The World Bank reported Monday that the economic recovery in Taliban-controlled Afghanistan remains precarious, beset by persistent challenges, including policy uncertainty, financial isolation, reduced foreign aid and fragile trade relations with neighboring Pakistan.

The bank assessed in its latest report that persistent high poverty levels, unemployment, limited resources, and weak purchasing power continue to leave millions of Afghans vulnerable in a country reeling from years of conflict and natural disasters.

The World Bank report revealed that Afghanistans trade deficit surged by 54% in 2024, reaching $9 billion, which represents 45% of the countrys gross domestic product (GDP). The report attributes this decline to a 5% drop in exports, totaling $1.8 billion, primarily due to a reduction in coal and textile exports.

In August 2021, the Islamist Taliban regained control of Afghanistan following the withdrawal of all U.S.-led Western forces from the country, marking the end of nearly two decades of foreign presence.

The Taliban takeover led to the suspension of international aid and the imposition of sanctions on the financial and banking sectors. These measures were implemented in response to terrorism concerns, as key Taliban leaders were designated as global terrorists by the United Nations for directing years of insurgent attacks on U.S.-led foreign troops.

Coal exports saw the steepest decline, plunging 64 percent to USD 92 million as Pakistan shifted to its traditional suppliers, stated the World Bank.

The report highlighted an 11.5% increase in Afghan revenue collection, primarily driven by non-tax revenue and taxes levied at the countrys borders.

Revenue collection remained strong in the first ten months of FY2024-25 (March 22, 2024 January 21, 2025), totaling AFN 190.5 billion ($2.5 billion), or 12 percent of annual GDP, stated the report.

The local currency, the Afghani (AFN), continued its depreciation trajectory for the third consecutive month, falling 12% from November 2024 to January 2025.

The report explained that the central Afghan bank suspended U.S. dollar auctions from Sept. 4 to Dec. 9, contributing to the depreciation of the local currency. The auctions resumed in January 2025, with the bank injecting more than $100 million.

The World Bank noted that Afghanistan, a landlocked nation, is compelled to diversify its export markets due to its precarious trade relations with Pakistan. Consequently, Iran, Kazakhstan and Uzbekistan each account for approximately 3% of the overall volume of Afghan exports.

However, Pakistan remains the largest export destination, accounting for 45%, followed by India at 34%, the report stated.

Afghanistan relies on Pakistani overland routes and seaports for bilateral and international trade.

Allegations that militants on Afghan soil are responsible for the rise in terrorist attacks in Pakistan since the Taliban regained control of Afghanistan have strained ties, affecting economic cooperation between the countries.

Pakistani officials have also complained that the Taliban have imposed high taxes and duties on bilateral trade, demanding significantly higher coal prices than international rates, resulting in a decline in mutual trade.

Furthermore, Islamabad asserts that de facto Afghan authorities are delaying the signing of trade-related agreements, thereby hindering the advancement of bilateral economic cooperation.

No countries have recognized the Taliban as a legitimate government of Afghanistan, primarily due to restrictions on freedom of speech and female rights to education and employment.

The Taliban attribute the difficulties in achieving economic recovery in the country to Western financial sanctions and the freezing of more than $9 billion in Afghan central bank assets held in the United States and other Western nations.