Afghanistan Analysts Network – English

Dossiers

The Afghan Economy Since the Taleban Took Power: A dossier of reports on economic calamity, state finances and consequences for households

Kate Clark AAN Team 13 min

When the Taleban captured power on 15 August 2021, the Afghan economy suffered sudden and catastrophic damage from all sides. Foreign aid fell away, United Nations and United States sanctions applied suddenly not to an armed movement but to the country’s government, Afghanistan’s foreign reserves were frozen, the banking sector paralysed, and the web of relationships and financing that had supported Afghanistan were broken. Since then, AAN has tried to make sense of what has happened to the economy and public finances, to the delivery of international aid and to individual families. This new dossier brings those reports together.

Women work at a tailor shop in the Daman district of Kandahar province. Since the Emirates ban on women working for NGOs and the UN, the private sector offers one of the only opportunities for women to earn a livelihood in Afghanistan. Photo: Mohammad Noori/Anadolu Agency via AFP, 15 May 2022.

This dossier is divided into three sections. We begin with families and how they have struggled to cope in an ailing economy. The second section looks at the national picture, at the consequences of a severely contracted economy for the nation; that includes in-depth scrutiny of public finances, both how the Taleban are taxing people and how they are spending revenues. The final section looks at the dilemmas and difficulties of delivering international aid. 

Section 1: Economic consequences for families

Reports in this section explore how the economic shocks associated with August 2021’s change of regime affected Afghans at the household level. Even before the fall of the Republic, a new research project, ‘Living under the Taleban’, had begun looking into how life had changed in districts that were then newly and swiftly coming under Taleban control, one after the other.[1] After the Taleban takeover, when we resumed our fieldwork, the clearest message from interviewees was a profound worry about the collapse of their household’s economy and how they would survive the coming winter. We embarked on two new rounds of interviews (in November and December 2021, and January and February 2022) that resulted in several dozen in-depth, semi-structured interviews with people from 22 provinces about their household economy, with care taken to ensure a diversity of socio-economic, ethnic and urban and rural backgrounds and hearing from both women and men.

This research produced interesting, surprising and often distressing reports on how people were coping – or not – how most interviewees were still trying to help others, how some were trying to keep businesses going or find new even if marginal sources of income, and how they had experienced the substantial humanitarian food aid effort launched by the United Nations and international donors over the winter of 2021/2022. A final report in this research series, ‘Living in a Collapsed Economy’, heard from economically hard-pressed fathers who had married their daughters to get a bride price or forgiveness of debt.

The travails of going to the bank, which can now involve a mother’s prayers and a sleepless night, and the struggle to stay warm in winter were the subjects of reports in the new series, ‘The Daily Hustle’, which presents first-person accounts of an aspect of life in Afghanistan since the change of government.

Finally, in this section, guest author Adam Pain, based on more than a decade of research in Afghanistan, looks at how people living in rural areas, repeatedly hit by unpredictability and catastrophe – regime change, conflict, drought and flooding – attempt to survive and prosper.

Section 2: Economic consequences for the nation

After the collapse of the Republic, it was immediately clear that the fallout would be huge and calamitous for Afghanistan’s economy. The second section of this dossier brings together AAN reports that unpicked these macro-economic consequences. Our first report, published in early September 2021, mapped out the implications for Afghanistan’s Gross Domestic Product (GDP), banking sector and standard of living – when half the population already lived in poverty. A second report looked at how, in capturing the Afghan state, the Taleban had immediately made it poorer. It explored what revenue the Taleban had coming in and where they might spend it. That theme was broadened in two more new reports, a special report on taxation and the Taleban’s collection of other domestic revenues and a second on how the Taleban government has been spending those revenues.

Section 3: Consequences for international assistance

We also took an in-depth look at aid and at the strange mechanism created to get around the dilemma of donor governments wanting to help Afghanistan’s poor but not its government, that is, focussing almost entirely on humanitarian aid and channelling it via UN agencies and NGOs, by-passing the, as they see it, ‘de facto authorities’. We have analysed this humanitarian effort in several reports, exploring its contradictions and dilemmas, its saving lives and some of its malign side-effects. This section includes a comparison of how humanitarians and the Taleban dealt with each other in the context of the Islamic Emirate bans on women working for NGOs and UN agencies in the 1990s and today.

Section 1: Economic consequences for families

1. The Daily Hustle: How to survive a winter in Kabul

Author: Roxanna Shapour

Date: 28 February 2023 

Winters in Kabul are always difficult, and this year was no exception – with temperatures dropping well below zero and heavy snowfall. The snow turns the unpaved secondary roads where most Kabulis live into rivers of mud, making it difficult for people to get around. But if there’s little snow – increasingly the case because of global warming – water will be scarce in the summer. This year, winter arrived early, leaving many Afghan families, already struggling with the fallout from Afghanistan’s economic collapse, ill-equipped to manage. The start of winter also marked weeks of power outages across the country and a skyrocketing of the cost of coal and wood, the fuels people use to heat their homes. In the latest instalment of The Daily Hustle, our series of individual accounts about one aspect of daily life in Afghanistan, we hear how one family is coping with winter in Kabul.

The Daily Hustle: How to survive a winter in Kabul
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2. The Daily Hustle: Going to the bank

Authors: Roxanna Shapour and Rama Mirzada

Date: 2 December 2022

In the wake of the Taleban takeover in August 2021, the Afghan banking system, which up to then had been linked to the global banking network, collapsed. Reportedly very little money had been left in the treasury, and then overnight, the United States stopped flying in dollars, the central bank’s reserves held in the US and Europe were frozen and US and United nations sanctions made getting money into Afghanistan difficult. Along with the sudden shortage of dollars afghani bank notes also began to wear out and could not, until recently, be replaced with newly printed ones. The new Taleban authorities closed the banks to stop people taking out all their savings, thereby saving the banking sector. Eventually, they lifted some, but not all restrictions. For Afghans trying to use the banking system, it remains a hellishly difficult proposition. In this episode of our series on how one aspect of a person’s daily life has changed since the takeover, we hear from a young man about going to the bank.

The Daily Hustle: Going to the bank
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3. Living in a Collapsed Economy (4): The desperation and guilt of giving a young daughter in marriage

Author: Ali Mohammad Sabawoon 

Date: 20 October 2022 

The collapse of the economy has led families across Afghanistan to make desperate decisions, including, for some, giving young daughters in marriage in exchange for a bride price. To gain more insight into this, AAN’s Ali Mohammad Sabawoon sought to interview fathers of young brides. He identified about a dozen such men, but most felt too ashamed and remorseful to talk about it. The four men who did speak described the pressures that had led to their decision, one they never imagined they would have to make, and the emotional turmoil that accompanied it. Unfortunately, for all four men, the difficult decision to marry off their daughters did not end up solving their problems.

Living in a Collapsed Economy (4): The desperation and guilt of giving a young daughter in marriage 
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4. Food Aid in a Collapsed Economy: Relief, tensions and allegations

Authors: Martine van Bijlert and the AAN Team

Date: 23 May 2022

A major focus of the international humanitarian response to Afghanistan’s economic collapse has been a ramped-up distribution of food aid, as large parts of the population no longer have the income to buy enough food for their families. In this fourth instalment of our economic research based on interviews conducted across Afghanistan, we look at the reach, scope and implications of food aid distribution at the community and household levels. In our sample, we found that around half of the families had, by mid-February, received some form of food assistance at least once, although the quantity, food items and methods varied. Interviewees were grateful for the much-needed help and hoped it would continue, but there was also a recurring concern that those who needed aid the most may not be receiving it. Interviewees in particular described favouritism and interference in the selection of beneficiaries and, to a lesser extent, corruption and capture. And while the aid had provided relief and allowed the interviewees to feed their families, many were acutely aware that it did little to address their long-term need for employment, livelihoods and a revived economy.

Food Aid in a Collapsed Economy: Relief, tensions and allegations
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5. Living in a collapsed economy (3): Surviving poverty, food insecurity and the harsh winter

Authors: Martine van Bijlert and the AAN Team

Date: 13 March 2022

In this third instalment of ‘Living in a Collapsed Economy,’ we returned to the people we interviewed at the beginning of winter to find out how they had managed since we last spoke to them, especially during the harsh winter months. For many of them, not much had changed, although their situation had slowly worsened as they continued to need to spend money they did not have. Some had been hit hard, while others found their situation somewhat improved after they found a job or were paid their salaries. Several people had family members who had died. Yet, despite the dispiriting hardship, most interviewees showed a remarkable determination to keep going and take care of their families and, often, wider communities. Many had received some form of food aid, which was much appreciated and provided a brief, but much needed relief. With its more than thirty interviews, quoted below, this report provides a detailed and layered picture of the many ways Afghanistan’s economic collapse is affecting families and businesses. It once again underscores that Afghanistan needs more than humanitarian aid to restart its economy. 

Living in a Collapsed Economy (3): Surviving poverty, food insecurity and the harsh winter
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6. Living with Radical Uncertainty in Rural Afghanistan: The work of survival

Author: Adam Pain

Date: 21 February 2022

Yet again, Afghanistan is experiencing a moment of rupture, the latest in a long series of upheavals that have marked the lives of most Afghans over the age of 55. For those living in rural areas, unpredictability is created not only by regime change or violent conflict, but also drought, flooding and other natural disasters. Trying to understand how rural households attempt to survive and prosper in this radically uncertain environment, guest author Adam Pain* draws on lessons from a research project that traced the livelihood trajectories of rural households from 2002 to 2016. Given that rural households can rely neither on the state or the market, he finds that they invest in village and household relationships and asks whether this will be enough to get people through the latest economic shock.

Living With Radical Uncertainty in Rural Afghanistan: The work of survival
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7. Living in a collapsed economy (2): Even the people who still have money are struggling

Authors: Martine van Bijlert and the AAN Team

Date: 23 December 2021

In this second instalment of ‘Living in a Collapsed Economy,’ we seek to map what Afghanistan’s economic collapse means, at the household level, for the relatively fortunate – those who were wealthy to start with or had a diverse set of income streams, as well as those who still have a stable salary. We hear from a landlord and a relatively successful factory owner in Kabul, an NGO employee in Zabul, an extended family in Khost with a brother in Dubai, a former government employee in Badakhshan who lives with her in-laws, and the only ‘doctor’ in a remote and poor area of Daikundi. Although they all are in a better state than most, they also struggle to adapt to a much harsher reality. Most of them are no longer able to access their capital or make proper use of their investments, and all of them indicated that they are no longer able to help others like they used to. This is distressing, as it points to an unravelling of a critical part of Afghanistan’s social safety net – support provided by the relatively wealthy to others in need, within their families, neighbourhoods and communities – at a time when the country needs it most.

Living in a Collapsed Economy (2): Even the people who still have money are struggling
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8. Living in a collapsed economy (1): A cook, a labourer, a migrant worker, a small trader and a factory owner tell us what their lives look like now

Authors: Martine van Bijlert and the AAN Team

Date: 7 December 2021

In the summer of 2021 AAN started a new research project for ‘Living under the Taleban’ that looked into how life had changed in districts that were newly coming under Taleban control, one after the other, with dizzying speed. Then the Republic collapsed, mere days after we conducted our first interviews. When we picked up the thread again, the message from the conversations was loud and clear: the new regime had brought many changes and much uncertainty, there was great disorientation, some occasional nervous hope, but most of all, people were deeply worried about the economic collapse and the coming winter. In this first instalment in a new series, we look at what that looks like at the household level, through the lens of a large urban middle class family, a landless labourer in a remote and poor area, a small trader with a garden, a factory owner and a former Gulf worker. 

Living in a Collapsed Economy (1): A cook, a labourer, a migrant worker, a small trader and a factory owner tell us what their lives look like now
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Section 2: Economic consequences for the nation

1. What Do The Taleban Spend Afghanistan’s Money On? Government expenditure under the Islamic Emirate

Authors: Kate Clark and Roxanna Shapour 

Date: 16 March 2023 

When the Taleban captured power in 2021, they moved swiftly to take over domestic revenue collection, adopting Ministry of Finance systems for taxes and customs. As insurgents, they had been diligent tax collectors and brought a wealth of experience in collecting money from people, but little in spending it – outside the war effort. Since foreign donors no longer support the Afghan state, it is now Afghan citizens who pay for what their government does. While the Islamic Emirate has been relatively open about revenues, it has been cagey about how it spends money. In this report, AAN’s Kate Clark and Roxanna Shapour have put together what little is known or can be found out about Taleban spending plans and priorities. They find large sums of money allocated to security and contingency codes and relatively little to social services apart from education. They also conclude that following the money reveals how well Afghan bureaucracy continued despite the upheaval of regime change – and how fully the Taleban have captured it.

What Do The Taleban Spend Afghanistan’s Money On? Government expenditure under the Islamic Emirate
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2. Taxing the Afghan Nation: What the Taleban’s pursuit of domestic revenues means for citizens, the economy and the state (Special Report)

Authors: Kate Clark and the AAN Team

Date: 28 September 2022 

On 15 August 2021, much in Afghanistan was overturned or radically altered. The insurgents became the rulers and the old elites fled. Afghanistan’s relationship with the rest of the world ruptured and the country became poorer overnight. It also went from being a state where the administration was reliant on foreign donors and military support to one where the government depends for funding on the domestic economy and its taxpaying citizens. AAN’s new special report is a first attempt at making sense of one of the most fundamental of these changes – the Emirate’s need to tax its citizens. Kate Clark, with research support from the AAN team, explores the ramifications of the Taleban’s serious-minded pursuit of taxation, the consequences to citizens across the country, to state power and the dilemmas it has created for donors.

New AAN Special Report: “Taxing the Afghan Nation: What the Taleban’s pursuit of domestic revenues means for citizens, the economy and the state”
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3. Killing the Goose that Laid the Golden Egg: Afghanistan’s economic distress post-15 August

Author: Kate Clark

Date: 11 November 2021

Even as the Taleban celebrated their unprecedented victory on 15 August 2021, Afghanistan was transformed. It was poorer, more isolated and extremely fragile, economically. Most aid stopped, sanctions came into effect against the Taleban government and foreign reserves were frozen. Economic disaster came on top of the worst drought in years and the ill-effects of the only recently-ended conflict. Just a month after the fall of Kabul, the World Food Programme assessed that only one in twenty Afghan households had enough to eat. In this report, Kate Clark maps out developments to Afghanistan’s economy and the Taleban’s own fortunes since 15 August, and looks at how politics will decide whether the Taleban and Afghanistan’s erstwhile donors can find ways – or not – to support Afghanistan’s ever-increasing poor.

Killing the Goose that Laid the Golden Egg: Afghanistan’s economic distress post-15 August
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4. Afghanistan’s looming economic catastrophe: What next for the Taleban and the donors?

Authors: Hannah Duncan and Kate Clark

Date: 6 September 2021

When the Taleban captured Kabul, it ruptured Afghanistan’s relationship with the international community. The problems now facing its aid-dependent economy and new Taleban rulers are rapidly piling up. Adding to the damage already wrought by conflict, pandemic and drought, foreign aid is now suspended and in doubt, the treasury is empty and foreign reserves held overseas are frozen, meaning the banking system is paralysed, and many of the country’s skilled workforce have fled the country. Economic catastrophe looms for a population, half of whom were already living in poverty. As Hannah Duncan and Kate Clark report, mitigating economic disaster would require revising existing sanctions regimes and continuing aid. Negotiations between actors who have been hostile for years – the Taleban and the donor governments – will mean navigating a legal, practical and ethical minefield. Both sides will need to ask themselves: What is the cost of preventing collapse?

Afghanistan’s looming economic catastrophe: What next for the Taleban and the donors?
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Section 3: Consequences for international assistance

1. Bans on Women Working, Then and Now: The dilemmas of delivering humanitarian aid during the first and second Islamic Emirates

Author: Kate Clark 

Date: 16 April 2023 

Anyone who lived in Afghanistan during the first Islamic Emirate will find the current stand-off between the Taleban and NGOs – and now the United Nations – over the issue of women working familiar. There is the same clashing of principles: the Emirate’s position that women must largely be kept inside the home to avoid the risk of social disorder and sin, and the humanitarians’ that the equitable and effective delivery of aid is impossible without female workers. The choices on the humanitarian side also feel familiar, and all unattractive: comply, boycott or fudge. AAN’s Kate Clark has spoken to people who were working in the humanitarian sector in Afghanistan in the 1990s, and who continue to follow Afghanistan, to get their insights into the similarities and differences – and what, possibly, might help.

Bans on Women Working, Then and Now: The dilemmas of delivering humanitarian aid during the first and second Islamic Emirates
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2. Two Security Council Resolutions and a Humanitarian Appeal: UN grapples with its role in Afghanistan

Authors: Jelena Bjelica & Roxanna Shapour

Date: 19 March 2023 

Recent complex negotiations surrounding UNAMA’s mandate in Taleban-run Afghanistan have shone a light on longstanding divisions among UN Security Council members concerning key issues, such as human rights, women’s rights, peace and security and governance. This year, on 16 March 2023, member states agreed to resolve their differences by passing two Afghanistan-related resolutions; one that extended the UNAMA mandate until 17 March 2024 and another that requested an independent assessment of in-country efforts, with a report to be presented to the council before 17 November 2023. Meanwhile, the new Humanitarian Response Plan, which requests USD 4.6 billion to support 23.7 million Afghans in need, was launched in early March after a two-month delay. Defining the coming months as an “operational trial” period, the HRP plans for enhanced monitoring to ensure minimal conditions are met. AAN’s Jelena Bjelica and Roxanna Shapour take a look at the latest developments related to the UN and humanitarian aid to Afghanistan and wonder what the efforts to increase scrutiny might bring.

Two Security Council Resolutions and a Humanitarian Appeal: UN grapples with its role in Afghanistan
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3. Donors’ Dilemma: How to provide aid to a country whose government you do not recognise

Author: Roxanna Shapour

Date: 5 July 2022

It has been ten months since the Taleban took control of Afghanistan, setting off economic collapse on an unprecedented scale that has seen millions of Afghans fall into extreme poverty. While the Taleban continue to snub calls from Western capitals to respect human rights, including the rights of Afghan girls and women, donor countries have tried to navigate the myriad difficult choices surrounding providing aid beyond the strictly humanitarian for Afghanistan. In this report, AAN’s Roxanna Shapour looks at how engagement between donors and the Taleban has gone so far, what the future of aid to Afghanistan might look like, how donors might bridge the distance between their demands and the Taleban’s increasing restrictions, and what mechanisms exist that might allow for non-humanitarian assistance.

Donors’ Dilemma: How to provide aid to a country whose government you do not recognise
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4. A Pledging Conference for Afghanistan… But what about beyond the humanitarian?

Authors: Roxanna Shapour and Kate Clark 

Date: 31 March 2022

The United Kingdom, Germany, Qatar and the United Nations are co-hosting a virtual, ministerial-level, international, pledging summit for Afghanistan, today. It aims to raise USD 4.4 billion for lifesaving humanitarian support to 22.1 million Afghans who are at “immediate and catastrophic levels of need.” Afghanistan’s Taleban government, in power since August 2021 but not recognised by any state is, notably, not among the invitees. In this report, AAN’s Roxanna Shapour and Kate Clark have been looking at what is in the Humanitarian Response Plan, and what is not there, and at potential problems hanging over the conference like last week’s Taleban ban on secondary schooling for girls, which for donors could complicate the provision of aid beyond the strictly humanitarian.

A Pledging Conference for Afghanistan… But what about beyond the humanitarian?
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[1] This research fed into the first of two end-of-year reports on the conflict. Afghanistan’s Conflict in 2021 (1): The Taleban’s sweeping offensive as told by people on the ground by Martine van Bijlert and the AAN team and published on 28 December 2021. A second report,Afghanistan’s Conflict in 2021 (2): Republic collapse and Taleban victory in the long-view of history, by Kate Clark, published on 30 December 2022, looks at the reasons for the Republic’s collapse.

References

References
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