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 each year. This bulletin analyzes economic developments during the third quarter of fiscal year 2019 (1398), which starts from June 22nd, 2019 to September 22nd, 2019. TABLE OF CONTENTS Contents EXECUTIVE SUMMARY .......................................................................................................................... V GLOBAL ECONOMIC ENVIRONMENT ................................................................................................. 17 1.1. ADVANCED ECONOMIES: .......................................................................................................... 17 1.1.1 United States’ Economy: ...................................................................................................... 17 1.1.2 The Economy of UK: ............................................................................................................. 18 1.1.4 Economy of Japan: ............................................................................................................... 20 1.2.1 Economy of China: ............................................................................................................... 21 1.2.2 Economy of Turkey: ............................................................................................................ 22 1.2.3. The Economy of India ......................................................................................................... 23 MONETARY AND CAPITAL MARKET DEVELOPMENT ....................................................................... 27 2.1. MONETARY PROGRAM ............................................................................................................. 27 2.2. MONETARY AGGREGATES........................................................................................................ 29 2.3. NET INTERNATIONAL RESERVE (NIR) ........................................................................................ 32 2.4. FROEIGN EXCHANGE MARKET ................................................................................................ 32 2.4.1. Foreign Exchange Rates .................................................................................................... 32 2.4.2. Foreign Exchange Auction ................................................................................................ 35 2.5. CAPITAL MARKET &LIQUIDITY CONDITIONS ......................................................................... 36 2.5.1. Capital Notes Auction ......................................................................................................... 36 2.5.2. Required and Excess Reserves .......................................................................................... 39 INFLATION TREND AND OUTLOOK .................................................................................................... 43 3.1. GLOBAL COMMODITY REVIEW ................................................................................................ 43 3.1.1. Executive Summary ............................................................................................................ 43 3.1.2. Recent Trends ..................................................................................................................... 43 3.2. CONSUMER PRICES IN AFGHANISTAN .................................................................................... 44 3.2.1. Developments in the National Headline Inflation (year-on-year changes) ................... 45 3.2.2. Developments in the National Headline Inflation (Quarter on Quarter Changes) ....... 45 3.2.3. Development in the Kabul Headline Inflation (year-on-year changes) ......................... 48 3.2.4. Development in the Kabul Headline Inflation (Quarter on Quarter Changes) ............. 49 3.3. AFGHANISTAN INFLATION OUTLOOK FOR THE END OF FY 2019 .......................................... 49 EXTERNAL SECTOR DEVELOPMEN ..................................................................................................... 55 4.1. SUMMARY ................................................................................................................................. 55 4.2. BALANCE OF PAYMENTS ......................................................................................................... 55 4.2.1. Current Account ................................................................................................................. 55 V 4.2.2. Capital Account .................................................................................................................. 56 4.2.3. Financial account ............................................................................................................... 56 4.3. MERCHANDISE TRADE ............................................................................................................. 58 4.4. DIRECTION OF TRADE .............................................................................................................. 59 4.4.1. Direction of Exports ........................................................................................................... 59 4.4.2. Direction of Imports .......................................................................................................... 60 4.5. COMPOSITION OF TRADE ....................................................................................................... 62 4.5.1. Composition of Imports ..................................................................................................... 62 4.5.2. Composition of Exports .................................................................................................... 63 4.6. EXTERNAL DEBT ....................................................................................................................... 64 4.7. NET INTERNATIONAL RESERVES ............................................................................................. 66 FISCAL SECTOR DEVELOPMENT ......................................................................................................... 73 5.1. BUDGET EXECUTION RATE ....................................................................................................... 74 5.2. CORE BUDGET (DEFICIT & SURPLUS) ...................................................................................... 75 5.3. TOTAL REVENUE: ...................................................................................................................... 76 5.3.1. Domestic Revenue: ............................................................................................................. 76 5.3.2. Non Tax Revenue ............................................................................................................... 77 5.3.3. Grants .................................................................................................................................. 78 5.4. EXPENDITURE ........................................................................................................................... 79 BANKING SYSTEM PERFORMANCE .................................................................................................... 83 6.1. ASSETS OF THE BANKING SYSTEM .......................................................................................... 84 6.1.1. Gross Loans ......................................................................................................................... 85 6.1.2. Interbank Claims ................................................................................................................ 90 6.1.3. Investment .......................................................................................................................... 90 6.1.4. Cash in Vault and Claims on DAB ...................................................................................... 91 6.2. LIABILITIES ................................................................................................................................ 91 6.2.1. Deposits .............................................................................................................................. 91 6.2.2. Borrowings ......................................................................................................................... 93 6.3. LIQUIDITY .................................................................................................................................. 93 6.3.1. Liquidity Ratio (broad measure) ....................................................................................... 94 6.4. CAPITAL ..................................................................................................................................... 94 6.5. PROFITABILITY .......................................................................................................................... 94 6.6. FOREIGN EXCHANGE RISK ....................................................................................................... 97 6.7. INTEREST RATE RISK ...............................................................................................................