The Taliban took control of Afghanistan, that’s the news yesterday. That thousands of distressed Afghans flocked to Kabul airport in an attempt to escape the country has also become a fact of life. The Taliban killed some local Afghan liberal humanist writers and artists, which is also well known to all. But now that the last American troops have officially left Afghan soil, marking the end of a 20-year war in which the Taliban emerged stronger, the most critical question is: what is the economic scenario for Afghanistan under the domination of the Taliban?
The context of the question has two dimensions: national and international. In the aftermath of the Taliban takeover, the most important questions are: first, the scenario of Afghanistan’s national economy, and second, the role of the international community, especially the United States, in the process.
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It goes without saying that the Afghan economy is currently in peril. Certainly, this crisis did not happen overnight; rather, it is the legacy of past administrations over the years. The governments that came after the fall of the Taliban in 2001 were weak, ineffective and vulnerable. The last two Afghan presidents were foreigners, having spent much of their lives in the United States. As a result, the complex realities of Afghanistan were beyond their comprehension and had no real connection to life in Afghanistan and its people. Therefore, they could not build an effective administration in the country. Over the past two decades, various parts of Afghanistan have been disconnected from each other. In fact, the work of the regional administration has been carried out by a number of powerful warlords, making the Afghan central government vulnerable and ineffective at the regional level.
So things went as planned. The Afghan economy remained depressed. In recent years, what could have been achieved has not been achieved, as the data show. Currently, Afghanistan’s gross national product is around $ 190 billion, slightly more than Dhaka city’s $ 160 billion economy. The country’s legal exports of goods and services are worth $ 1 billion annually, and each year it imports $ 6 billion worth of goods and services. The balance of payments deficit is a persistent problem.
The production, sale and export of opium play a major role in the Afghan economy. About 80 percent of the world’s opium production comes from Afghanistan. Each year, Afghanistan produces nearly 10,000 tons of opium and the revenues generated amount to around seven billion dollars. About 87 percent of the income of opium-producing farmers comes exclusively from this product alone. Afghanistan’s illicit opium exports amount to US $ 2 billion annually. Therefore, both at the micro and macro level of the Afghan economy, the role of opium is important.
The other crucial element for the Afghan economy is foreign aid. Last year, the donor community pledged to provide $ 20 billion in aid to Afghanistan. About 80 percent of public spending in this country is funded by grants. Since 2002, the World Bank has provided Afghanistan with a total of US $ 5.3 billion in development assistance and emergency relief. The IMF has allocated $ 400 million in Special Drawing Rights (SDRs) to Afghanistan to fight the Covid-19 pandemic in the country.
It is clear from the socio-economic indicators of Afghanistan that the country is at a vulnerable stage. About 47 percent of its population lives below the poverty line of one dollar a day. The percentage of the working poor — those who work but live below the poverty line — is 33 percent in the country. If the poverty line is raised to two US dollars a day, 90 percent of Afghans would be poor. Afghanistan’s Multidimensional Poverty Index (MPI) also indicates that 55 percent of its population is poor in multiple dimensions of deprivation. Even in this 21st century, the average life expectancy of an Afghan is only 64 years, and the average years of schooling in the country is only four years. About 55 percent of Afghans are illiterate.
In Afghan society, the position of women remains the most vulnerable. An Afghan woman, on average, can expect to live to age 64 – her average years of schooling is only two years. One in five Afghan women participates in the labor market. The maternal mortality rate in Afghanistan is 638 per 100,000 live births.
It was under these circumstances that the Taliban seized power. The seizure of power by a group with such archaic and intolerant ideals and beliefs is not acceptable to the democratic world. As a result, Western countries and international organizations have taken various economic measures to make the Taliban ineffective. Economic sanctions and charges are among these measures.
The United States has frozen about $ 10 billion in Afghan assets held in various banks in Afghanistan. The International Monetary Fund (IMF) withdrew the USD 400 SDR previously allocated to Afghanistan to deal with the Covid-19 crisis. The World Bank has not said anything yet, but it may also impose restrictions on its funding in Afghanistan. There has been a 20 percent decline over the past four years in the allocation of grants to Afghanistan by the donor community. Donors seem more interested in providing annual grants rather than making long-term commitments. Against the background of all this, the current weakness of the Afghan economy could become even more vulnerable.
Because of all these sanctions and restrictions, the Afghan people would be hit the hardest. Sanctions always have a negative impact on the poorest segment of the population. Afghanistan will be no exception to this rule. There may also be inflation in the economy and food shortages may appear. The possibility of famine cannot be ruled out.
Until the end of June of this year, the Afghan central bank had $ 10 billion in assets in its vault, including $ 366 million in foreign exchange reserves, which is not much. This amount will not go far to meet import demands from Afghanistan. The Taliban’s income from various sources is estimated at between $ 300 million and $ 1,600 million. It is not known whether he will spend this money on rebuilding Afghanistan.
In the meantime, two other things can happen. First, due to the imposition of Western economic sanctions, the Taliban may encourage the production and export of more opium. Such an initiative could well resonate with Afghan farmers. Second, with the withdrawal of SDR funding from the IMF, the Covid-19 situation could worsen in Afghanistan.
Ultimately, the economic situation in Afghanistan under the Taliban is expected to be more vulnerable. The incidence and depth of poverty may increase, the plight of common people is likely to increase, and infrastructure development should be hampered. And the rights and lives of Afghan women are already deteriorating. Overall, the economic scenario for Afghanistan under the Taliban does not look promising at all.
Selim Jahan is the former Director of the Human Development Report Office and the Poverty Division of UNDP.