The World Bank in its latest “Afghan Development Update,” said that the Afghan economy continues to contract and face uncertainty and fragility after the Islamic Emirate's takeover.

According to the report, inflation declined sharply and, since April 2023, turned into deflation.

“The economy adapts to structurally lower aggregate demand, improved supply conditions, and a stronger AFN,” the report reads. “However, if deflation persists, the economy may face further deterioration.”

The World Bank noted that falling food prices have helped Afghan households, but poverty rates are still high.

“The crisis caused high unemployment, especially among youth and women,” it reads.

The report indicated the stability of the Afghani currency, saying that the currency appreciated despite a significant trade deficit caused by high imports in specific categories.

The World Bank reported that the Islamic Emirate heavily relies on border taxes due to underperforming inland revenue receipts, with operating expenditure replacing development expenditure.

It also warned that the financial sector faces liquidity and stability risks.