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Qasim Khanani

December 7th, 2022

By not developing an international policy, are we punishing the people of Afghanistan? 

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Estimated reading time: 10 minutes

Qasim Khanani

December 7th, 2022

By not developing an international policy, are we punishing the people of Afghanistan? 

0 comments

Estimated reading time: 10 minutes

Background:

August 15th, 2021 marks a historic day for the Afghan people, with the Taliban forcefully taking over the country. Initially, the Taliban signalled a departure from their hard-line rule in the 1990s and   rebranded themselves as defenders of human and gender rights; however, the manifestation was not innocuous and they seem to be more repressive than they were in the past.

The west swiftly responded by imposing sanctions in a bid to compel the Taliban to seek a more moderate path. However, the Taliban have not shifted away from a totalitarian and authoritative regime. Afghanistan now stands at a crossroads between descending into further chaos or weathering the storm and progressing as a society. 

It is imperative to take into account that by not developing an international policy on Afghanistan, it is ultimately (mostly innocent) people of Afghanistan who bear the brunt of the consequences of the western inaction and complacency.

Afghanistan macroeconomic assessment

Afghanistan enjoyed a positively scattered real GDP growth in the past decade, except for 2020, when the pandemic wreaked havoc on the world economy. However, the Taliban takeover on August of 2021 set a complex economic crisis in motion. The World Bank’s Afghanistan Development Update highlighted numerous challenges facing the Afghan economy. The halt of international donor support and loss of access for Afghanistan to its overseas assets created a severe liquidity crisis. The government imposed a withdrawal limit amidst the ongoing bank run and its economy is severely constrained in its ability to pay for imports and receive money for exports.

Moreover, the government cannot access new AFN notes due to sanctions, which makes it unable to control the domestic money supply. The liquidity crises have forced the Taliban regime to undertake a massive reduction in public spending, causing a sharp output decline by approximately 34% (reversing all socio-economic gains made since 2007) in the real sector. In addition, there were disruptions to the supply chain, and the government was unable to pay the salaries of over 700,000 public officials. In addition, Afghanistan suffered a drought, which caused the agricultural output to decline by 5%. The amalgam of reduced public spending, disruptions to the supply chain, inability to control the money supply, and a drought has caused the overall prices to increase by 12.2% year on year, and food inflation to reach 17.7%. Inflation has a rudimentary effect on savings and the value of money – translating that into Afghanistan’s context means over 70% of Afghan households now have an inadequate income to meet basic needs. 

The monetary indicators show that bank deposits have reduced by 12.9% as people now prefer to hoard cash, and the government, to meet the banking sector’s liquidity needs, is using its reserves – raising the risk of default. While complete data is unavailable to assess the exact effect on the banking sector, preliminary signs are anything but positive, especially when we factor in the multiplier effect

Afghanistan’s future economic outlook under the current scenario is bleak and uncertain. The rising debt-to-GDP ratio means debt servicing is a constraint, which is evidenced by Afghanistan missing its debt repayment to multilateral donors in 2021 and early 2022. The formal economy is expected to decline amidst the exit of many firms, with women  disproportionately impacted economically, as they owned a majority of the firms which downsized or shut down, as revealed by a recent survey conducted by the World Bank.  In addition, 97% of the population is expected to decline into poverty if the current economic conditions continue to prevail. The exclusion of women from public life and in the entrepreneurial space is definitely a detriment to Afghanistan’s economy.

Also, without an international approach to Afghanistan, we risk the country further delving into extremism due to a solid and negative co-relationship between extremism and economic growth. The US could lose vital influence over the Taliban regime as non-state actors and neighbouring countries conspire for power in Afghanistan. Moreover, Afghanistan could become a haven for other terrorist organizations such as Al-Qaeda, which have already promised ‘war on all other fronts’. This would have ramifications for US national security and political mileage for the Biden administration, particularly, when considering Afghanistan is on the brink of sliding into another civil war.

Conclusion:

Currently, The education and health sectors are in shambles, with education being heavily male-focused. Afghanistan, as of 2022, ranks lowest worldwide for the global gender gap index, with signs of further deterioration of gender equality. The health sector lacks essential items and hygiene products and is on the ‘brink of collapse.’

Therefore, according to evidence, it is safe to say that an international approach and a coherent and consistent policy needs to be taken when engaging with the Taliban. However, what is certain is that the Afghan people have and are continuing to suffer over the past two decades and urgently need moral and economic support. 

Photo by Sohaib Ghyasi on Unsplash

About the author

Qasim Khanani

Qasim is a masters student studying Public Administration (Specializating in economic policy). Qasim’s research interests lie in inclusive economic growth, sustainable debt financing and political economy

Posted In: Terrorism | Uncategorized

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