Monday, September 20

Can the Taliban resuscitate Afghanistan’s shattered economy?


The Taliban took Afghanistan in a blitzkrieg through its cities, exposing the weakness of the government in Kabul and humiliating the United States and its allies. The withdrawal of Western forces this week is their greatest victory. Now they are preparing to announce their rule, and resurrecting Afghanistan’s shattered economy may be their biggest challenge.

What has happened to the Afghan economy since the Taliban victory?

Against the backdrop of the worst drought in decades and deteriorating security, Afghanistan’s economy had been struggling for years, even before the events of August. The sudden rise of the Taliban has been the strongest shock yet.

The price of the goods that ordinary people depend on to survive – such as flour, oil and rice – has been increasing day by day. The same is true for the price of fuel, which adds further pressure on families who have to drive to get to work.

The queues at the banks stretch for hundreds of meters. Banks, fearing a flight of funds, have limited withdrawals, which has caused a cash crisis that has paralyzed economic activity in large cities.

“Banks are still closed in Herat,” says Shahab Siddiqui (not his real name), a civil servant in that city. “There are only two ATMs working in the entire city, so you have to queue for hours. But when your turn comes, they don’t have any more money or the power goes out. ”

Uncertainty and fear have forced hundreds of thousands of Afghans to move within the country or across the border, to countries such as Iran and Pakistan.

For many Afghans it is not so much the restriction of their personal freedoms that keeps them awake as these dark economic clouds. “That is the question everyone is asking here,” says a money changer in Herat, who asks not to be named. “How are the Taliban going to handle the money? One US dollar is now 86.3 afghans (the Afghan currency). Before the fall of the government, it was about 80.”

Why has the economic blow been so hard?

One of the main reasons is that the Afghan economy was largely dependent on foreign donors who had interests in the previous government, and they have not yet clarified how they will engage with the Taliban.

Since the start of the US-led invasion, Afghanistan’s economy has been underpinned by foreign aid and development aid, which last year accounted for more than 42% of the country’s GDP and financed three-quarters of public spending.

That aid has been dwindling over the last few years and few companies are willing to invest in such an unstable country. With the return of the Taliban to power, the United States, the United Kingdom, the International Monetary Fund, the World Bank, the European Union and Germany, among other donors, have suspended the development funds they planned to give to Afghanistan. They may continue to provide humanitarian aid, but it is likely to be channeled through charities and not the Taliban government.

According to an analysis by Chatham House, “if aid is frozen for an extended period, it will cause a large contraction in government funding, leading to the dismissal of public workers and NGO staff, the collapse of essential services such as health and safety. education and the risk of hyperinflation ”.

The Taliban are also unable to tap into the country’s reserve assets to prevent the Afghani from depreciating. Most of these funds – more than $ 7 billion out of an estimated total of $ 10 billion – are in US bank accounts frozen by Washington.

In addition to a drought that will affect agricultural yields – although it is not yet clear to what degree – Afghanistan will face a significant food shortage this winter, the United Nations World Food Program has warned.

What do these economic problems imply for the Taliban’s way of governing?

The Taliban know that ruling effectively means meeting the basic needs of the population and providing hope for the future in a country where the average citizen is 18 years old.

So far, the Taliban have been magnanimous in victory, calling for a resumption of relations with many of the countries they defeated to regain control of Afghanistan, including the United States.

Analysts see this as a sign that the group’s leaders intend to somehow integrate into the world economy and try to access foreign aid and development funds.

“The Taliban are fully aware that they will need to access the global financial system,” says Fung Sui, senior economist for Asia at the Economist Intelligence Unit. there will be social disorder in the country and they may not be able to control it. ”

There are already signs of a greater openness to international organizations by the group, Siu adds. “20 years ago the Taliban depended on their own means, they didn’t go for help [extranjera]. But the World Health Organization (WHO) has managed to transport supplies by air and has done so from Qatar, using the national airline of Pakistan. Therefore, they are not completely closed to help, only that it will have to be done in a very difficult and convoluted way ”.

Economic interests may give the West some leverage over the incoming Taliban administration, perhaps linking the unfreezing of funds to the advancement of human rights or the denial of space to jihadist groups. But ultimately, it is the suffering of the Afghan population that is being haggled.

Translation by Julián Cnochaert.



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