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.A boy walks on a street in Kandahar City looking for recyclable materials.
Photo: Javed Tanveer/AFP, 27 October 2021
Highlights of the report
- The Taleban had no plans for how they would run the Afghan state without aid, an entirely predictable outcome of their decision to push for a military victory.
- By seizing power, the Taleban ruptured Afghanistan’s relations with donors who had provided the equivalent of 43 per cent of GDP and funded 75 per cent of public expenditure. UN and US sanctions applied to the Taleban as an armed opposition group went into effect against the Taleban as government. Most aid and Afghanistan’s currency reserves were frozen and the banking sector virtually closed down.
- The repercussions of the post-15 August economic collapse, on top of severe and continuing drought, have been savage. An estimated 47 per cent of Afghans are now at crisis or emergency levels of food insecurity. This is projected to rise to 55 per cent over the lean winter season, both in rural areas and the cities.
- This report maps out the Taleban’s revenues before and after their capture of power. In opposition, they taxed the population under their control effectively, but were able to leave public services entirely up to the government, NGOs and ultimately donors to fund/deliver. Now, in power, the Taleban find government revenues greatly reduced and they have an entire population to look after. So far, the new administration appears to have focused revenues on paying fighters, with, lately, some teachers and other government workers also being paid.
- Given the scale of the economic crisis, foreign assistance is vital, but both the Taleban and western governments face ethical and practical problems dealing with each. The report considers what the Taleban could do to make it easier for western nations to provide assistance. It also considers the implications of the lack of action by the key outside player – the United States.
- Humanitarian assistance has been the one relatively easy option for western donors to take, but because of the banking crisis, it is proving difficult to deliver. Moreover, the sums promised are relatively tiny compared to the funds that had flowed into Afghanistan. They will help the economy only at the margins.
- There is talk about Afghanistan ‘going back’ to the 1990s, but the situation is actually much grimmer. The population is larger, with far less agricultural land per head of population and both neighbouring and European countries are far less keen on migrants/refugees.
- Assistance will provide some immediate relief, but will not help the fundamental dysfunction of the Afghan economy, which has been an outlier in its high dependence on aid and other foreign income – support to the security sector and money spent by the foreign armies. The Republic should have started properly dealing with this dependence when it had the means. Even if the immediate humanitarian crisis is resolved, there is little prospect of Afghanistan not once again becoming one of the poorest nations on the earth, isolated, with an immiserated middle class and the economic distress deep and widespread in both urban and rural areas.
The economic repercussions of the Taleban taking over a state dependent on funding from foreign donors hostile to them were evident from day 1 of their rule. We laid these out in detail in a previous report published on 6 September, but in summary, they are:
The Afghan economy was already weak, undiversified and heavily dependent on unearned foreign income, known by economists as ‘rent’ because it is income gained not through work or effort. That rent included civilian aid, financial support to the Afghan National Security Forces (ANSF) and money spent by foreign armies in the country. The rent was so huge, Afghanistan was categorised, as we reported, as a ‘rentier state’, with implications for democracy, corruption and growth.
Foreign grants, at around USD 8.5 billion per year, of military and civilian assistance comprised the equivalent of 43 per cent of Afghanistan’s GDP and funded 75 per cent of public expenditures, 50 per cent of the budget, and around 90 per cent of government spending on security.
In 2021, the second severe drought in three years (see this new AAN report) and fighting which, for some farmers, disrupted sowing, irrigation and harvest, compounded the economic damage done by Covid-19.
When the Taleban captured power, United States and United Nations sanctions, which had been targeting an insurgent movement (US sanctions) or its leaders plus the ‘Haqqani Network’ (UN) suddenly applied to a government. Even without those sanctions, the Taleban’s capture of power by military force would have made relations with donors who had backed the Republic highly problematic.
The consequences of the takeover were calamitous and immediate: the US froze Afghanistan’s foreign reserves mainlyheld in the US, the World Bank and IMF halted planned transfers of funds and many donors froze aid.
Rent had enabled Afghanistan to run a massive trade deficit, with imported goods worth six times the value of exports. That rent is no longer available to pay for medicine, fuel, electricity, wheat, rice and other basics.
The Central Bank held only small reserves in Kabul (batches of dollars had been flown in periodically). With the supply of dollars cut-off, the banking sector was paralysed, civil service salaries could not be paid, much of the state stopped working and the Afghan economy went into free fall.
On 15 August, Afghanistan went overnight from being a global outlier in terms of the massive scale of the foreign assistance it was receiving to one getting tiny amounts. Adjusting just to normal levels of aid for a poor country would always have been painful, even if it was done carefully and over a long period – it was something the Republic should have properly embarked on when it had the means to do so. As it is, the fall in rent was sudden, colossal and unplanned, and mitigating its ill effects is made so much more difficult because of UN and US sanctions. They have helped put Afghanistan’s foreign reserves out of reach of the Taleban, paralysed the banking system and placed severe obstacles to carrying out routine international commercial transactions, sending remittances (previously four per cent of GDP, according to the latest Integrated Food Security Phase Classification (IPC) report), and delivering aid.
The first section of this report attempts to map out the Taleban’s own changed economic fortunes since 15 August. In doing so, it reveals just how dependent the Taleban also were and are on the rentier economy in their funding and governance. The Taleban’s economic fortunes changed as suddenly and dramatically as their country’s on 15 August because, when they won control of the Afghan state, they transformed it. In capturing power, the Taleban, in effect, killed the goose that had been laying the golden eggs. As a group, their revenues are now greater than when they were in armed opposition, but as a government, those revenues are far, far less than the Republic had. Plus, the Taleban are now responsible for a whole population. The economic shock also has repercussions for how the Taleban rule and their dealings with the western powers.
Economic prospects of the Taleban
Before they took power, the Taleban had controlled or influenced large areas of the country and were able to ‘tax’ the population and the various economic activities people there undertook. These included: the agricultural harvest (ushr), especially opium; cross-border trade, both legal and illegal; mines; salaries, including of civil servants and NGO staff; business profits and; projects by NGOs and private companies. They also gained revenue in the form of protection money from shops, mobile phone companies and other businesses and from exacting money from travellers at checkpoints. The Taleban also received donations from Afghan and foreign supporters.
This was in effect free money. Funds could go straight into the ‘jihad’ with no need to plough any of it, including taxes taken from the population, into services such as health and education. As AAN research in 2018-19 showed in six districts controlled or influenced by the Taleban, public services continued to be delivered and/or paid for, variously, by the old government, NGOs and donors. When the Taleban captured power, they gained full control of various revenue streams – although many had diminished or disappeared entirely ) – but at the same time, they also acquired a population needing services. As the new government, rather than an armed opposition group, they are expected to provide public services. Moreover, the population’s expectations after twenty years of the aid-assisted Republic and the improvements it was able to make to health services, access to education and infrastructure, were far higher than when the Taleban were last ruling Afghanistan in the 1990s.
Working out what has changed in terms of Taleban revenue since 15 August is tricky. The author found recent research by David Mansfield and Graeme Smith helpful for providing a context for thinking about the Taleban’s changed fortunes. Their study, published in August just before the fall of Kabul, mapped out the formal and informal taxes and bribes paid to the government, the Taleban and government-affiliated actors in Nimruz province in Afghanistan’s southwest.
Nimruz is a particular place: it has very little good agricultural land, a lively cross-border trade in legal and illegal goods – people and drugs going one way, fuel and legal goods coming the other – and relatively little development assistance. Other provinces had a greater reliance on foreign assistance, government spending, civilian or ANSF salaries, or a more significant agricultural base. Even so, Mansfield and Smith’s research points to some tentative conclusions, and to some issues that need to be watched, when calculating the Taleban’s fortunes now that the group is in power.
By 2020, official statistics, quoted by Mansfield and Smith, showed the Afghan government annually taking USD 50 million in direct taxes and USD 43.2 million in customs in Nimruz; the border crossing at Zaranj is the fourth highest-earning crossing in the country. The two authors calculated, however, that the actual cross-border customs revenue in Nimruz was four times higher than was officially reported, in the order of USD 176 million per year, USD 132.3 million from transit goods and USD 43.8 million from fuel. They put the discrepancy down to large quantities of goods, especially fuel, entering the country undeclared, with officials bribed to undervalue loads or misreport the quantity.
The authors also tracked Taleban taxation on cross-border trade, which they say the group had carried out ‘systemically’, they said, since 2018. They estimated the Taleban collected “$17.5 million on fuel and $23.4 million on transit goods [ie legal goods] in 2020, accounting for 79% of the estimated $54.3 million it collects in taxes each year in Nimroz province.” Making up the other 21 per cent of the Taleban’s estimated revenues were (in order of size): taxes on illegal drugs (cultivation, production and smuggling), legal crops, land, people smuggling and development assistance.
Finally, the study’s authors calculated how much people affiliated with government – officials or members of the Afghan National Security Forces, typically networked and passing money upwards to MPs, ministers and other senior figures in the province and/or country – were taking in bribes. Their estimate was USD 36 million, a figure almost equivalent to official customs revenue. The goods/activities on which the bribes were taken were (in order of size): transit goods, people smuggling, opiate smuggling, legal fuel, development assistance, methamphetamine smuggling and fuel smuggling.
Looking at the situation now in Nimruz, as at other border crossings, the trade available to be taxed is smaller since the Taleban takeover. The loss of 43 per cent of GDP overnight, even without the additional obstacles faced by many traders trying to work without a functioning banking sector, necessarily means there is less money for imports. The one exception, at Nimruz at any rate, is fuel. The Taleban, under sanctions themselves, are less worried about the consequences of breaking international sanctions on Iran; the relative price stability of petrol is attributed to a greater supply now coming from Iran. Illegal trade will continue and may increase; at a time of economic hardship, more Afghans are likely to try to get to Iran and, as a general rule, more farmers who can grow opium, turn to it in times of uncertainty.
Even though trade in general is down, there is no longer a three-way split on payments made by traders, farmers and others, so a far greater proportion of what is paid will come to the Taleban in government than it did to the Taleban in armed opposition. However, not all the money that used to go to the government and corrupt officials and ANSF officers will now automatically accrue to the Taleban in government, unless the Taleban put tax rates up, which would not be popular with citizens. At the same time, the endemic corruption in the old regime and the Taleban’s better reputation for probity makes it fair to assume there will be less ‘leakage’ out of the formal tax system now. However, it will be important to monitor bribe-taking or other abuses of power involving financial gain.
As members of an armed opposition group, Taleban commanders were, by Afghan standards, well-disciplined in passing revenue up to the centre. Effective command and control and the principle of obeying one’s superiors that runs strongly through the movement helped ensure there was relatively little of the same leakage seen in the Republic’s administration. With the Taleban now in power and the booty promised from winning the war having proved so meagre, local commanders may not be as enthusiastic about passing all revenues from customs, mines, ushr and zakat on to the centre. If individual commanders do decide to keep some resources back, this would be an important indicator of waning central power and coherence, and would be significant.
Using Nimruz as an example, one can see a pattern to how capturing power has affected Taleban fortunes: they certainly benefit from being in power – they can take more customs revenue as a government than they did as an armed opposition group, but even though revenue collection should be less corrupt and more efficient now than during the Republic, overall, customs revenue is much lower than before 15 August.
At a national level, one calculation of the repercussions to customs revenues by the Taleban’s capture of power has been made by former finance minister Khaled Payenda in a recent interview with AAN. He assessed that the Republic’s potential customs revenue, ie if there had been no smuggling or corruption, was as much as seven or eight million dollars a day. However, since then, “economic collapse and uncertainty” meant “trade has drastically reduced to basic necessities, food and fuel, so the potential custom revenues have also gone down.” Payenda’s estimate for current revenue was potentially 2.5 to 3.7 million USD a day.
Another important sector, mining, is also now under full Taleban control. Government officials speaking to the UN team monitoring sanctions imposed under UN Security Council Resolution 1988 in a report published on 1 June 2021, said there were 709 ‘mining zones’ (not defined) across Afghanistan. The officials said the then government controlled 281, the Taleban 280 and ‘local warlords’ 148. “The Taliban,” reported the Monitoring Team, “derived income from mining directly under their control and are assessed to derive further revenues from at least some of the mining areas controlled by the warlords.” Given that so many mines were already in areas under Taleban control or influence, the group’s capture of the entire country will have pushed revenues up, but only to a certain extent.
In research conducted by AAN over winter 2020/2021 in three districts under Taleban control, we found, as the report on Andar in Ghazni put it, the Taleban “seriously and actively tax[ing] all economic and business activities.” Residents reported the Taleban taxing the harvest, especially opium, shops, businesses and salaries, with local fighters seconded for a year as tax collectors and reporting to the Financial Commission (see also reports on Nad Ali in Helmand and Dasht-e Archi in Kunduz.) In many districts captured by the Taleban in summer 2021, residents reported the new rulers immediately and systematically taxing the population that had fallen under their control (as well as billeting fighters in villages and expecting local people to feed them). Such ‘taxes’ are taken yearly, so unlike customs and taxes on minerals, will not provide steady revenues to the administration.
As to the taxes that the Republic used to take on salaries and profits, those sources of revenue will have shrunk, in some sectors to nearly nothing, now there is no longer money to pay the civil service, the ANSF does not exist, the aid sector has contracted vastly and many businesses are struggling. The services sector, including construction, which has probably been hardest hit by the huge reduction in rent, will also generate far less tax.
Ironically for the powers that have imposed sanctions, it is the more formal parts of the Afghan economy, businesses keeping records and paying taxes, that were internationalised to some extent into the global financial system, that will be hardest hit; they include telecoms, banking and larger companies. The illicit and informal sectors are likely to do better in the new environment – hawala money changers, illegal mining, narcotics and the smuggling of goods and people. The Taleban will be able to continue to tax some of these activities even if the Republic could not. However, much of the informal and illicit economy was still dependent on the formal economy, ultimately also fed by the aid and other rent that used to flow so freely into the country.
Mitigating the crisis – economics and politics
As an opposition group, the Taleban could easily access the revenues they needed to fight, while public services could be left to the Republic and its foreign allies to fund and provide. In power, they find themselves far poorer than the previous government, but also now have an entire population to provide for, with expectations greater than when they were last in power in Kabul in 1996-2001.
Mitigating the economic crisis that has befallen Afghans to any meaningful extent would need both the Taleban and the western powers to take difficult political decisions. The ethical and practical dilemmas run both ways. Donors are concerned about assistance helping stabilise the new Taleban state, one they see as unwholesome for a whole host of reasons – breaches of human and women’s rights, links to foreign jihadist groups, the exclusivity of the Taleban government etc. Taleban beliefs run contrary to the donors’, that women should not have public roles and should be subject to their male relatives’ guardianship, and that a God-given victory should not be compromised. They also have different needs and priorities, including to consolidate their rule and reward those who fought so long and triumphed over the former ‘puppet government’ and its American backer.
One consequence of these considerations for the Taleban was the make-up of their administration, announced in three rounds, on 7 September (see AAN reporting here), 21 September and 4 October (see AAN analysis here). The new administration was extremely narrow, with senior officials being drawn from their own ranks. It is all male, almost entirely madrassa-educated and overwhelmingly Pashtun. The new administration looked like a sharing out of the spoils of war, primarily an attempt to keep various powerful players and networks within the Taleban movement happy.
The new administration is one example of how the Taleban have not wanted to make the sort of compromises that might have allowed the donors to take a more ‘business as usual’ approach. If the leadership had brought non-Taleban into the government, let girls’ secondary schools stay open and women continue going to university and to paid work, and not carried out reprisal attacks, it would have been easier for donors to countenance treating the new administration as the de facto power in the land. Several western diplomats described the Taleban takeover as so swift, complete and sudden that there was a moment when accepting the Taleban capture of power as a fait accompli had been possible. That window soon closed, one said, because of the absolute lack of compromising or confidence-boosting measures taken by the Taleban.
The Taleban government has taken some small steps to deal with the crisis. It has started sometimes uneasy working relationships with NGOs and UN agencies. The computerised customs system is back up and running, which should help with collection. It has also banned banks from sending money abroad in a bid to stop capital flight, with exceptions for the purchase of food and other necessities. Banks are now allowing some small withdrawals of dollars and afghanis, although the banking system remains stymied. It has transpired that there is a shortage not only of dollars and other hard currency, but also afghanis, because these were printed abroad. This dual shortage may have helped support the afghani whose value has been surprisingly stable this year, until the end of October.
What revenue the Taleban had appeared to be going, at least initially, on paying their fighters, continuing their practice when in opposition. On 10 November, Hasht-e Subh tweeted an announcement by Taleban spokesman Zabihullah Mujahed that teachers’ salaries had been paid for the month of Asad (21 July to 20 August) and they were working on Sunbula (21 August to 20 September). AAN research suggests some teachers and some civil servants have been paid, but this varies across the provinces, and some civil servants have been laid off.
For countries which have been supporting Afghanistan for the last twenty years, the ethical dilemmas over what to do now are grave. Providing any aid requires governments to set aside concerns or find ways to allay their concerns about aid going astray to Taleban or their clients. Donors understand that the Taleban will benefit even from humanitarian aid. If all the assistance goes to the poorest and most needy without discrimination – a very tall order – it would still make it easier for the Taleban to focus their resources on strengthening their control of the state, including, for example, by channelling limited resources to fighters, rather than other citizens. Nonetheless, humanitarian aid is the one relatively easy policy option for donors to take, as it is, in principle, non-political – and there has been some movement on this.
The US Treasury issued two waivers to its sanctions aimed at easing the movement of humanitarian and other relief on 24 September, the US. General License 14 authorises “the U.S. government, NGOs, and certain international organizations and entities, as well as those acting on their behalf, to engage in the provision of humanitarian assistance to Afghanistan or other activities that support basic human needs in Afghanistan.” General License 15 authorises “certain transactions related to the exportation or reexportation of agricultural commodities, medicine, and medical devices (as well as replacement parts, components, and software updates for medical devices).” (See press release here, General License 14 here and General License 15 here.) A 13 September pledging conference convened in Geneva by UN Secretary-General Antonio Guterres raised USD 1.2 billion for humanitarian assistance to Afghanistan. On 12 October, members of the G20 group of major economies held a virtual conference and agreed to provide humanitarian aid to Afghanistan, with the EU pledging 1 billion Euros (media reporting here). At the end of the month, on 26 October, UNAMA was complaining that “less than US$300mil has come through.”
It is worth bearing in mind that there are several hundred million dollars already given and sitting in the donor-provided World Bank administered Afghanistan Reconstruction Trust Fund (ARTF) or earmarked for other projects. Also, as the last section showed, the Taleban government does have revenues from customs and other taxes: donors might want to ask the Taleban how they plan to direct it towards public services and providing relief to their compatriots.
Obstacles to delivering humanitarian – and other assistance
There are two major problems with the current aid strategy. Firstly, with the banking system operating so minimally because of sanctions, getting cash into the country is difficult and burdensome. Risk averse international banks worry more about the consequences of being found in breach of US sanctions than they are attracted by the relatively small benefits of facilitating international transfers into Afghanistan, even if the funds are for humanitarian purposes. Beyond that, moving cash around a country that no longer has a functioning banking system is problematic – how to get salaries to health staff or those distributing food aid, for example. The lack of liquidity is proving a major obstacle for the UN and NGOs.
Secondly, humanitarian aid, even if sufficient to meet immediate needs and delivered successfully, will leave some essential services, notably education, but also development aid (see for example, our latest report on global warming in Afghanistan and how urgent measures needed to mitigate the damage wrought by drought cannot be undertaken because there is no funding). Nor will humanitarian aid close the gap in Afghanistan’s finances: even if all the humanitarian aid pledged at the UN-hosted conference and the G20 had come through, it would still be far, far less than the 8.5 billion dollars that Afghanistan had been getting previously, made up not only of humanitarian, but also development aid and support to the Afghan National Security Forces. Humanitarian assistance will help the wider economy only at the margins, which means there is no end in sight yet to the hardship and distress.
For the US and the members of the UN Security Council, limiting or lifting sanctions is difficult politically and practically. To free up funds for humanitarian assistance, but also to help Afghans beyond the humanitarian, given the reluctance to work with or help the Taleban, needs creative thinking as well as explicit political backing. The key western player that needs to give its backing is the United States, given the clout and reach of its sanctions regime, the fact that it controls most of Afghanistan’s foreign reserves, that it is the largest backer of the World Bank and was previously providing the bulk of aid and security assistance to Afghanistan. Beyond a pledge of USD 144 million in humanitarian aid (see this National Security Council statement on 28 October) and the Treasury waivers – which helped others to get on with delivering humanitarian aid – the US has been notably quiet on Afghanistan.
The White House has given every impression of being paralysed by the shock of the sudden collapse of its ally in Kabul and the victory of its enemy, and by domestic political concerns of how any action will look. Addressing either Afghanistan’s liquidity crisis or expanding the definition of humanitarian assistance would need President Joe Biden to expend political capital. There are risks to action – the Republicans portraying him as helping the Taleban – and inaction – if and when images of starving Afghan children come onto US television screens.
The lack of clear direction from the top was apparent in the briefing given to journalists by the new US Special Representative for Afghanistan, Thomas West (Zalmay Khalilzad’s successor) on 8 November. BBC radio (at 17:06.49) reported that West acknowledged the pressing need to do something and said it was imperative that the US and her allies work together for a stable Afghanistan, but gave no detail. It also reported him saying there would be a new round of Taleban-US talks, but without giving a date. (See also Reuters reporting of West’s briefing here with somewhat different emphasis.)
Complaints about the lack of action are brewing. On 11 October, UN Secretary-General Antonio Guterres urged “the world to take action and inject liquidity into the Afghan economy to avoid collapse,” stressing that any measures taken would need to bypass the Taleban government (media report from 11 October here). On 3 November, the UN Office for the Coordination of Humanitarian Affairs (UNOCHA) urged, donors to “ensure transactions and other activities required for humanitarian operations are excluded from the scope of sanctions regimes to allow humanitarian activities to continue without impediment.” It also said it was concerned about ‘conditional humanitarianism’ and attempts to “‘leverage’ humanitarian assistance for political purposes.”
At the same time, the Taleban have not been able, or have not wanted to act in ways that would help the donors. On 3 November, as well as criticising the donors, UNOCHA also urged the Taleban, the “de facto authorities to deliver on their promises to protect the rights of all Afghan citizens — including women, children, minority communities, former government employees,” including “freedom of movement for women to work and to enjoy their basic rights — and for girls to have effective access to all levels of education.” Part of that would be ensuring that female aid workers can continue to work. Yet, according to Human Rights Watch, reporting on 4 November using work by UNOCHA mapping agreements between the Taleban provincial authorities and aid agencies, Taleban rules “prohibiting most women from operating as aid workers are worsening the humanitarian crisis. Countrywide restrictions mean that aid will reach fewer families in need, particularly women-headed households.”
Many donors would like to start supporting education again, especially given how crucial it is for Afghan women and girls, both as pupils/students and as working teachers – teachers are one of the largest group of paid Afghan women workers. UNICEF, Reuters reported on 3 November, is planning to start paying teachers’ salaries directly, without channelling money through the Taleban administration. Yet, supporting such measures would be so much easier if the Taleban clearly announced that older Afghan girls could go to school. As Human Rights Watch’s Heather Barr tweeted, if girls’ secondary schools are still closed, that would be problematic for donors, “who can’t fund discriminatory systems.”
The EU has been very clear about what it expects from the new administration in Kabul. Apart from what it calls ‘humanitarian plus’ aid, which includes assistance on health, to be channelled through international organisations on the ground, any resumption of normal development aid to Afghanistan is conditional. A spokesperson said the Taleban would have to respect five ‘benchmarks’: grant free passage to those wanting to leave Afghanistan; respect human and women’s rights, rule of law and media freedom; prevent terrorists from using Afghan soil; allow free access to humanitarian operations; “establish an inclusive and representative government through negotiations.”
The Taleban, while welcoming foreign aid, have chosen not to change policies to help the donors help their hungry compatriots. They continue to insist their government should be recognised, foreign reserves unfrozen without conditions (see media report here), sanctions dropped (media report here) and Afghanistan treated as a sovereign nation.
Given the ‘difficult’ demands and apparent impasse from western donors, the Taleban may look for alternative support from the region. So far, the most significant help has come from Uzbekistan and Tajikistan which have continued to supply electricity, despite not being paid (Afghanistan imports 78 per cent of its electricity). In early October, with the debt about to reach USD 85 million, the head of Da Afghanistan Breshna Sherkat, Safiullah Ahmadzai, said they had appealed to UNAMA to pay the country’s electricity bill as part of humanitarian aid (see this media report). The debt has mounted. As to other neighbours, China has pledged USD 30 million worth of aid, Kazakhstan has donated 5,000 tons of wheat flour and India has announced it will send 50,000 metric tonnes of wheat. It is difficult to see any regional player matching the resources the US and its allies have poured into the country over the last two decades. The region is important to Afghanistan economically – whether neighbours maintain open borders for Afghan exports, or example – but the regional players cannot, or will not, fill the hole left in the Afghan economy by the near cessation of rent which had flowed from the US and other western powers.
Neighbouring countries are also asking for help to deal with the Afghan crisis. They include Pakistan, which supported the Taleban’s military campaign so wholeheartedly and Iran, also actively hostile to the US presence in Afghanistan. At least some of the aid promised by the west will go to the neighbours and not all of it to supporting Afghan refugees. The billion euro package announced by the EU at the G20 summit, for example, includes help for “Afghanistan’s direct neighbours” for “migration management, as well as in cooperation on terrorism prevention, fight against organised crime and migrant smuggling.”
If the Taleban had hoped for more support from the region, they must be disappointed, and not only by the paucity of aid. In the region, as internationally, no country has recognised the new Taleban government. Instead, Afghanistan’s neighbours have been urging the Taleban to change their administration and some of their policies; at least some of the discussion has come in the context of aid and the economy. All of Afghanistan’s immediate neighbours – Iran, China, Tajikistan, Turkmenistan, Pakistan and Uzbekistan – as well as Turkey and Russia, either individually or as participants in a regional conference on Afghanistan held on 27 October in Tehran, have called for the Taleban to establish an inclusive government. Afghanistan’s neighbours are not outliers in this. It has also been a central message from the UN.
If the Taleban want international support beyond the humanitarian, they must deal with the western donors, and if those donors wish to help Afghans, they have to find ways to ease the banking crisis and to bypass the new government as far as possible, but also work with the Taleban. Given the historical enmity between the Taleban and the west, and their respective mindsets, it is difficult to be optimistic that a resumption of development aid will come soon or to any large extent.
When they were dealing with the Republic, under both Hamed Karzai and Ashraf Ghani, donors’ efforts to make development aid conditional had mixed results. While some, such as the World Bank’s ARTF Incentive Programme, which focused on key reforms, delivered tangible results, others, such as the various mutual accountability frameworks, lacked focus and were vague and unquantifiable and typically resulted in failure. The Taleban-donor relationship will hardly be any more effective. However, while before 15 August, the default was always to keep the funding going anyway, the new default is likely to be to not re-start funding to any great extent.
Moreover, still behind everything, increasing assistance will not help with the long-term problem of Afghanistan’s aid-dependent economy.
A grim outlook
The severity of the economic collapse triggered by the Taleban capture of power, coming on top of the devastating drought, was manifested swiftly. The latest Integrated Food Security Phase Classification (IPC) report for the post-harvest season – September and October 2021 – found almost 19 million Afghans were “facing high levels of acute food insecurity,” with nearly 12 million Afghans ‘in crisis’ and 6.8 million more ‘in emergency’. In other words, an estimated 47 per cent of the population, both rural and urban, required “urgent action to save their lives, reduce food gaps and protect their livelihood.” IPC projections for the ‘winter lean season’ – November 2021 to March 2022 – are for food insecurity to worsen, with four million more people pushed into crisis or emergency, altogether an estimated 55 per cent of the population, the highest figure ever. Driving the hunger, the IPC predicted, will be continued drought, high food prices, sanctions on the Taleban, growing unemployment and possibly increased displacement, reduced incomes, lower international and domestic remittances and continuing obstacles to humanitarian assistance, many related to the financial crisis and limited physical access during the winter.
The grievous consequences of the economic collapse are being reported daily: collapsing livestock prices, households selling their possessions, families taking children out of school to work and marrying very young daughters to men who would usually be considered unsuitable – old, with wives already, or from outside the clan, which both reduces the number of mouths to feed and brings in a bride price, making the survival of the household more viable. Parents of malnourished children, reported AP on 8 November, may find a hospital or clinic still open, even though medical staff themselves have typically not been paid for months, or they may find health facilities have shut completely because of lack of funding. Typically, as well, it will be women and girls who suffer disproportionately. When poverty strikes, they are often the last in the household to eat.
Yet even if the Taleban, the donors and agencies manage to work together so that Afghans survive the winter and the immediate humanitarian crisis, it is hard to see the country not again becoming one of the poorest in the world, isolated, with a middle class immiserated and poverty in urban areas particularly savage. A return to the Afghanistan of the 1990s is now spoken about, to life as it was before the US intervention and the huge influx of rent. Yet, the poverty this time can only be predicted to be worse and more keenly felt. Afghanistan’s population is far larger after two decades of health spending, which drastically reduced infant and maternal mortality and for many, rising living standards, at least for a while. There is less agricultural land per head of population which means that subsistence agriculture will be able to sustain a smaller proportion of the population than it did in the 1990s. Out-migration has also become more difficult, with both Iran and Pakistan less hospitable than they were in the 1990s and European states viewing migrants generally with hostility, whatever their reasons for travel.
Even what should have been a boon if no other existed, the end of the fighting, if looked at in purely national economic terms, still does not make up for the losses. There will certainly be a peace dividend in places where conflict had made farming, travel and transport of goods difficult. It should now be easier and cheaper, for example, for those farmers to get crops to market who had previously been hampered by conflict and predation by different armed actors and officials. An end to the conflict also means that access for NGOs and the UN is easier than it has been for years. Even so, the economic benefits flowing from the peace will still only be marginal nationally compared to the harm done by the absolute loss in foreign income and the isolation Afghanistan now faces.
Concluding her 2020 report on Afghanistan as a rentier state, the author wrote:
…The Taleban [have] made no proposals about how they expect to rule Afghanistan without the external rent. Taleban negotiators have said the US has promised aid after foreign troops are withdrawn; this, they said, was something they would welcome. “We have told them,” [Deputy Head of the Taleban’s political office in Doha] Sher Muhammad Abbas Stanakzai told the Voice of America radio station in January 2019, “that after ending your military intervention, we will welcome U.S. engineers, doctors and others if they want to come back for reconstruction of Afghanistan.” The US did commission proposals from the World Bank to look at aid after a deal. However, officials in Washington told this author in 2019 that such support would be highly conditional and if the Taleban expected to ‘walk into Kabul’ as military victors, to rule exclusively or dismantle the civil and political gains of the post-2001 era, they could not also expect financial support. Other donors have also made this clear.
It may be that an intra-Afghan peace deal is reached, aid continues and international interest in Afghanistan is sustained into a new era. Even then, all the problems of the rentier state, the gap between the vision at Bonn and the constitution and what has emerged, would remain: the democratic deficit, the untouchability of those in power, inequality, poverty and corruption. The question would also still persist, of what happens to Afghanistan when the rent does eventually stop.
An alternative scenario is also all too easy to imagine, that the US withdraws military and financial support and ‘walks away’… If that were [to be] the case, the political system and economy built up since 2001 would suddenly appear very fragile indeed.
Just how fragile the rentier economy was is now evident. Almost three months on from the Taleban’s seizure of power, the scale of the consequences of their decision to push for military victory is abundantly clear. Yet, neither they nor Afghanistan’s former backers have begun to put together policies to deal with the economic devastation, nor made the compromises that would allow large-scale relief to flow.
Edited by Roxanna Shapour
This article was last updated on 24 Nov 2021