Mass Afghan displacement poses economic shock, IMF urges joint action by region, world

Afghanistan’s displacement and migration tragedy, examined in a new IMF working paper prepared with support from the United Nations High Commissioner for Refugees, the World Bank, and regional policy institutes, has become one of the largest population movements in modern history. By 2023, the combined total of Afghan refugees, internally displaced persons, and emigrants exceeded 20 million, nearly half of the national population. No other country in the past five decades has generated so many waves of uprooted people, a grim distinction that highlights both the severity of Afghanistan’s turmoil and the difficulty of resolving it. The IMF’s analysis stresses that this crisis is no longer just humanitarian; it is also a regional macroeconomic shock with profound implications for Afghanistan and its neighbors, Iran and Pakistan.

Conflict, Collapse, and Climate Pressures

The report traces the Afghan exodus to four overlapping forces: violent conflict, political repression, economic collapse, and climate stress. Armed violence has been a driver for decades, but the Taliban’s return to power in August 2021 introduced new triggers. Their restrictions on women and girls, along with international non-recognition of their authority, led to a halt in development aid, frozen foreign reserves, and the severing of banking ties. Public spending dropped to half of 2020 levels, and the economy contracted by 27 percent across 2021 and 2022. Though a modest rebound of 2.3 percent came in 2023, output remains a quarter below pre-takeover levels. Compounding this are natural disasters: Afghanistan ranks as the world’s third most exposed country to climate change and faces some of the weakest coping capacity. Droughts, floods, and earthquakes have displaced millions, creating new waves of migrants on top of those fleeing war and repression.

Human Faces Behind the Numbers

The demographics of Afghan refugees underscore the human toll. Men once dominated refugee flows, but since 2021, women and children have fled in greater numbers, so that families now make up nearly half of those abroad. Seniors aged sixty and above have also risen sharply, further increasing the burden on health services in host countries. Education levels remain extremely low; more than half of refugees in Iran and Pakistan have no formal schooling, which confines them to precarious, low-paid jobs. In Iran, Afghan men often work in construction while women are concentrated in the food and garment industries. In Pakistan, garbage collection and agricultural labor dominate. This widespread reliance on informal jobs heightens exploitation risks and depresses productivity. Meanwhile, a parallel “brain drain” sees skilled professionals, students, and entrepreneurs departing in large numbers, leaving Afghanistan with a shrinking base of human capital.

Iran and Pakistan: Hosts Under Strain

Iran and Pakistan together host about 85 percent of displaced Afghans. In 2023, Iran sheltered 8.5 million and Pakistan 4.1 million, making Afghans the largest foreign community in either nation. The fiscal and social strains are immense. Iranian officials estimate that supporting Afghan refugees costs them more than $10 billion a year, roughly 2.5 percent of GDP, with hidden subsidies on energy and other public services adding to the bill. Pakistan faces smaller direct costs, but political backlash has been intense. In October 2023, Islamabad announced the forced repatriation of undocumented Afghans, a move that led to more than three million returns by the end of 2024. Iran has simultaneously stepped up deportations, citing security concerns and resource disputes. In total, 1.7 million Afghans returned in 2023, 1.6 million in 2024, and another 1.3 million in just the first half of 2025. For Afghanistan, already facing economic freefall, the arrival of destitute returnees has further strained food supplies, services, and employment opportunities.

Searching for a Way Forward

To examine possible futures, the IMF used its Flexible System of Global Models to simulate four scenarios. Faster forced repatriation, the first scenario, modestly relieves Iran and Pakistan through higher wages and lower fiscal costs but worsens Afghanistan’s plight, reducing GDP per capita as returnees swell the ranks of jobless IDPs and remittances shrink. The second scenario, involving reforms inside Afghanistan to reduce displacement and integrate IDPs, delivers striking benefits: by 2030, GDP grows by over 7 percent, employment jumps by 8 percent, and debt ratios fall. The third scenario envisions Iran and Pakistan easing restrictions to integrate Afghan refugees into their labor markets. This brings better outcomes for refugees and higher remittances for Afghanistan, but reduces wages and per capita incomes in host countries while raising their debts. The final and most ambitious scenario combines reforms in Afghanistan with integration measures in Iran and Pakistan. This produces broad-based gains; Afghanistan sees higher incomes and lower displacement, while host nations enjoy stronger output, but it also carries fiscal costs. The IMF estimates that Iran and Pakistan would need $5 billion in international support by 2030 to keep debt burdens stable.

Unilateral approaches, whether mass deportations or piecemeal reforms, are insufficient and may even prove counterproductive. Durable solutions require simultaneous actions on both sides of the border. Afghanistan must implement reforms that respect rights, support women and girls, and stabilize its economy, while Iran and Pakistan need to open labor markets and social services to Afghans in a sustainable way. Crucially, international support must go beyond short-term humanitarian relief to include development finance that addresses the structural roots of displacement. Without such a coordinated strategy, Afghanistan risks deeper poverty and instability, while Iran and Pakistan will remain locked in cycles of inflows and costly expulsions. With it, however, the region has a chance to turn crisis into cooperation, building resilience in one of the world’s most fragile theaters.