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Vol. 3 No. 1 (2026): January

Copyright (c) 2026 Zahidullah Akhonzada

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Inflation in Afghanistan: The Role of Exchange Rates and Imports

https://doi.org/10.62810/jssh.v3i1.229
Zahidullah Akhonzada
Albukhary International University, School of Business and Social Sciences, Kedah, Malaysia

Corresponding Author(s) : Zahidullah Akhonzada

akhonzada.zahidullah@yahoo.com

Journal of Social Sciences and Humanities, Vol. 3 No. 1 (2026): January

Abstract

This study empirically investigates the extent to which exchange-rate fluctuations and import dynamics shape inflation in Afghanistan over 2000–2024, using annual macroeconomic indicators from the World Bank, Afghanistan National Statistics and Information Authority (NSIA), and the Asian Development Bank (ADB). While conventional exchange-rate pass-through (ERPT) theory predicts that currency depreciation should exert intense inflationary pressure in small, import-dependent economies, Afghanistan’s structural and institutional characteristics substantially weaken this mechanism. Applying descriptive statistics, Pearson correlations, and an Ordinary Least Squares (OLS) regression, the analysis finds no statistically significant impact of either the official exchange rate or import values on consumer price inflation. This reflects Afghanistan’s distinctive economic environment, characterized by pervasive dollarization, donor-driven foreign-exchange buffering, administrative price controls, and extensive informal trade—particularly hawala and sarafi networks—operating through parallel exchange rates and segmented markets. Such factors attenuate the transmission of external price shocks, resulting in muted ERPT. The findings indicate that inflation is driven predominantly by internal supply-side rigidities, market inefficiencies, and institutional frictions. Policy implications emphasize formalizing trade channels, strengthening domestic production, enhancing market integration, and strengthening coordinated policy efforts to achieve sustained price stability.

Keywords

Afghanistan Exchange Rate Pass Imports Inflation Macroeconomic Stability Price Dynamics
Akhonzada, Z. (2026). Inflation in Afghanistan: The Role of Exchange Rates and Imports. Journal of Social Sciences and Humanities, 3(1), 260–272. https://doi.org/10.62810/jssh.v3i1.229
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