Afghan’s Economic Conundrums and Taliban
The economy of Afghanistan has remained in turmoil for centuries, owing to multiple reasons. However, its ongoing economic dilemma is akin to the decades of war and conflicts in the country. From 1979 to 1989, Afghanistan was in the Soviet Jihad, followed by the rise of the Taliban, and later, the 20-year American invasion. Post-withdrawal, Afghanistan is now under Taliban rule. Thus, a country enduring years of war faces significant challenges in rebuilding its economy. Prior to the Taliban takeover, Afghanistan, still recovering from previous disruptions, faced lingering effects of the Covid-19 pandemic and drought in many parts of the country. These factors contributed to severe economic, humanitarian, and security issues.
Before the Taliban’s rise to power, their engagement was primarily with neighboring countries such as Pakistan, Iran, Turkmenistan, Uzbekistan, and Tajikistan. Later, they expanded their engagement to include countries like China, Japan, and Russia. Economic infrastructure development efforts were made throughout the 20th century, transitioning the economy from traditional to centrally plan. However, post-withdrawal, IMF payments to Afghanistan were halted, prompting the Taliban to make efforts to establish a beneficial economic system aimed at alleviating poverty.
‘”The Afghan economy continues to face uncertainty and fragility in the aftermath of the Interim Taliban Administration’s (ITA) takeover. The economy contracted by 25 percent since the takeover, the ITAmanaged to collect $2.2 billion in revenue during Fiscal Year (FY) 2022, comparable to the amount collected in 2019.”
The World Bank Report, 2023
Upon the Taliban’s takeover of Kabul, Afghanistan’s dynamics shifted dramatically. The return of the Taliban has once again turned Afghanistan into a terrorist safe haven, erasing advances made in securing the rights of women and girls. This has led to increased internal instability, a mass exodus of refugees, growing humanitarian crises, and sanctions from the United Nations and European Union, further exacerbating the situation in Afghanistan. UN sanctions were imposed to prevent the Taliban from supporting and conducting international terrorism, while Western powers suspended foreign aid, which accounted for about 40% of Afghanistan’s GDP.
Since the Taliban’s takeover, Afghanistan has faced numerous economic and financial challenges, resulting in a significant increase in poverty and inflation. According to a 2021 World Bank report, job losses and economic deprivation were widespread, with the GDP contracting by 20.7%. Afghanistan’s internal banking system froze, and sanctions from the EU and US were imposed. The humanitarian situation deteriorated significantly, with a record number of conflict-related casualties reported, and millions displaced by conflict within the country.
Despite these challenges, there have been some positive developments. Afghan exports to Pakistan increased significantly, while imports from Pakistan decreased. Revenue collection increased, the banking withdrawal system eased, and the Afghani preserved its value against major currencies. The UN continued cash shipments for humanitarian support, contributing to currency stability. Merchandise trade deficits widened, but trade agreements were signed, and development projects continued.
In conclusion, Afghanistan’s economic condition remains fragile, but the Taliban has made efforts to stabilize the economy, albeit amid ongoing challenges. They have managed to stabilize the Afghan currency, reduce inflation, partially recover imports, double exports, and improve customs and tax collection compared to the previous administration. However, the road to economic recovery remains uncertain, with ongoing conflict, humanitarian crises, and international sanctions posing significant obstacles.
The writer is a BS student.
Great work. It’s so informative