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 1397 (2012). The new fiscal year begins from first of Jadi (December 22nd) each year. This bulletin analyzes economic developments from for FY 2019 (from Jadi, 1397 till Qaws, 1398. TABLE OF CONTENTS Contents EXECUTIVE SUMMARY ....................................................................................................................... XIII 1 - GLOBAL ECONOMIC ENVIRONMENT ............................................................................................. 17 1.1. ADVANCED ECONOMIES: ....................................................................................................... 17 1.1.1 United States’ Economy: ...................................................................................................... 17 1.1.2 The Economy of UK: ............................................................................................................ 19 1.1.3 Economy of Germany: ......................................................................................................... 19 1.1.4 Economy of Japan: .............................................................................................................. 20 1.2 EMERGING ECONOMIES: ........................................................................................................... 21 1.2.1 Economy of China: ............................................................................................................... 21 1.2.2 Economy of Turkey: ............................................................................................................ 21 1.2.3. The Economy of India ........................................................................................................ 22 2 - MONETARY AND CAPITAL MARKET DEVELOPMENT ................................................................... 25 2.1. MONETARY PROGRAM ............................................................................................................. 25 2.2. MONETARY AGGREGATES........................................................................................................ 27 2.3. NET INTERNATIONAL RESERVE (NIR) ..................................................................................... 30 2.4. FROEIGN EXCHANGE MARKET ................................................................................................ 30 2.4.1. Foreign Exchange Rates .................................................................................................... 30 2.4.2. Foreign Exchange Auction ................................................................................................ 33 2.5. CAPITAL MARKET &LIQUIDITY CONDITIONS ......................................................................... 34 2.5.1. Capital Notes Auction ........................................................................................................ 34 2.5.2. Required and Excess Reserves .......................................................................................... 37 3 - INFLATION TREND AND OUTLOOK ................................................................................................ 41 3.1. GLOBAL ...................................................................................................................................... 41 3.2. CONSUMER PRICES IN AFGHANISTAN ...................................................................................... 41 3.2.1. Developments in the National Headline Inflation (year-on-year changes) ..................... 42 3.2.2. Developments in the National Headline (Quarter-on-Quarter Changes) ....................... 43 3.2.3. Development in the Kabul Headline Inflation (year-on-year changes) ......................... 45 3.2.4. Development in the Kabul Headline Inflation (Quarter on Quarter Changes) ............. 45 4 - EXTERNAL SECTOR DEVELOPMEN ................................................................................................ 51 SUMMARY ........................................................................................................................................ 51 4.1. BALANCE OF PAYMENTS .......................................................................................................... 51 4.1.1. Current Account.................................................................................................................. 51 4.1.2. Capital Account .................................................................................................................. 52 V 4.1.3. Financial account ................................................................................................................ 53 4.2. MERCHANDISE TRADE ............................................................................................................. 54 4.3. DIRECTION OF TRADE .............................................................................................................. 55 4.3.1. Direction of Exports ........................................................................................................... 55 4.3.2. Direction of Imports .......................................................................................................... 57 4.4. COMPOSITION OF TRADE ....................................................................................................... 58 4.4.1. Composition of Imports .................................................................................................... 58 4.4.2. Composition of Exports .................................................................................................... 60 4.5. EXTERNAL DEBT ....................................................................................................................... 61 4.6. NET INTERNATIONAL RESERVES ............................................................................................. 63 5 - FISCAL SECTOR DEVELOPMENT .................................................................................................... 71 5.1. BUDGET EXECUTION RATE ....................................................................................................... 72 5.2. CORE BUDGET (DEFICIT & SURPLUS) ...................................................................................... 73 5.3. TOTAL REVENUE: ...................................................................................................................... 73 5.3.1. Domestic Revenue: ............................................................................................................. 74 5.3.2. Grants ................................................................................................................................. 76 5.4. EXPENDITURE ........................................................................................................................... 78 6 - BANKING SYSTEM PERFORMANCE ............................................................................................... 81 6.1. ASSETS OF THE BANKING SYSTEM .......................................................................................... 81 6.1.1. Gross Loans ......................................................................................................................... 83 6.1.2. Interbank Claims ................................................................................................................ 87 6.1.3. Investment .......................................................................................................................... 87 6.1.4. Cash in Vault and Claims on DAB ...................................................................................... 87 6.2. LIABILITIES ................................................................................................................................ 88 6.2.1. Deposits .............................................................................................................................. 88 6.2.2. Borrowings ........................................................................................................................ 90 6.3. LIQUIDITY .................................................................................................................................. 90 6.3.1. Liquidity Ratio (broad measure) ....................................................................................... 90 6.4. CAPITAL ..................................................................................................................................... 90 6.5. PROFITABILITY .......................................................................................................................... 91 6.6. FOREIGN EXCHANGE RISK ....................................................................................................... 93 6.7. INTEREST RATE RISK ................................................................................................................ 93 6.8. ISLAMIC BANKING PERFORMANCE ........................................................................................ 93 Summary .....................................................................................................................................