I II Monetary Policy Department Da Afghanistan Bank Ibn-e-Sina Watt Kabul Afghanistan Telephone: +93-20-2103932 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 on December 21st each year. This annual bulletin analyzes economic developments during the fiscal year 2017, which covers December 21st, 2016 to December 20th, 2017. III CONTENTS EXECUTIVE SUMMARY .............................................................................................................................. XII GLOBAL ECONOMIC ENVIRONMENT ..................................................................................................... 16 1.1.1The United States Economy .................................................................................................. 16 1.1.2 The Economy of United Kingdom ......................................................................................... 18 1.1.3 The Economy of Germany.................................................................................................... 20 1.1.4 The Economy of Japan ......................................................................................................................................23 II. EMERGING MARKET ECONOMIES............................................................................................................24 1.2.1The Economy of China ................................................................................................. 24 1.2.2 The Economy of India .......................................................................................................................................25 1.2.3The Economy of Turkey ............................................................................................... 26 MONETARY AND CAPITAL MARKET DEVELOPMENT.....................................................................32 I. MONETARY PROGRAM ..................................................................................................................... 32 II. MONETARY AGGREGATES ............................................................................................................. 34 III.NET INTERNATIONAL RESERVE (NIR) ........................................................................ 37 IV.FOREING EXCHANGE MARKET ................................................................................... 37 V. OPEN MARKET OPERATION & LIQUIDITY CONDITIONS ................................................. 38 2.5.1 Foreign Exchange Auction ......................................................................................................................... 38 2.5.2 Capital Notes Auction ..................................................................................................................................39 2.5.3 Required and Excess Reserves ................................................................................................................... 41 INFLATION TREND AND OUTLOOK....................................................................................................46 I. ANNUAL GDP OUTLOOK 2017 .................................................................................... 46 1.1 AGRICULTURE SECTOR ....................................................................................................................... 47 1.2 SERVICES SECTOR .................................................................................................................................48 1.3 INDUSTRY SECTOR ...............................................................................................................................50 II. INFLATION TREND AND OUTLOOK IN AFGHANISTAN ........................................................52 III. CONSUMER PRICES IN AFGHANISTAN .................................................................................... 53 3.1 Developments in National Headline Inflation .................................................................................... 53 3.1.1 Annual Developments in National Headline Inflation..........................................................................53 3.1.2 Quarterly Developments in National Headline Inflation ....................................................................57 3.2 Developments in Kabul Headline Inflation ...................................................................................58 3.2.1 Annual Developments in Kabul Headline Inflation ............................................................................58 3.2.2 Quarterly Developments in Kabul Headline Inflation .......................................................................59 EXTERNAL SECTOR DEVELOPMENT..................................................................................................ERROR! BOOKMARK NOT DEFINED. I. BALANCE OF PAYMENTS .................................................................................................................. 64 1.1 Current Account Balance ................................................................................................................................ 65 1.2 Capital Account .................................................................................................................................................. 65 1.3 Financial Account .............................................................................................................................................. 65 1.4 FDI and Portfolio Inflow ................................................................................................................................ 66 II. MERCHANDISE TRADE...................................................................................................................... 66 III.DIRECTION OF TRADE ................................................................................................. 68 IV.COMPOSITION OF TRADE ............................................................................................ 71 3.1 Composition of Imports ................................................................................................................................... 71 3.2 Composition of Exports ................................................................................................................................... 72 V. EXTERNAL DEBT ................................................................................................................................. 73 VI.NET INTERNATIONAL RESERVE ....................................................................................... 74 IV FISCAL DEVELOPMENTS.......................................................................................................................84 I. BUDGET EXECUTION RATE ........................................................................................................... 85 II. CORE BUDGET (DEFICIT AND SURPLUS) .................................................................................. 86 III.REVENUE COLLECTION ............................................................................................... 87 3.1 Domestic Revenue ............................................................................................................................................. 87 3.2 Non-tax Revenues ............................................................................................................................................. 88 IV.GRANTS ......................................................................................................................... 89 V. EXPENDITURE............................................................................................................................................89 BANKING SYSTEM PERFORMANCE ........................................................................................................ 94 I. ASSETS OF THE BANKING SYSTEM ............................................................................................. 95 1.1 Gross Loans ........................................................................................................................................................ 97 1.2 Loan Loss Reserves .......................................................................................................................................... 97 1.3 Distribution of Credit ....................................................................................................................................... 97 II. CLASSIFICATION OF LOANS .......................................................................................................... 100 2.1 Non-performing loans .................................................................................................................................... 100 2.2 Adversely-classified loans ............................................................................................................................. 101 2.3 Loans classified Watch .................................................................................................................................. 101 2.4 Loans classified loss ........................................................................................................................................ 101 2.5 Inter-bank Claims