Afghanistan's Economy is on the Brink of Collapse, Predicts the Economist

By: Pragya Singh
16 Sep 2021 10:08:54 AM Shoolini University, Solan, Himachal Pradesh

The freezing of international aid to Afghanistan by western countries such as the USA and Germany following the Taliban takeover compounded with the pandemic’s market slowdown and the alleged theft of the national treasury by former president Ashraf Ghani and his allies are now pushing the afghan economy towards a ‘triple shock’ crisis, The Economist predicted.


Even before the Taliban had begun its war, Afghanistan was already witnessing one of the worst droughts in its history. Agriculture and crop exports to neighbouring countries have been one of the nation’s stable sources, but the double whammy of the drought and the pandemic has slowed down the sector almost to a halt.


Adding to that, the Taliban’s scorched earth policy, which, according to CNN and NYT reports, sees the organisation burn down farms of villages opposing them, and the agriculture sector has completely stopped. The civil war had also displaced many thousands of rural farmers, starting an internal migration of those ruined by violence towards the capital city of Kabul.  


As per an Al-Jazeera report, all the western banks in Afghanistan were shuttered as the World Bank, the International Monetary Fund, the Deutsch Bank, and the US Central Bank suspended the country’s access to any international funds. “Any Central Bank assets the Afghan government have in the United States will not be made available to the Taliban,” the Biden administration confirmed to the BBC.


According to The Economist’s intelligence department, three-fourths of the Afghan economy was dependent on foreign aid. A slightly less harsh estimation by the World Bank put the dependency at 40%. By the World Bank definition, any nation whose GDP comprises 10% or more of foreign aid is considered an ‘aid dependant nation’.


“The government had employed hundreds of thousands,” said the unit’s chief journalist Sebb Stratford-Bloor who had been ground reporting from Kabul till last week, “but now that those once powerful have vanished with millions of dollars, former government employees are on the streets trying to sell their belongings. Local businesses are expected to suffer the worst considering they are mainly cash-based and citizens are finding it increasingly difficult to access cash and savings.”


On Monday, the Taliban head of the Afghanistan Chamber of Commerce and Investment’s (ACCI), Yusuf Mohammad, called for the US and its allies to release frozen assets, which according to the Taliban, “belongs to the people of Afghanistan”, warning that should the country be pushed into an economic crisis, the diplomatic blame would be put on America. 


The governments of Qatar and Pakistan supported the Taliban’s request with the Qatar foreign ministry saying, “Humanitarian situation and humanitarian assistance should be independent of any political progress because we believe that the Afghan people deserve to be helped, deserve to be supported despite what’s happening in the political landscape.” 


India too had a major role to play in supplying foreign aid and infrastructure development in Afghanistan, Without Indian investment and technology, the powerlines along the eastern region of the country have been frayed, and entire grids went offline for days till the Chinese fired them back up.


This brings us to Afghanistan’s immediate future. Taking heed of the western media’s grim predictions, the Taliban administration has joined hands with the west’s current favourite boogiemen: China and Pakistan. 


The Xi Jinping government has already managed to convince the Taliban to join its Belt and Road Initiative, much to India’s consternation. Beijing has also taken over many of Delhi’s projects and even a couple of American airbases as it establishes itself in the region. Meanwhile, the UN, backed by the US, India and others, is opening an investigation into Pakistan’s role in arming and training the insurgents. 


Afghanistan is also a hub of illegal opium production and home to large deposits of minerals, including lithium, uranium, mercury and bauxite. If the western world and its allies refuse to recognise the Taliban, chances are it could just begin operating an alternate economy on the global grey market just as its rival Iran had for a decade and a half. 

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