Afghanistan on the brink of economic collapse | By Huma Baqai -October 30, 2021
AFGHANISTAN ON THE BRINK OF ECONOMIC COLLAPSE
THE takeover of Afghanistan by the Taliban is overshadowed by headlines about Afghanistan’s imminent economic collapse and the unfolding humanitarian catastrophe.
Except three per cent households all are expected to fall below the poverty line in coming months. The country under Taliban is confused, hungry and hopeless.
More than half the population, close to 22.8 million people face acute food insecurity, and approximately 3.2 million children under five could suffer acute malnutrition.
David Beasley, the Executive Director of the World Food Programme, is on record saying that Afghanistan is now among the world’s worst humanitarian crisis if not the worst and that it’s on a countdown to catastrophe.
The takeover of the country by the Taliban on August 15, 2021, weakened an already fragile economy heavily dependent on foreign aid; Western powers suspended aid and to add insult to injury World Bank and IMF froze accounts and halted payments.
United States froze $9.5 billion in foreign reserves, Germany suspended $300 million in aid, while IMF suspended 440 million dollars in special drawing rights allocation. About 75% of public spending was previously funded by international grants.
Afghanistan’s dependence on foreign aid is critically high, 40% of its GDP was in external aid. A nation is considered aid dependent when 10% or more GDP comes from foreign aid.
The spectacular takeover by the Taliban and the subsequent chaotic exit by US pales in comparison to the looming economic and humanitarian crisis.
The international community without a second thought flooded their propped-up system with aids and funds keeping an inefficient and corrupt Afghan government afloat, worst still preventing it from being held accountable to the Afghan people.
Some efforts to mitigate the crisis are underway the United Nations has raised more than $1.2 billion in pledges for humanitarian assistance to Afghanistan.
The US and several European countries have also committed humanitarian aid. The aid will be disbursed through NGO’s and UN agencies bypassing the Taliban Administration; the Taliban are so desperate that they have still welcomed it. However, the money is peanuts compared to the amount of money frozen by the US and IMF.
Shah Mehrabi, a senior board member of Afghanistan’s Central Bank and an appointee of the former government categorically said if the international community wants to prevent an economic collapse, they need to allow the central bank to gain limited and monitored access to its reserves, these reserves belong to Afghanistan and its people, this is not aid.
Afghanistan is already in the midst of an economic implosion where long blackouts are common, people are on the roadside trying to sell their belongings to buy food and survive with practically no buyers.
The country will soon run out of medicines, many a food items, and fuel. People are selling their children to survive. Afghanistan is choking. Someone has to take responsibility and move beyond the baggage of the past.
Compounding the crisis is the constant brain drain, everybody who is anybody has left or is struggling to leave. Institutional infrastructure is collapsing as wages are not being paid.
The international community wants to help but is extremely skeptical of the Taliban. It refuses to release Afghan assets and is withholding direct aid which could push millions towards not just acute poverty, but hunger leading to death.
The Taliban are constantly appealing to the international community to help them prevent this crisis.
Afghanistan may have averted a civil war post-US exit; however, the dire economic situation could trigger one and exodus of refugees not just to the peripheral countries but even to Europe.
Taliban have unveiled food-for-work programs to tackle both hunger and unemployment. They aim to distribute more than 60,000 tons of wheat across Afghanistan in exchange for jobs.
However, the Taliban food-for-work scheme will not pay labourers and those who are currently unemployed and at risk of starvation during the winter.
Will the Taliban survive this challenge? It’s debatable, they are resilient by nature and trading is a part of their DNA. Largely they are not financially corrupt and have the ability to survive on less.
Some analysts are of the view that the Taliban control of the trade routes serving as strategic choke points for the flow of goods across South Asia will provide the group with sufficient revenue.
Pakistan, China, Russia, Turkey and Qatar may not be strong financial powerhouses compared to the entire international community helping the Afghanistan of yesterday, but they may help prevent a collapse.
It is also true that what funded the insurgency operations of the Taliban was largely illegal mining and opium production which may not be enough to operate a fully functional government.
But a much bigger question is if the Taliban are not helped at this moment in time and the economic meltdown results in a governance vacuum Afghanistan has experienced before, can the international community afford the cost it may incur and more importantly are they once again allowing an opportunity to engage with the Taliban in a constructive fashion and to mainstream them into the international community wither away.
The Taliban are actively seeking it right now, at least trying to accommodate the demands of the global community.
Yes, there are serious issues on the ground, the Taliban’s style of government is unacceptable to most, news and stories coming out of Afghanistan are not pretty. Many are doubting the Taliban 2.0 paradigm and think it’s an eyewash.
Undoubtedly one of the biggest challenges for Taliban today is the ‘Lack of Trust’; there is widespread suspicion about the Taliban among the international community and for good reason.
Taliban must walk there talk, however, abandoning them and more importantly the people of Afghanistan is not an option.
International recognition for the Taliban depends on whether they stick to their promises, including allowing access for aid deliveries, ensuring women and human rights, allowing safe passage out of Kabul to those who wish to leave, forming an inclusive government incorporating the ethno-religious landscape and most importantly come down hard upon terrorist operatives trying to regroup on Afghan land.
Both sides have their reservations, trust deficit is high; Taliban are struggling with internal compulsions and external demands. Keeping a resistance alive for twenty years is much easier compared to running a country.
Only time will tell if they’ve learnt their lesson from the past and are able to find a way out of this mess. The fate of the poor Afghans hangs in balance.
—The author is an Associate Professor of Social Sciences and Liberal Arts at the Institute of Business Administration, Karachi.