Public expenditure foreign trade and economic growth of Afghanistan

Afghanistan is considered to be the least developed and sluggish economy in Asia However, according to the Ministry of Finance (2019) announced the significant increase in economic growth but still there are many areas need to improve, for instance, the per capita income is meager, safety is lacking and education is not good. Afghanistan's exports and natural currency reserves are declining despite having many mineral assets, moreover the economy of developing countries' are heavily rely on the presence of small and medium-size enterprises (SMEs). In Afghanistan, SMEs contribute to over fifty percent of the country's GDP and employ over one-third of its labor force. Despite their positive impact they are still facing tough challenges due to the rapid emergence and evolution of new technologies and the globalization of their operations, therefore, to fill this gap, this study aims to comprehensively analyze the relationship between Afghanistan's public expenditures, foreign trade and economic growth from 2008 to 2020 and the biggest obstacles that affect the performance of SMEs in the country. The time-series data was collected from various sources such as World Development Indicator Ministry of Finance, National Statistics Information and World Bank Enterprises. It used different statistical methods including descriptive statistics and correlation technique. Based on the results of theoretical, descriptive and co-relational analysis indicates a statistically significant positive relationship between economic growth and government expenditures and significant negative relationship between foreign trade and economic growth, and identified the operation of SMEs that has been hampered by the biggest obstacles such as political instability, lack of access to capital, weak infrastructures, and unfair competition. Furthermore, study finding indicates the key factors that can improve economic growth and the performance of SMEs. The government should undertake specific measures to stabilize the exchange rate, reduce the import and export gap, adopt precise and accurate control of its spending, effective policies, a favorable business environment, and access to capital and other financial resources, reduce corruption and mismanagement. It can help to improve Afghanistan's economy and competitiveness of SMEs. Keywords: Foreign trade, public expenditure, economic growth, enterprises.