"The cultivation, production, trafficking and consumption of illicit drugs flourish in Afghanistan," the report, which was released and submitted to the US Congress on Wednesday, said.
A symbiotic relationship exists between the insurgency in Afghanistan and organized narcotics trafficking, the State Department observed.
"2015 saw a resurgence of the security challenges seen in earlier periods of the insurgency, and the intensity of active battles undermined progress toward the Afghan government’s drug control goals," the report acknowledged.
The Taliban generates revenue by taxing drugs trafficked through areas they control, the State Department noted.
Afghanistan has one of the highest substance abuse rates in the world with an estimated 3 million people being addicted, or 11 percent of the population, it added.