CHICAGO, Illinois — According to the World Bank, foreign aid accounted for approximately 40% of Afghanistan’s gross domestic product (GDP) before the Taliban takeover. The World Bank considers a country “aid-dependent” when this figure sits at 10% or higher. In light of the inevitable Taliban takeover of the capital of Kabul, the World Bank and the International Monetary Fund suspended foreign aid payments, following the United States and Germany in their decisions. With international transfer companies such as MoneyGram and Western Union also halting services, Afghanistan’s economy faces collapse.
The Consequences of the Taliban Takeover
Economic isolation has devastating effects on people’s daily lives. Already disturbed by the intruding presence of the Taliban, the Afghan people face bank closures, food shortages and long gas lines. In comparison to the dollar, the value of the afghani, the national currency, dropped by close to 8% in response to the fall of President Ashraf Ghani’s government on August 15, 2021. The effective freezing of international transactions has left the currency “relatively stable,” but any cash Afghans still possess has “lost most of its value.”
With the Taliban exerting full economic and political control over the nation, Afghanistan’s economy may potentially see even greater shifts. The Taliban generates revenue between $300 million to $1.6 billion, which experts speculate largely comes from the sale of narcotics. But, the spread of the Taliban influence has allowed the group to gain control of the country’s natural resources. Mineral resources include copper, gold, oil and natural gas have an estimated value of “up to $3 trillion.” However, prior to the Taliban takeover, the mining industry funded equipment and other costs primarily through foreign aid and donations, which the industry now has no access to. Narcotics sales are not nearly enough to fund aid programs, infrastructure costs and the rebuilding of a war-ridden nation. Despite Afghanistan’s economy’s potential, the Taliban’s restrictive presence prevents it from building necessary global connections.
In the coming months, the lack of international aid and access to global trade will further Afghanistan’s inevitable economic collapse. With almost 90% of Afghans living under the national poverty level in July 2020, these consequences are highly troubling.
Global Impacts
Airlines are facing an increase in fuel costs and flight times with instructions to avoid the airspace above Afghanistan. As chaos ensues at the Kabul airport and emergency rescues are carried out, commercial airlines are forced to fly around the country, lengthening the duration of flights. This increase in costs puts immeasurable pressures on airlines, creating a spike in plane ticket prices.
While Afghanistan’s economy comprises only 0.9% of the global economy, its role in regional trade was instrumental to stability within the volatile Middle East. Prior to the Taliban takeover, Iran was exporting $2 billion worth of non-oil goods to Afghanistan annually. As the GDP per capita in Afghanistan increased from $900 in 2002 to $2,100 in 2020, the spending power of the average Afghan dramatically increased. With the Taliban takeover freezing all international trade with Afghanistan, Iran’s non-oil economy teeters on the edge of instability. Iran has faced several domestic uprisings since 2017 and it remains a U.S. priority that Iran remains stable in a violence-ridden Middle East region. Unfortunately, Afghanistan’s economic collapse hints at further insecurity in the region.
Leaders Taking Action
The Biden administration’s decision to halt the release of funds reserved for the Afghan government has limited the Taliban’s initial economic moves. With European nations and the United States mounting pressures on global organizations such as the IMF to halt funding, it is likely that almost all global aid to Afghanistan has come to an end. The U.S. Treasury Department has moved to freeze the Afghan government’s assets, meaning that the Taliban has access to no funds.
By strategically weakening the Taliban’s economic hold, the global community can then enact sanctions, which would force the Taliban to limit drastic human rights violations and comply with global regulations in order to sustain the Afghan economy.
When the control of the Taliban weakens, global organizations such as the United Nations and the International Monetary Fund can restore aid programs and monitor the distribution of aid to the Afghan people. However, as poverty rapidly rises, the clock is ticking as to how fast leaders can restrain the Taliban in order to help vulnerable Afghan citizens. Despite the turmoil, Afghans remain hopeful for a brighter tomorrow.
– Shruti Patankar
Photo: Unsplash