In a headline that has stunned economists across South Asia, the Afghan Afghani (AFN) has now overtaken the Indian Rupee (INR) in exchange rate value. As of July 2025, 1 Afghan Afghani equals approximately ₹1.25, marking a historic and symbolic economic shift between the two neighboring countries.
This development raises major questions: How did Afghanistan—plagued by decades of conflict—achieve this monetary milestone? And what does it mean for India, one of the largest and fastest-growing economies in the world?
What Does 1 AFN = ₹1.25 Actually Mean?
As of late July 2025:
- 1 USD = 71.3 AFN
- 1 USD = 83.2 INR
By calculating the cross rate: 1 AFN ≈ ₹1.25. That means one unit of Afghan currency is now worth more than one Indian Rupee—something unprecedented in modern economic history.
How Did the Afghan Afghani Become Stronger?
Despite political instability and economic hardships, several key factors have supported the Afghani’s nominal strength:
- Strict Currency Controls: Citizens and businesses are forced to use AFN only, limiting demand for foreign currency.
- Surge in Foreign Aid: Aid in USD and Euros continues to enter Afghanistan via NGOs and UN agencies.
- Reduced Imports: Sanctions and internal policies have shrunk the demand for imported goods, saving foreign reserves.
- Informal Trade Networks: Cross-border trade with neighbors keeps local currency in circulation.
Why Is the Indian Rupee Falling Behind?
In contrast, the Indian Rupee has struggled due to several economic pressures:
- High Oil Imports: India imports over 80% of its oil, and rising prices increase the trade deficit.
- Capital Outflows: Global investors have pulled out funds, impacting forex reserves.
- Inflation: Core inflation and rising food prices have put the RBI in a tight spot.
- Policy Focus: India has chosen to prioritize inflation control and economic growth over defending the Rupee aggressively.
INR vs AFN: 20-Year Exchange Rate Timeline
Here’s a historical look at how the exchange rate evolved over the past two decades:
2005–2014
| Year | 1 INR = X AFN | Highlights |
|---|---|---|
| 2005 | 1.14 AFN | Reconstruction aid boosts Afghan economy |
| 2006 | 1.12 AFN | Indian GDP growth strengthens INR |
| 2007 | 1.10 AFN | IMF support stabilizes AFN |
| 2008 | 1.08 AFN | Global crisis impacts both currencies |
| 2009 | 1.09 AFN | INR rebounds post-recession |
| 2010 | 1.07 AFN | South Asian trade grows |
| 2011 | 1.06 AFN | U.S. presence peaks in Afghanistan |
| 2012 | 1.05 AFN | INR wavers, AFN stable |
| 2013 | 1.06 AFN | India faces fiscal pressure |
| 2014 | 1.07 AFN | Afghan elections, Indian reforms |
2015–2025
| Year | 1 INR = X AFN | Highlights |
|---|---|---|
| 2015 | 1.06 AFN | Status quo |
| 2016 | 1.05 AFN | AFN begins strengthening |
| 2017 | 1.04 AFN | Afghan conflict intensifies |
| 2018 | 1.03 AFN | INR stable |
| 2019 | 1.02 AFN | AFN slows |
| 2020 | 1.01 AFN | COVID-19 impacts trade |
| 2021 | 1.00 AFN | Taliban regains power |
| 2022 | 0.97 AFN | Kabul imposes capital controls |
| 2023 | 0.90 AFN | Global inflation pressures INR |
| 2024 | 0.86 AFN | AFN rises due to artificial demand |
| 2025 | 0.85 AFN | AFN = ₹1.25 – Historic reversal |
Is This Currency Strength Truly Sustainable?
Experts warn that the Afghani’s strength may be short-lived:
- Afghanistan’s GDP per capita remains among the lowest in Asia.
- The economy is aid-dependent with little industrialization.
- Currency controls are artificial and not viable long term.
So, while 1 AFN = ₹1.25 may look impressive, it doesn’t mean Afghanistan is economically ahead of India.
Impact on India-Afghanistan Trade and Relations
This currency shift affects both countries:
- Indian exports may become costlier in Afghan markets.
- Afghan goods like saffron and carpets may gain pricing advantage.
- Remittances, aid, and trade will require new currency strategies.
FAQs: 1 Afghani = ₹1.25 – What You Should Know
1. Is 1 Afghani really worth ₹1.25 now?
Yes, according to current exchange rates, it approximately equals ₹1.25.
2. Does this mean Afghanistan’s economy is stronger than India’s?
No. India’s economy is much more robust in terms of infrastructure, industries, and GDP.
3. Why did this reversal happen?
Due to strict currency controls, limited imports, and foreign aid flowing into Afghanistan.
4. Is this sustainable?
Experts believe the strength is temporary without reforms or investments.
5. What happens to Indian traders?
They may find Afghan markets less competitive due to costlier exports.
6. Could this be reversed?
Yes. India has the fundamentals to bounce back once inflation and deficits are addressed.
7. Is this the first time such a reversal happened?
Yes. This is the first known case of AFN overtaking INR in modern currency value.
8. Will it affect remittances or foreign aid?
Yes, NGOs and expats may need to adjust planning for currency conversion and value shifts.
9. Is Afghanistan manipulating its currency?
There’s no direct evidence, but currency controls artificially maintain strength.
10. Should India worry about its Rupee?
In the short term, yes—but long term stability is expected due to India’s economic resilience.
Conclusion
The fact that 1 Afghan Afghani equals ₹1.25 is symbolically significant, but not economically decisive. India remains a strong global player. Afghanistan’s gain is more a result of restrictive policies than sustainable growth.
This situation is a wake-up call for India to strengthen its forex strategies while Afghanistan must prove it can turn currency strength into economic substance.
Report by Toofan Express