A Crash Course on the Afghan Economic Crises
- Fincon Club
- Oct 3, 2021
- 5 min read
BY ARADHIA BHAGAT
First and foremost, context:
Flashback to 20 years ago:
Back in 2001, the US was responding to the 9/11 attacks, in which nearly 3,000 people were killed by the Islamist militant group al-Qaeda, and its leader Osama Bin Laden.
Bin Laden was in Afghanistan, under the protection of the Taliban, the Islamists who had been in power since 1996. When they refused to hand him over, the US intervened militarily, quickly removing the Taliban and vowing to support democracy and eliminate the terrorist threat.
Nato allies had joined the US and a new Afghan government took over in 2004 but deadly Taliban attacks continued. President Barack Obama's "troop surge" in 2009 helped push back the Taliban but it was not long term.
In 2014, at the end of what was the bloodiest year since 2001, Nato's international forces ended their combat mission, leaving responsibility for security to the Afghan army. However, in 2015 the Taliban launched a series of suicide attacks, car bombings and other assaults. The parliament building in Kabul, and the city of Kunduz are attacked. Islamic State militants began operations in Afghanistan and the Taliban resurged in Afghanistan.
In 2020, the US and the Taliban signed an “agreement for bringing peace” to Afghanistan, in Doha, Qatar. The US and Nato allies agree to withdraw all troops within 14 months if the militants uphold the deal and on 13th April 2021, Joe Biden announced that US troops will leave Afghanistan by 11 September 2021.
Now let’s fast-forward to present day:
In just over a month, the Taliban swept across Afghanistan, taking control of towns and cities all over the country, including Kabul. Afghan security forces collapse in the face of the Taliban advance.
Stats:
Now that we’re all caught up, let’s move on to a few statistics to reinforce how unfathomably severe this situation really is:
42,745 Afghan civilians killed since August 2021
444 aid workers killed since August 2021
72 journalists killed since August 2021
390,000 Afghans have been displaced within the country – 80 percent are women and children since may 2021
Percentage of Afghan teenage girls able to read today is 37 %
$104.5 billion dollars worth Aid disbursed throughout the decades.
Nearly 20 years after the United States’ invasion of Afghanistan, the cost of its global war on terror stands at $8 trillion and 900,000 deaths
We’re not here to dissect the action taken by the US Government, the Afghan Government and the Taliban, but to help readers understand its impact on the lives of innocent civilians, Afghan women, and the global economy.
The Economic Viewpoint:
Banking Crises-
The economy was already extremely fragile, heavily dependent on aid. A nation is considered aid-dependent when 10% or more of its gross domestic product (GDP) comes from foreign aid; in Afghanistan's case, about 40% of its GDP was international aid, according to the World Bank.
Long queues have formed outside banks, many of which are closed, and ATMs that aren't dispensing money. With limited access to cash, people are becoming increasingly desperate.
Afghans in August 2021
When it became clear that the Taliban would gain control of Kabul, western powers including US and Germany, suspended foreign aid to the country. The World Bank, IMF and DAB are some of the other foreign reserves that have halted payments. DAB has reserves of roughly $9bn (£6.5bn), most of which is held in the US.
Unemployment:
To state that the Afghan economy is buried into a deep recession will be an understatement. Afghans are desperate to exit the country, and are trying to recruit as much money as possible for banks to seek asylum in any country that would accept them. However, with banks shutting down and halting payment, these civilians are at increased danger and very susceptible to losing their homes, families and lives-further increasing the economic cost of the war and Afghanistan’s colossal budget deficit.
Any civilian opposing Taliban’s reign will either be killed or jailed, and the Taliban can already be seen restricting women rights, preventing them from working and providing them access to education. Consequently, this has reduced working women in the economy. In the past decade the percentage of the female population has risen dramatically, though at 22% in 2019 it was still low by international standards. Under the Taliban the change is likely to be reversed, further damaging economic prospects. This greatly limits the Afghan workforce and skilled labour force, who could work towards uplifting the economy.
Sources of Revenue:
A major source of revenue is from its large illicit economy. There is illegal mining and, of course, opium production and related activities such as smuggling. The drugs trade has been an important source of revenue for the Taliban.
However, to look at the -somewhat- bright side, the country does have significant natural resources, which would, in the context of better security and less corruption, be attractive to international business. There are several types of minerals available in substantial quantities, including copper, cobalt, coal and iron ore, along with rich resources like oil and gas. One with particularly striking potential is lithium, a metal that is used in batteries for mobile devices and electric cars. The latter application is going to be especially important as the motor industry makes the transition to zero-carbon forms of transport. However, now with the Taliban taking over, one cannot predict whether the natural resources will be optimised or exploited.
The rest of the world:
Now that governments such as China and Russia (do I see a pattern here???) are legitimizing the Taliban to be a government…
It is suspected that China is interested in contracts regarding operations in copper and oil. These opportunities appear to be very substantial as the two countries do share a short border. But any Chinese agency - official or a business - would want to be confident of succeeding. They will be reluctant to commit unless they feel the security and corruption problems will be well enough contained to enable them to extract worthwhile quantities of these industrial commodities.
A key question for any hard-nosed potential investors - from China or anywhere else - will be whether the Taliban is likely to be any more able than the previous Afghan government to create the kind of environment they need.
The Need of the Hour (or the past two decades?):
I know your head is probably spinning as you consume all this heavy information. I would like to thank you for your time and reaching the (almost) end of this editorial. If there’s one thing I would want you to take away from the editorial is this:
With migration and seeking asylum becoming nearly impossible for the Afghans, civilians consider latching onto a metal tube, 50000 feet in the air, to be safer than staying in their home country.
The Taliban is at war with innocent civilians and the women of Afghanistan. Women and human rights are being continuously threatened to the extent of making this crisis a dystopia too dark for me to even want to read.
Please help in any way you can. I am linking a few petitions for you to sign and share with others to help Afghan refugees, asylum seekers, women and civilians:
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