conditions have spurred the growth of private security services that protect government officials and businesspeople.

Labor: Because of the very large black-market economy, statistics on the labor force are incomplete. In 2004 the labor force in the legitimate economy was estimated at 15 million. The conflicts of the 1980s and 1990s seriously depleted the supply of skilled labor. According to a 2004 estimate, about 80 percent of the workforce was in agriculture, 10 percent in industry, and 10 percent in services. Although accurate statistics on unemployment generally have not been available, 2005 estimates were 40 and 50 percent. No minimum wage has been set. Existing labor laws are little observed, and unions have not played a role in protecting workers’ rights. ((DOS 05InvClmtStmt))

Foreign Economic Relations: The United States has given Afghanistan status as a least-developed beneficiary developing nation, which removes tariffs on several U.S. imports from Afghanistan. In 2004 the United States signed a bilateral Trade and Investment Framework Agreement, which will increase trade levels with Afghanistan. The European Union also gives Afghan products preferential trade status. Trade with Iran has increased substantially in the post-Taliban era. Iran has given Afghanistan the use of its Arabian Sea port at Chabahar under favorable conditions, despite U.S. objections. In 2003 Afghanistan, Iran, and Uzbekistan established a trans-Afghan trade corridor linking Uzbekistan with Chabahar and Bandar-e Abbas. Uzbekistan’s border procedures have slowed commerce along the route, however. Trade with Pakistan is complicated by a high level of smuggling across the border; in 2004 an estimated 80 percent of goods entering Afghanistan from Pakistan were subsequently smuggled back into Pakistan. In 2002 the two countries revived their Joint Economic Commission, which had been moribund for 10 years, in order to improve commercial relations. The commission has met regularly in the ensuing years.

In 2004 the main purchasers of Afghanistan’s exports in order of volume were Pakistan, India, the United States, and Germany. The main suppliers of Afghanistan’s imports in order of volume were Pakistan, the United States, India, Germany, Turkmenistan, Kenya, the Republic of Korea (South Korea), and Russia. Aside from opium, the main export commodities were fruits and nuts, carpets, wool, cotton, hides and pelts, and precious and semi-precious gems. The main imports were capital goods, food, textiles, and petroleum products. The volume of Afghanistan’s foreign trade increased substantially in the early 2000s. In the fiscal year ending in March 2005, Afghanistan’s exports (including re-exports) were worth US$1.7 billion, and its imports were valued at US$3.9 billion, creating an unfavorable trade balance of US$2.2 billion.

Balance of Payments: For fiscal year 2004, Afghanistan had a balance of payments surplus of US$131 million, mainly because of US$2.7 billion in international grants. In 2005 Afghanistan had US$1.3 billion in foreign-currency reserves.

External Debt: In 2004 Afghanistan had US$8 billion in bilateral debt, owed mainly to Russia. Some US$500 million also was owed to multilateral development banks. Both bilateral and multilateral debt figures increased significantly in 2005.

Foreign Investment: To encourage foreign investment, in 2002 the government began allowing 100 percent foreign ownership of Afghan enterprises, offering substantial tax benefits and unlimited transfer of assets out of the country. The Afghanistan Investment Support Agency was established in 2003 to centralize foreign investment activities. However, Afghanistan’s highly corrupt and inefficient bureaucracy has limited investment, and there is no legal system for adjudication of commercial disputes. In addition, the liberalized policy does not apply to investment in pipeline construction, telecommunications infrastructure, the fuels and minerals industries, or other heavy industry where state-owned enterprises predominate. Likely future investment sectors are telecommunications, energy, mining, agricultural equipment, and health care systems. In 2004 foreign direct investment totaled an estimated US$351 million. The largest investors were Pakistan, Iran, China, the United Arab Emirates, Central Asian countries, members of the European Union, and the United States.

Currency and Exchange Rate: In late May 2006, the exchange rate of the afghani was 49.58 to the U.S. dollar. The rate has remained relatively stable since the currency reform of 2002, having increased from 42.8 afghanis since early 2005. Acceptance of the afghani has been gradual, and in 2006 many foreign currencies were in circulation.

Fiscal Year: The fiscal year begins March 21.


Overview: Afghanistan’s transportation system, which prior to 1979 was rudimentary except for a modern system of main roads, suffered severe damage during the ensuing two decades. In the early 2000s, the road system, which provided the only transport in most parts of the country, has been an urgent reconstruction project. Some 79 percent of public transport expenditures for the period 2005–11 were earmarked for road improvement. No rail system exists. After suffering damage to most airports during the wars, the air transport system has been reviving in the early 2000s. Because landlocked Afghanistan has been very dependent on routes through Pakistan, with which relations have been tense, a top priority is diversifying Afghanistan’s access to seaports and to new markets in India by making new bilateral transportation agreements.

Roads: The main internal road system that was built in the 1960s included about 2,000 kilometers of roads. In 2003 Afghanistan had 8,200 kilometers of paved roads and 26,600 kilometers of unpaved roads. Heavily damaged in the 1980s and 1990s, the main arteries connect the cities of Ghazni, Herat, Kabul, and Kandahar with roads crossing the Pakistan border. Critical commercial and military roadways through the Salang and Tang-e Gharu mountain passes, respectively north and east of Kabul, were badly damaged during the Soviet occupation and ensuing conflicts. A new highway connects Kabul with Kandahar, and in 2004 work began on a connector between Kandahar and Herat. Germany is financing a road connecting Jalalabad with the Pakistan border. India, Iran, and Pakistan are constructing roads connecting Afghanistan with their respective national road systems. Provincial roads, which also received heavy damage during conflicts of recent decades, generally have not been repaired since the end of hostilities. In 2003 only about 28,000 vehicles were licensed privately; the government’s goal was to increase that number to more than 100,000 by 2010. In 2002 some 33,500 taxicabs were in operation.

Railroads: In 2006 Afghanistan had no functioning railroads. For a variety of geopolitical and practical reasons, numerous plans for a trans-Afghan line failed to materialize in the nineteenth and twentieth centuries. Only five short domestic lines were built, including one line passing across the Friendship Bridge into Uzbekistan. Otherwise, lines built toward Afghanistan by surrounding countries stopped at the border. A 2002 plan would build a new line to link the major cities of Afghanistan with the Iranian port of Bandar-e Abbas and with Pakistan. However, in the early 2000s road building is a much higher priority of infrastructure restoration than is railroad building. Only US$100,000 of public transport funds for the period 2005–11 were earmarked for railroad construction. In 2006 plans called for five new freight dispatch stations along the borders to link domestic roads with railroad lines from neighboring countries.

Ports: Afghanistan is landlocked; the main ports along its chief waterway, the Amu Darya River, are Kheyrabad and Shir Khan.

Inland Waterways: The most important inland waterway is the Amu Darya River, whose 800 kilometers along Afghanistan’s border can accommodate vessels up to 500 deadweight tons.

Civil Aviation and Airports: In 2005 some 46 airports were in operation; 10 had paved runways, but only three had runways longer than 3,000 meters. Nine heliports also were in operation. In 2005 Kabul International Airport, the only destination for international flights into Afghanistan, was under renovation and did not have international certification. Connections to Kabul were made via Delhi, India; Islamabad, Pakistan; and Baku, Azerbaijan. Airports at Herat, Jalalabad, and Mazar-e Sharif also were renovated in the early 2000s. The military conflicts of 1979–2001 destroyed many of the aircraft of the national line, Ariana, and damaged most of the civilian airports. After a series of crashes in 1998–99, Ariana lost its international flight status; the airline regained approval for international flights in 2002. In 2004 Ariana began regular flights to Delhi, Dubai, Frankfurt, Islamabad, Istanbul, and Moscow. In 2003 the first private airline, Kam Air, began flights. However, in 2005 both Ariana and Kam were rated as having poor safety regulations. Beginning in 2002, Afghanistan has received substantial foreign assistance; India has trained flight staff and contributed three Airbuses.

Pipelines: In 2004 Afghanistan had 387 kilometers of natural gas pipelines.

Telecommunications: In 2004 Afghanistan had an estimated 50,000 main telephone lines and 600,000 cellular phones. In 2002–3 two foreign-owned mobile telephone companies began operations, bringing investment commitments of US$180 million and heralding a significant improvement in national telecommunications. Both cellular networks have been unreliable in their first years of operation, however. In the early 2000s, expansion occurred almost entirely in mobile phones; between 2002 and 2004, only 7,000 new landlines went into service. The number of Afghans with Internet access increased rapidly between 2000 and 2005, multiplying from an estimated 1,000 to 25,000. In 2004 public Internet facilities were available in Herat, Kabul, Kandahar, and Mazar-e Sharif. However, in 2005 Internet cafés in Kabul increasingly were targeted by terrorist attacks.

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