For more than four decades, Afghanistan has been in the midst of conflict.
The human and financial cost of the war in Afghanistan has been devastating.
In August 2021, in a matter of weeks, the Taliban seized control of key cities in the
country, causing the democratically-elected government to collapse and a mass exodus of
citizens and expatriates.
After a 20-year absence from power, the Taliban had taken control of Afghanistan, a move
that was met with outrage by most of the international community.
Losing that support will be costly for the Taliban, the nation’s economy and its people.
To make sense of what’s happening, I called Natasha Turak, a correspondent in our Middle
East bureau, who’s been covering the Afghanistan crisis since the news broke.
Hey, Natasha.
Thanks for joining us.
Thanks so much for having me, Nessa.
How’s everything?
How’s Afghanistan coverage?
It’s intense.
Honestly, it’s nothing in comparison to what people on the ground are dealing with,
so I’m grateful for the opportunity.
So what does the Taliban takeover mean for Afghanistan’s economy?
The situation we're looking at, it means that Afghanistan's formal economy is likely to crash.
This would mean a humanitarian crisis, a refugee crisis and political instability that is far
worse than what we’re already seeing.
That's for a few reasons.
The key reason being that Afghanistan's economy is heavily, heavily dependent on foreign aid.
Nothing will make up for the sheer volume of funding that Western countries have been
providing Afghanistan for the last 20 years.
Afghanistan is staring right at a liquidity crisis.
80% of the Afghan government budget was funded by the U.S. and other Western institutions.
40% of the country’s GDP came from foreign aid.
Importantly, 4% of Afghanistan’s GDP comes from remittances, that’s money from overseas
workers that get sent back home.
That’s one of the highest rates in the world and those remittances have not been able to
reach Afghans in the country who need it.
The Biden administration froze all of Afghanistan’s foreign assets that are in the U.S., which
includes more than $7 billion of the Afghan Central Bank’s $9 billion.
This could leave the Taliban to impose capital controls.
Capital controls are regulations taken by governments or central banks to limit how
much money enters and leaves a country.
These include restrictions on money transfers and cash withdrawal limits at banks.
Losing access to foreign currency is a big deal because Afghanistan’s economy is heavily
import-dependent.
Afghanistan’s currency has fallen to record lows, the prices of basic commodities like
flour and gas spiked 50% within just two weeks of Kabul’s fall to the Taliban.
International organisations like the World Bank and the International Monetary Fund also
pulled funding from Afghanistan.
$12 billion in foreign aid from more than 60 countries was also under scrutiny.
Afghanistan's financial future depends heavily on whether the Taliban government gets internationally
recognized or not.
And that, in itself, will depend on what concessions it is willing to give to the international
community, whether it be on human rights guarantees, whether it be guarantees that it will not
harbour terrorist groups as it did in the 1990s.
Natasha now brings us into the fallout.
As Afghanistan faces the risk of economic collapse, what will this mean for its citizens?
Nearly 70% of Afghanistan’s population is below the age of 25.
That means an entire generation of Afghans has grown up with not knowing Taliban rule.
So, this is an entire generation of young Afghans, tens of millions, who grew up being
able to play soccer, being able to work in media, women being able to participate in
politics, in the private sector, in art, in entrepreneurship, in international organisations,
in international business.
The United Nations have also called women’s rights in Afghanistan “on a fundamental red line.”
While female presence in the workforce has still not been huge, what the country risks
losing is not just the progress that’s been made in the last two decades, but the future
productive potential that would be lost if it chooses to lock half of its population
out of the economy.
And to take this away from all of these people, first of all, it’s devastating for the people
who’ve enjoyed these rights and who’ve experienced these freedoms for the last 20 years.
According to the World Food Bank, it needs $200M by the end of the year to aid millions
of Afghans who are facing the risk of starvation.
In a country of almost 39 million people, nearly half of the Afghan population lived
below the national poverty line in the last year.
It is a perennial dilemma for countries that provide aid, when the governments of those
countries are committing human rights abuses.
Do you cut off funding to ensure that the government itself doesn’t get to enjoy those funds?
Or do you continue funding to support the people who will likely be hurt the most?
And that is continuing to be deliberated, and I think will probably be deliberated for some time.
Most of their independent funding comes from criminal activity.
So, the Taliban, for decades, funded itself on illicit opium trade, on extortion, kidnappings,
there’s illicit timber trade, there are some illicit mining activities going on around
the country.
The thing is: they were able to fund themselves, they were able to fund an insurgency for many,
many years.
Their net opium revenues ranged from between $40 million US dollars - $400 million in recent years.
Do you think we will see a lot more of these activities to fund Taliban operations in Afghanistan?
The funding of the Afghan government budget in the last year was $5.3 billion.
So that’s an enormous difference.
And there is no way frankly, from all the analysts, the economists I’ve been speaking
to, that the Taliban can fill that enormous gap, with the activities it’s been partaking
in, in the last 20 years, to fund itself alone.
Afghanistan's strategic, landlocked location has also brought up discussions of its potential,
especially for countries with geopolitical interests.
Economists say that Afghanistan has more than $1 trillion in untapped mineral wealth.
That’s everything from copper and iron ore, and gold and gemstones, to lithium, which
is exploding in price on the market today, because of the demand for electric vehicles.
Now China is working to be a world leader in electric vehicles.
And this is something very interesting to them.
However, Afghanistan is very underdeveloped in terms of infrastructure.
So it’s going to take a while, I think, before Afghanistan as a country can take advantage
of these minerals and the natural resource wealth that it has.
It simply doesn’t have the volume and the scale and the level of roads, railroads, power
lines, infrastructure in general, to move this kind of technology around the country.
Despite Afghanistan having a very strategic location for the expansion of China’s Belt
& Road Initiative, the security situation on the ground has always been the number one
issue for any investor.
The Taliban doesn’t necessarily control the whole country.
There are tribes, there are other militia groups, militants that are in control of other
parts of the country.
So the Taliban, even if they tried to guarantee security for an investor like China, they
can’t really guarantee it on the ground.
And remember that parts of the country are still laden with IEDs, with landmines, and
the fact that you also have the potential in the coming years for renewed civil war
in the country.
In the early days of the Taliban takeover, countries like China, Russia, Iran, Qatar,
Turkey and Pakistan kept their embassies open in a bid for diplomatic outreach.
Several among those countries are developing relationships with the Taliban, including
Russia and China, who likely see a strategic opportunity to wield influence in Afghanistan
in the vacuum that the U.S. has left behind.
As the country continues to grapple with the swift regime change, the Taliban takeover
brings to mind its harsh rule in the past.
However, Afghanistan’s inevitable dependence on foreign aid might prove pivotal to its future.
Afghans also make up one of the largest refugee populations in the world, with most settling
in Pakistan, Iran, Germany and Turkey.
As more people flee, the exodus of skilled workers may lead to a brain drain, further
hampering the country’s recovery.
The future of Afghanistan is thus far very unclear.
The uncertainty here is that we don’t know what a future Taliban government is going
to look like.
The Taliban leadership say that, oh, things will be different now, they’re going to
be a more inclusive government, they are going to allow women to work, but it’s very unclear
how much they will actually abide by those pledges.
Or by how their spokespeople have talked about having a more inclusive government, having
a more tolerant government, have so far been shattered by reports of violence across the
country, reports of beatings, turning women away from places of work and education, people
being killed while trying to protest the Taliban.
We’ve talked about how much the Taliban has said that they will change, but we’re
also forgetting how much has the Afghan society or community, in general, they have changed as well.
And this might prove to be a big challenge for a Taliban government.
The ball is essentially in the Taliban’s court.
But at the same time, there is leverage that Western countries hold.
So whether the Taliban will be willing to make concessions to the West to gain some
of the funds that they vitally need to fund the government is yet to be seen.