International Journal of Management and Humanities (IJMH) ISSN: 2394-0913 (Online), Volume-5 Issue-2, October 2020 25 Retrieval Number:100.1/ijmh.B1153105220 DOI:10.35940/ijmh.B1153.105220 Journal Website: www.ijmh.org Published By: Blue Eyes Intelligence Engineering & Sciences Publication © Copyright: All rights reserved. Abstract: This study examined the economic development in Afghanistan in 2002-2019. Secondary data were used, which were collected and retrieved from annual reports of various public, non-government’s organizations and World Bank. Using descriptive statistics analysis, it was found that the overall economic situations and performances of the country aren’t in accordance with the expectations, poverty and unemployment rates are constantly increasing. Afghanistan had huge trade deficit in the study period, on average imports raised by 88.33 percent from US $3251 million in 2002 to US $7407 million in 2018. Furthermore, economic growth declined from 8.8 percent in 2003 to 1.0 percent in 2018. Real GDP per capita was only US $ 520.9 in 2018. Reduction in international aids, withdrawal of international forces, worsening security situations, political instability, high corruption, severe droughts, higher population growth rate than economic growth rate, weak investors’ confidence and lack of smooth political transition are the main reasons that have had adverse effects on Afghanistan’s economic growth. Keywords: Economic development, economic growth, GDP, imports & exports, Afghanistan I. INTRODUCTION Forty years of war and conflict had destroyed almost every infrastructure and institution in Afghanistan. Major sectors of the economy such as industry, agriculture and service had been mostly damaged during the wartime. In addition, majority of the countrymen were living below the poverty line. Financial and banking systems stopped functioning during the Taliban regime. International community had paid great attention to the reconstruction of fundamentals sectors in Afghanistan soon after 9/11 and the collapse of Taliban regime in the country. Establishing new constitution, liberalization of financial system and banking sector in 2002 encouraged and prompted all sectors in the country. The new constitution have laid the foundation for the market-based economy and allowed the government to replace closed and centralized economy on open and market-based economic system. According to the market-based economic system, the government plays a role as a regulator not a producer of goods with a clear separation between the public and private sectors. International community has been supporting public and private sectors’ development and economic growth in the country since 2001. However, no significant efforts have been made to either reinstate the past economic structure, or develop new ones Revised Manuscript Received on October 10, 2020. * Correspondence Author Rahmanullah Rasa*, PhD candidate at Shanghai University, Faculty at Shaikh Zayed University, Khost, Afghanistan. Email: Rahmanullah.rasa@szu.edu.af © The Authors. Published by Blue Eyes Intelligence Engineering and Sciences Publication (BEIESP). This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/) that could help to build a modern state and developed economy. Instead, energy was wasted on projects and activities in the name of privatization and the free market, which have brought more harm than benefit to the country and economy[37]. Furthermore, security and political instability severely harmed the economic development and have continually decreased investment and rapidity of economic development processes in Afghanistan. The collapse of Kabul Bank- the largest commercial bank in Afghanistan- in 2010 as a result of fraud, corruption and political instability imposed significant fiscal cost on the economy. The embezzlement of the bank was $ 987.7 million, which threatened the whole banking sector very badly and the trustworthiness of Afghans on banking sector gradually decreased[43]. Afghanistan economy has seen lots of ups and downs in the last two decades. The prolong war has severely depressed the economic activities until 2001. After the collapse of Taliban regime, when the recovery began, the economy rebounded strongly posting real Gross Domestic Products (GDP) growth rates of 8.8 percent in 2003 and 1.4 percent in 2004. Despite of a severe drought, which adversely effect on agriculture reduction, the overall real GDP growth rate was maintained at an impressive level of 11.2 percent in 2005. The economy lost momentum in 2006 with growth declining to 5.8 percent from 11.2 percent in 2005[12]. Insecurity has slowed down economic growth of the country in different periods. With the withdrawal of international security forces starting in 2011 and with the subsequent security and political transition in 2014, Afghanistan’s growth trajectory has declined significantly. Mean growth plummeted from an average annual rate of 9.4 percent in the period from 2003 to 2012 to 2.1 percent in the period from 2013 to 2016. In 2016, the growth rate increased to 2.2 percent,from 1.1 percentin 2015, principally due to the strong growth of the agriculture sector. The significant decline in growth since 2012 reflects the impact of reduced aid and weak investor’s confidence because of the increasing insecurity and continued political uncertainty[10]. After the political transition in 2014, the annual growth rate has slightly declined for the coming years. The annual growth rate in 2017 was 2.7 percent and 1.0 percent in 2018, the slowest since 2001[4]. However, it was forecasted 2.7 percent in 2019 and 3.4 percent in 2020[2]. International assistance and aid are the main drivers of this growth, which dropped from $ 6.5 billion in 2010 to $ 4.3 billion in 2015 and has continued to fall since then. There were two major reasons for the economic downturn of 2018. First, in late 2017 and early 2018, Afghanistan experienced the worst drought in decades, which has caused a sharp decline in agricultural and livestock productivity. Second, the business environment and investors’ confidence deteriorated due to intensifying violence and ongoing political uncertainty. Economic Development in Afghanistan Rahmanullah Rasa