A car bomb explosion outside a bank in the Afghan city of Lashkar Gah in southern Helmand province has killed dozens of civilians and soldiers who were waiting at a bank to collect their pay.

The Helmand governor’s office said that at least 29 people had died and more than 60 were wounded in the attack at midday local time on Thursday, as people queued for wages ahead of the Eid al-Fitr holiday, which begins on Friday.

Emergency workers and volunteers tried to pick out the injured from the dead among dozens of bodies strewn across the street, ferrying them to local hospitals in makeshift ambulances and civilian cars.

Lashkar Gah's health director Haji Moladad Tobagar told the AP he feared the death toll would rise as more casualties arrived at medical centres. Most of the dead are civilians, he added.

The Taliban claimed responsibility for the attack. Spokesperson Qari Yusuf Ahmadi claimed a higher death toll and stated that no civilians, and only soldiers, had been hurt. The authorities immediately disputed the insurgency group's claim.

Both the Taliban and Isis have in the past targeted bank branches where police, soldiers and civil servants collect wages.

“These brutal terrorist attacks ... prove that they have no respect for any religion or faith. They are enemies of humanity.” Afghan President Ashraf Ghani said in a statement condemning the bloodshed.

Afghanistan has been rocked by unrest since the Taliban announced the beginning of what is now its traditional spring offensive. There has also been a step up in violence since the holy month of Ramadan began on 26 May.

Most of the attacks which have grabbed headlines have occurred in the capital of Kabul, but there have been dozens of smaller incidents across Afghanistan in recent months - particularly in Helmand, a traditional Taliban heartland.

The most high profile incident saw 150 people killed and 400 injured in a huge truck bomb in Kabul's diplomatic quarter on 3 June, the deadliest attack since the US invasion in 2001. The blast was not officially claimed by any organisation, but Afghan intelligence services believe the Haqqani network, affiliated with the Taliban, was to blame.

US drops 'Mother Of All Bombs' on Islamic State cave system in Afghanistan

Although the Taliban lost control of Afghanistan following the 2001 war, it has steadily regained ground since the majority of US and allied troops left in 2014, and is now in control of some 40 per cent of the country. The chaos has also allowed Isis to gain a foothold in Afghanistan's remote eastern provinces.

The deteriorating security situation has led to protests and calls for government officials to resign. Many people are losing patience with the weak and divided government of President Ashraf Ghani, which they say is not doing enough to protect the people from militant violence.

Several people were killed earlier this month after police opened fire on protesters in Kabul calling for better security measures.

The demonstration turned violent as it reached the gates of the Presidential Palace.