Afghanistan Trade Profile
Table of Contents
Overview
The Islamic Emirate of Afghanistan (previously known as the Islamic Republic of Afghanistan) is situated in the heart of south-central Asia, completely landlocked by 6 countries. With a population of roughly 41.7 million in the year 2021, the country’s GDP per capita stands at $553.
The economy has seen substantial growth from 2001 after recuperating from decades of conflict. Afghanistan designates 7.8 million hectares of land for agricultural purposes. The country’s top exports are gold, grapes, insect resins, nuts, and tropical fruits. The latter range from pomegranates, fresh and dries grapes and figs, liquorice sap and extract, to sweet melons and mulberries. Cotton, natural gums, carpets of wool and fine animal hair are examples of Afghanistan’s potential exports.
In 2019, Afghanistan exported a total of $2.24 billion, ranking 138th worldwide. Afghanistan’s top 5 export and import countries of 2019 are presented in Figures 1.1 and 1.2 below respectively.
| Figure 1.1 - Exports | |
|---|---|
| United Arab Emirates | $1,000,000,000 |
| Pakistan | $544,000,000 |
| India | $485,000,000 |
| United States | $35,600,000 |
| China | $29,100,000 |
| Figure 1.2 - Imports | |
|---|---|
| United Arab Emirates | $1,620,000,000 |
| Pakistan | $1,180,000,000 |
| India | $891,000,000 |
| China | $600,000,000 |
| United States | $596,000,000 |
Pakistan - Afghanistan Trade Profile
Pakistan’s Exports to Afghanistan
In 2019, Afghanistan received imports worth $1.18 billion from Pakistan which mainly consisted of raw building materials – stone, plaster, cement – ($180 million), milling products – including starch and wheat gluten – ($155.5 million), sugars and sugar confectionary ($148 million), and cereals ($114.8 million). The country imported 43.5% of intermediate goods, with vegetables being the second-highest fraction of imports at 35.18%, consumer goods at 23.10%, food products at 17.36%, stone and glass at 16.67%, raw materials at 8.69%, and chemicals at 8.09%. Wood, textiles and clothing, animal, footwear, metals, capital goods, mach and elec, plastic or rubber, hides and skin, transportation, minerals, and fuels totaled at a collective 24.87%.
As per the United Nations COMTRADE database on international trade, Afghanistan’s imports from Pakistan fell to $870 million in 2020. The top products imported from Pakistan in 2020 are presented in Figure 2.1 below.
| Figure 2.1 | |
|---|---|
| Cereals | $146.51M |
| Edible fruits, nuts, peel of citric fruit, melons | $86.92M |
| Pharmaceutical products | $73.84M |
| Salt, sulphur, earth, stone, plaster, lime and cement | $73.80M |
| Animal, vegetable fats and oils, cleavage products | $43.13M |
| Edible vegetables and certain roots and tubers | $38.34M |
| Wood and articles of wood, wood charcoal | $32.85M |
| Plastics | $32.37M |
| Iron and steel | $28.51M |
| Sugars and sugar confectionery | $24.72M |
Pakistan’s Imports from Afghanistan
In 2019, Afghanistan exported $544 million to Pakistan, which mainly consisted of grapes ($80.6 million), coal briquettes ($78.1 million), and dried legumes ($74.6 million). The country imported 78.84% of raw materials ($235 million), with vegetables ($162 million) coming second at 54.40%, fuels ($69.5 million) at 23.28%, textiles and clothing ($40.7 million) at 13.63%, and intermediate and consumer goods at 10.89% and 7.58% respectively. Other exports to Pakistan include minerals at 6.06% and hides and skins at 1.86%.
As per the United Nations COMTRADE database on international trade, Afghanistan’s exports to Pakistan fell to $298.64 million in 2020. The top products exported by Afghanistan to Pakistan in 2020 are presented in Figure 2.2 below.
| Figure 2.2 | |
|---|---|
| Edible fruits, nuts, peel of citric fruit, melons | $81.97M |
| Mineral fuels, oils, distillation products | $69.51M |
| Edible vegetables and certain roots and tubers | $61.11M |
| Cotton | $23.59M |
| Salt, sulphur, earth, stone, plaster, line and cement | $18.08M |
| Carpets and other textile floor coverings | $16.99M |
| Oil seed, oleagic fruits, grain, seed, fruits | $8.74M |
| Cereals | $6.34M |
| Raw hides and skins (other than furskins) and leather | $5.56M |
Increasing Exports to Afghanistan
Pakistan would benefit greatly by increasing exports of wheat and rice, cement and plaster, sugar, and petroleum products to Afghanistan. Additionally, Pakistan has promising potential for exporting medium oils and preparations of petroleum, wheat and meslin, Portland cement, textile materials, and blankets. While telephones or parts of telephone sets for cellular networks, and parts of aircraft and spacecraft are still not being exported to Afghanistan, their market can be developed.
As per the United Nations COMTRADE database on international trade, Afghanistan’s exports to Pakistan fell to $298.64 million in 2020. The top products exported by Afghanistan to Pakistan in 2020 are presented in Figure 2.2 below.
Trade Framework between Afghanistan and Pakistan
Bilateral Agreements
Bilateral relations have been established between Afghanistan and Pakistan through agreements and memoranda of understanding (MoUs) which have been provided in the table below.
| Sr. | Name of Agreement/MoU | Description | Date |
|---|---|---|---|
| 01. | Pakistan – Afghanistan Agreement Relating to Air Service | 1957 | |
| 02. | Pakistan – Afghanistan Agreement on Regulation of Traffic | 1958 | |
| 03. | Pakistan – Afghanistan Agreement on Re-establishment of Embassies and Consulates | 1963 | |
| 04. | Agreement for Regulation of Traffic in Transit | This agreement was drafted to solidify relations and improve the flow of goods passing through the Afghanistan and Pakistan, giving special consideration to trade development. | 1965 |
| 05. | Pakistan – Afghanistan Agreement for the Operation of Chaman-Spin Boldak Railways | To boost cooperation and deepen trade operations between Afghanistan and Pakistan, the agreement set out commitments regarding railways. | 1966 |
| 06. | Pakistan – Afghanistan Agreement for Commencement of Bus Service between Peshawar and Jalalabad | The agreement was reached to solidify ties between Afghanistan and Pakistan, and increase the movement of people and goods. | 2005 |
| 07. | Pakistan – Afghanistan Agreement for Commencement of Bus Service between Quetta and Kandahar | Afghanistan and Pakistan reached an agreement to tighten relations ties, trade, development, and increase the movement of people and goods. | 2005 |
| 08. | Agreement on Cooperation in the Field of Tourism between Pakistan and Afghanistan | The aim of this agreement was to provide a platform for greater integration between the countries in terms of tourism. | 2005 |
| 09. | Agreement on Cultural Cooperation between Pakistan and Afghanistan | The agreement served as a reminder that both countries have diverse cultures and cooperation would enhance cultural relations. | 2005 |
| 10. | Pakistan – Afghanistan Agreement on Media Cooperation | 2005 | |
| 11. | Memorandum of Understanding on Promotion of Investment between Afghanistan Investment Support Agency and Board of Investment of Pakistan | To magnify the economic and financial relations between the countries, Pakistan and Afghanistan entered a memorandum of understanding and promoted greater promotions. | NA |
| 12. | Tripartite Agreement for Voluntary Repatriation of Afghan Refugees Agreement among Pakistan-Afghanistan-UNHCR | The agreement aimed to facilitate and aid the voluntary repatriation of refugees in Afghanistan. It strengthened political and social relations between Pakistan and Afghanistan greatly. | 2007 |
| 13. | Afghanistan Pakistan Transit Trade Agreement | The agreement was set to strengthen economic relations and ensure the smooth movement of goods and vehicles between the two countries. | 2010 |
| 14. | Deed of Understanding Educational and Scientific Cooperation between the Ministry of Higher Education Afghanistan and Higher Education Commission Pakistan | The main objective of this deed of understanding was to enhance and augment education and scientific cooperation in Afghanistan and Pakistan. | 2017 |
Regional Agreements
| ECO Transit Transport Framework Agreement 2013 | In 1985, the Economic Cooperation Organization (ECO) was established to promote economic, technical and cultural cooperation amongst countries. In 2013, it enacted the ECO Transit Transport Framework Agreement to which Pakistan and Afghanistan are both signatories. The agreement aims to promote regional integration and augment cooperation between the two states by enhancing connectivity, trade, energy, tourism, investment, industry, economic growth and productivity, social welfare and environment. It also prioritises the furtherance of education and scientific linkages, cultural and people-to-people contacts within ambit of the ECO. |
| Charter of the Shanghai Cooperation Organization (SCO) – Preamble | Formed in 2001, the SCO is an intergovernmental organization with Pakistan as a signatory. Afghanistan, however, is only an observer state (those states interested in acceding as a member). If Afghanistan ratifies the full membership, cooperation between the two nations would increase in terms of developing trade and economic linkages. With the advantage of their geographical proximity, elimination of trade barriers, simplified customs procedures, and boosted investment under the purview of the agreement, Pakistan-Afghanistan relations would thrive. |
| South Asian Association for Regional Cooperation (SAARC) | Established in 1985, SAARC caters to economic and political cooperation between parties with aim of promoting social progress and cultural development. The regional organization through its charter and declaration provides a platform for economic integration through the cultivation of trade, education, science and technology. |
Recent Developments and Strategic Commitments
The Afghanistan Transit Trade Agreement of 1965 which granted Afghanistan access to open seas via Pakistan was replaced with the Afghanistan-Pakistan Transit Trade Agreement 2010 (APTTA), a more complex agreement than its predecessor, which aims to grant Afghanistan greater access to Pakistan’s ports and identifies new transit corridors.
The amendment was required after the signing of the United Nations Convention on the Law of the Sea due to its limitations. APPTA introduced a provision to reduce illicit trading which conforms with the Revised Kyoto Convention, ratified in 2006.
The routes identified included:
- Karachi – Peshawar – Torkham
- Karachi – Chaman – Spin Boldak
- Port Qasim was included subsequently in 1998.
Pakistan Railways was the authorized carrier however due to limited availability, transportation was allowed through National Logistics Cell trucks, authorizing 80% of goods to be transported by private trucks. Pakistan remains committed to the United Nations Millennium Development Goals which require member countries to facilitate the transit of landlocked countries like Afghanistan.
Pakistan aimed to increase its influence in Afghanistan in order to facilitate commerce with Central Asian Republics (CARs). Afghanistan would be able to export its products to Pakistan and India under the bilateral agreement, and Pakistan will be able to trade with CARs via the Afghan territory.
In August 2021, the Secretary of the Pakistan Ministry of Commerce said that the system constructed under APPTA was “working well at the moment” as trade continues between Pakistan and Afghanistan. Although the Taliban takeover on the 15th of August 2021 created a dip in economic ties between the two countries, trade is now being resumed at a steady pace as per Pakistan Customs.
Key Institutions
The financial institutions mutually affiliated with Afghanistan and Pakistan are as follows:
- International Monetary Fund (IMF)
- World Bank
- Central Asia Regional Economic Cooperation (CAREC) Program
The Central Asia Regional Economic Cooperation (CAREC) Program is a partnership of 11 countries and development partners, including Pakistan and Afghanistan, working together to promote development through cooperation, leading to accelerated economic growth and poverty reduction. The program may serve as a proactive facilitator of practical, results-based regional projects, and policy initiatives critical to sustainable economic growth and shared prosperity between the regions, by helping establish multimodal transportation networks, increasing energy trade and security, facilitating free movement of people and freight, and laying the groundwork for economic corridor development.
- Islamic Development Bank (IsDB)
- Asian Development Bank
- International Fund for Agricultural Development (IFAD)