Outside the iron gates of the Iranian embassy, braced against the winter sleet in woollen caps and ankle-length chupans, hundreds of Afghan men roll out blankets and kneel towards Mecca. At each bow the men's noses merge with the slushy grey mixture of mud, snow and sewage that covers the rutted pavements and roads of Kabul. Their prayers are for a new life elsewhere and food for their starving families - they are queueing in the dawn's half light to leave Afghanistan.

'I wish I hadn't come back home from Iran after the Taliban left. I had a better life there, I had occasional work at least, so I am going back.' Zahair Mohammad stands in the line trying, with hundreds of others, to get an Iranian visa. 'I was thinking positively for a long time about rebuilding a life here in Kabul, where I was born, but I was wrong, very wrong. It's time to go. I need to work abroad, like most, as a cheap labourer and send money home. What we're hearing on the radio about a new Afghanistan is nothing but a dream.' He gestures at the kilometre-long queue. 'I was a refugee before and now I'm choosing to become one again. I'm not alone.'

Five years after the Taliban were deposed by a US-led military alliance, Afghanistan remains entrenched in poverty. Intense frustration with the government, particularly among refugees who returned amid promises of change, is growing. The Observer has learnt that such is the demand among ordinary Afghans to leave that this weekend the Interior Ministry has run out of the basic materials to make passports.

According to human rights watchdogs, the huge increase in economic migrants exposes the shortcomings of Western-led reconstruction, estimated to have cost $8bn (£4.5bn) so far, failures which are disturbingly apparent in the overflowing slums of the capital, Kabul. Hundreds of thousands may have returned from Pakistan and Iran, swelling the city's population to more than two million, but with local unemployment running at 70 per cent there is simply no future for them.

A United Nations report concluded last year that Afghanistan remains one of the world's least developed countries, ranking 173rd out of 178 countries surveyed. For every 1,000 babies born in Afghanistan, 142 die before their first birthday. An Afghan woman dies in pregnancy every half-hour. Overall life expectancy is estimated at just under 42 years. Three-quarters of adults are illiterate and few girls go to school. But no problem haunts the country more than its displaced peoples - the UN estimates four million Afghans are refugees in Pakistan and Iran, and another two million are uprooted in their own country. The total, a fifth of the population, represents the largest refugee crisis in the world.

'Refugees who returned to Afghanistan after the Taliban have become fed up with promises and not seeing much improvement practically,' said Wadir Safi, a law professor at Kabul University. 'Millions returned hoping some brave new world awaited them, but found no work, no housing and no hope. The billions of dollars' worth of aid apparently given to date has made little difference to the lives of ordinary Afghans. Now the men have no option but to leave again, in order to support their families, who must remain behind. They may not be fleeing persecution this time, but they are escaping unimaginable poverty and can no longer sit by as their families starve.'

Last week, following a crisis conference in London, international donors, led by the US and the UK, pledged more than £5.9bn to Afghanistan in a wide-ranging reconstruction programme known as the Afghan Compact. President Hamid Karzai claimed much progress had been made and the money would ensure it continues. US Secretary of State Condoleezza Rice said: 'The transformation of Afghanistan was remarkable, but incomplete.' In Kabul people are asking: 'What transformation?'

In the bombed remains of Kabul's Ministry of Energy, Nasir Salam, aged eight, skips through the mud, his jacket flapping in the wind, exposing his skinny ribs. He is running towards a vast mound of rubbish where children are playing with kites, one of Afghanistan's most popular pastimes, although the kites are composites of plastic bags and greasy lengths of string. The youngsters are badly malnourished, their hair and flesh a mass of sores. their chests wheezing. On the road that runs parallel to the slum, their mothers congregate, dressed in filthy burqas and chadris, eyes visible through latticed slits as they bang on car windows begging for money. Others like them had earlier caught a bus to beg in central Kabul, hoping that passing aid workers will spare a dollar. Idle men are everywhere, standing in small groups amid creeks of raw sewage.

Nasir and his parents are among hundreds of families who have taken up residence in this abandoned compound - most were refugees, encouraged to return home from Iran or Pakistan, after the fall of the Taliban but now destitute. The buildings where some are squatting have collapsed ceilings, but they offer some respite from the cold. Few charities come here. The only visitors in the past month have been officials from a government ministry who came to inspect the site and said they would evict the squatters and reclaim the land for the state.

Nasir's father, Allahnazzar, 47, says he would leave, if he could. 'What is there for us here? There are hundreds of thousands like us, perhaps millions. There is no work. We are squatting in the corner of a bombed building for shelter, there is no clean water and children die from disease here every month. Many friends who were with me in Pakistan after the Taliban took power have gone back to find work as labourers. Abroad they can work and send money back to their families to help them survive.' In a far corner of the slum, 20-year-old Enayatullah Khan has invited neighbours to his 'home' for a celebration. He is clutching his Afghan passport, empty save for an Iranian visa. He is due to leave the next day. 'I know I will earn money in Iran, I will get work as a labourer and with spring coming I will work in the fields. I am young, I don't mind leaving Kabul, most of my friends have gone.'

Outside the Ministry of Interior, a cottage industry has sprung up supplying services to those who want to leave the country, from roadside photographers providing passport pictures to local people filling out forms for the illiterate.

Tariq has raised the money to buy an ancient camera and takes at least 200 passport snaps a day. 'The demand is high. Everyone wants to go to Iran and Pakistan to work, young and old, nobody wants to stay here. The queue for the visas is so large that the traffic police marshal it. But what you are seeing here is the people who want to enter within the law, probably because they have been put in jail as illegal immigrants before and don't want that again.

'Hundreds of thousands more will go over the border illegally, what other option do they have,' he adds, pointing across the street where a group of men have monopolised a playground. 'Look at them, they are playing on a children's roundabout, there is nothing else to do.'