Countries: Afghanistan, Iran (Islamic Republic of), Pakistan Source: World Food Programme Please refer to the attached file. KEY HIGHLIGHTSAfghanistan Economic Outlook: Afghanistan’s economy saw modest growth of 2.5% in 2024, driven by improvements in agriculture and industry. However, growth is expected to slow to 2.2% in 2025 due to ongoing structural challenges, including limited investment, restricted access to finance, declining foreign aid, high unemployment and continued international isolation. These factors continue to hinder sustained economic progress. The humanitarian situation remains fragile. According to the latest IPC analysis (March–April 2025), an estimated 12.6 million people (27% of the population) are in IPC Phase 3 and above. Projections for May–October indicate a slight improvement to 9.5 million (21%), mainly driven by improved harvest prospects. However, the upcoming projection period could see a renewed increase in acute food insecurity in the country due to the decline in humanitarian aid, particularly the continued pause in U.S. funding, alongside the influx of over 2.7 million returnees from Pakistan and Iran in 2025. This strain is further compounded by weak private sector activities, job losses from reduced foreign aid, increased demand for jobs by returnees and the dismissal of thousands of government positions by the DFA, resulting in high unemployment, lower incomes, and reduced purchasing power. Afghanistan remains at a fragile crossroad, where funding cuts, global pressures, and domestic vulnerabilities threaten to reverse recent growth and destabilize the already deprived food security situation. The World Bank warns that without major policy reforms or increased external support; economic growth will remain minimal, entrenching poverty and unemployment. Additionally, the IMF highlights slower regional recovery and "heightened uncertainty" due to trade frictions and sanctions. Inflation Rate: Afghanistan’s inflation rate declined steadily throughout the recent years reaching a low of -10.2% by January 2024. However, by April 2025, the overall inflation rate had risen slightly to 0.1%, indicating a modest upward trend. Food inflation followed a similar trajectory, increasing from - 15.1% in January 2024 to -0.7% in April 2025. Non-food inflation stood at 0.9%, primarily driven by a 9.3% increase in housing costs. Given Afghanistan’s heavy reliance on imported food items, the inflation rate remain vulnerable to exchange rate fluctuations, global market prices, and domestic economic and political conditions. Afghani Exchange Rate: As of May 2025, the national average exchange rate stood at AFN 69.8 per USD, marking a 2.7% appreciation compared to April 2025 and a 3% increase compared to May 2024. Despite recent fluctuations, the Afghani has shown resilience against USD, appreciating by 12% compared to the two-year average and 10% compared to May 2021 (preTaliban takeover). Nevertheless, political uncertainty and aid disruptions remain key risks to future stability. Global Price Trends: • Cereals: The FAO Cereal Price Index declined to 109 points in May 2025 (-1.8% MoM, -8.2% YoY), driven by lower wheat prices amid subdued global demand and improved crop conditions in key producing regions. • Vegetable Oils: The Vegetable Oil Price Index fell by 3.7% MoM but remained 19.1% higher YoY, with declines in palm, rapeseed, soy, and sunflower oil prices due to seasonal supply increases and weaker import demand. • Fertilizers: The World Bank Fertilizer Price Index rose to 133.2 in May 2025 (+3.1% MoM, +22.8% YoY), reflecting persistent supply constraints. DAP prices increased by 5.4% MoM (28% YoY), while Urea prices rose 1.3% MoM (38% YoY). Geopolitical factors, including China’s export restrictions and upcoming EU tariffs on Russian/Belarusian fertilizers, continue to drive price volatility in the global market. Food Basket Prices • WFP In-Kind Food Basket: The national average price in May 2025 was AFN 5,156, down 1.5% MoM and 1% YoY. Prices were highest in Nuristan (23% above average) and lowest in Takhar (15% below average). • FSAC Food Basket (CBT): The AFN price declined by 1.3% MoM and 2% YoY, meanwhile the USD price also saw a 2.7% MoM decrease. The current price is 7.3% lower than the last transfer value (TV) revision in May 2024 and does not trigger a revision.