Monetary Policy Department Da Afghanistan Bank Ibn-e-Sina Watt Kabul Afghanistan Telephone: +93(0)-20-2103930 Internet: www.dab.gov.af Email: [email protected] All Rights Reserved Rights and Permissions The material in this publication is copyrighted, but may be freely quoted and reprinted. Acknowledgement is requested together with a copy of the publication. Note: Afghanistan’s fiscal year has changed effective from 2012 (1391). The new fiscal year begins from December 22nd. This bulletin analyzes economic developments during the third quarter of fiscal year 1399, which starts from June 21st, 2020 to September 21st, 2020 (Jadi 01, 1399 – Saratan 31, 1399). TABLE OFCONTENTS Contents EXECUTIVE SUMMARY ....................................................................................................................... XIII 1 - GLOBAL ECONOMIC ENVIRONMENT ............................................................................................. 17 1.1. Advanced Economies: ................................................................................................................ 18 1.1.1 United States’ Economy: ...................................................................................................... 18 1.1.2 The Economy of UK: ............................................................................................................. 19 1.1.3 Economy of Japan: ............................................................................................................... 20 1.2. Emerging Economies: ............................................................................................................... 21 1.2.1. China: ................................................................................................................................... 21 1.2.2. The Economy of Turkey: .................................................................................................... 22 1.2.3. The Economy of India: ........................................................................................................ 24 2 - MONETARY AND CAPITAL MARKET DEVELOPMENT ................................................................... 29 2.1. Monetary Program: ................................................................................................................... 29 2.2. Monetary Aggregates: ............................................................................................................. 31 2.3. Net International Reserve (NIR): ............................................................................................. 34 2.4. Foreign Exchange Market ........................................................................................................ 34 2.4.1. Foreign Exchange Rates .................................................................................................... 34 2.4.2. Foreign Exchange Auction ................................................................................................ 37 2.5. Capital Market &Liquidity Conditions ..................................................................................... 38 2.5.1. Capital Notes Auction ......................................................................................................... 38 2.5.2. Required and Excess Reserves .......................................................................................... 41 3 - INFLAITON TREND AND OUTLOOK ................................................................................................ 45 3.1. Global Commodity Review ....................................................................................................... 45 3.1.1. Executive Summary ............................................................................................................ 45 3.1.2. Recent Trends ..................................................................................................................... 45 3.2. Consumer Prices in Afghanistan .............................................................................................. 46 3.2.1. Developments in the National Headline Inflation (year-on-year changes) ................... 46 3.2.2. Developments in the National Headline Inflation (Quarter on Quarter Changes) ....... 47 3.2.3. Development in the Kabul Headline Inflation (year-on-year changes) ......................... 50 3.2.4. Development in the Kabul Headline Inflation (Quarter on Quarter Changes) ............. 50 3.3. Afghanistan Inflation Outlook for The End of FY 1399 .......................................................... 51 4 - EXTERNAL SECTOR DEVELOPMEN ................................................................................................ 57 4.1. Summary: ................................................................................................................................... 57 4.2. Balance of Payments: ............................................................................................................... 57 V 4.2.1. Current Account: ................................................................................................................ 57 4.2.2. Capital Account: ................................................................................................................. 58 4.2.3. Financial account: .............................................................................................................. 58 4.3. Developments in Merchandise Trade: .................................................................................... 60 4.3.1. Exports: ............................................................................................................................... 60 4.3.2. Imports: .............................................................................................................................. 60 4.4. Direction of Trade: ................................................................................................................... 61 4.4.1. Direction of Exports: .......................................................................................................... 61 4.4.2. Direction of Imports: ......................................................................................................... 62 4.5. Composition of Trade: ............................................................................................................. 64 4.5.1. Commodity Composition of Exports: ............................................................................... 64 4.5.2. Composition of Imports: ................................................................................................... 65 4.6. External Debt: ........................................................................................................................... 66 4.7. Net International Reserves: ..................................................................................................... 67 5 - FISCAL SECTOR DEVELOPMENT .................................................................................................... 75 5.1. Budget Execution Rate: ............................................................................................................ 76 5.2. Core Budget (Deficit & Surplus): ............................................................................................. 77 5.3. Total Revenue: .......................................................................................................................... 78 5.3.1. Domestic Revenue: ............................................................................................................. 79 5.3.2. Grants and Loans: ............................................................................................................... 80 5.4. Expenditure: .............................................................................................................................. 82 6 - BANKING SYSTEM PERFORMANCE ............................................................................................... 87 6.1. Assets of The Banking System: ................................................................................................ 88 6.1.1. Gross Loans: ........................................................................................................................ 89 6.1.2. Interbank Claims: ............................................................................................................... 93 6.1.3. Investment: ......................................................................................................................... 94 6.1.4. Cash in Vault and Claims on DAB: ..................................................................................... 94 6.2. Liabilities: .................................................................................................................................. 94 6.2.1. Deposits: ............................................................................................................................. 95 6.2.2. Borrowings: ....................................................................................................................... 96 6.3. Liquidity: ................................................................................................................................... 97 6.3.1. Liquidity Ratio (broad measure): ...................................................................................... 97 6.4. Capital: .....................................................................................................................................