The writer heads the Sustainable Development Policy Institute.
“We have not seen this level of near-universal poverty in any country in recent history,” said Ms Kanni Wignaraja, assistant secretary of the United Nations Development Programme, last month, while referring to the deteriorating economic situation of Afghanistan. The UN estimates that the percentage of the Afghan population living below less than $1.90 when the Taliban took over will increase from 50 percent to 97 percent by next summer.
The above shocking numbers were partly due to changing weather patterns, prolonged periods of drought accompanied by above-average temperatures. Food insecurity further worsened after the change in regime in Kabul. According to the World Food Program’s (WFP) estimates released in the beginning of this month, three million Afghans were at the brink of famine. Likewise, an equal number of children are malnourished. Another 23 million, in a country of 38 million, faced acute hunger. Out of those, 8.7 million were only one step behind famine: in WFP language, in a state of emergency. Children and women in Afghanistan are the worst affected by this situation. There are four million internally displaced persons in Afghanistan; of them, 80 percent are women and children.
In its recent story, ‘The Economist’ has described the worsening situation in Afghanistan in these words, “Locals report cases of entire families starving to death in their homes. Hospital wards are taking in emaciated children, including 11-year-olds who weigh just 13kg. Poor Afghans are selling their remaining possessions for food. Some are selling their daughters. The misery is as bad in the cities as it is in the countryside. As the winter sets in, the agony will only deepen.”
A closer analysis reveals that ‘Western Coalition Forces’ were merely interested in maintaining a status quo in war-torn Afghanistan during the last two decades. They did nothing to stabilise Afghanistan as a country.
Under twenty years of coalition-supported rule, the Afghan economy did not prove to be much different from its armed forces. Both collapsed without showing any sign of resistance. While a strategic affairs expert can tell you about the armed forces, let me describe why the Afghan economy collapsed after the Taliban’s victory.
It would not be wrong to say that successive governments in Afghanistan were dependent on foreign aid. Till August 2021 (before the Taliban interim government), Afghanistan used to receive $8.5 billion per annum as foreign aid. That external financing was equal to 45 percent of its GDP, and financed 75 percent of the government budget, including almost all health, education and security spending.
Almost 80 percent of its electricity needs are met through imports from neighbouring countries (from Uzbekistan, Tajikistan, Turkmenistan and Iran). Other essential imports include wheat (from Kazakhstan, Uzbekistan, and Pakistan), fuel (from Iran, Turkmenistan, Kazakhstan, and Uzbekistan), and medicines (from India, Pakistan, and Iran). Since America has frozen Afghan assets worth $9 billion, it is unable to pay for its imports.
The Afghan government does not print its local currency and hence is facing a shortage of it. Half a million soldiers and police personnel have lost their jobs, and civil servants, including 220,000 teachers, have gone unpaid for months. Only last week, the Taliban government made partial payments to select civil servants through the meagre revenue collected during the three months of their rule.
The US lists the Taliban as specially designated global terrorists (SDGT) so routing payments through US dollar payment system is fraught with criminal liability. As per the UN Security Council’s Resolution 1988 (mandatory implementation by all countries), the Afghan Taliban as an entity are not sanctioned. However, some cabinet members are listed under UNSC 1988. Hence dealing with the Taliban may invoke international sanctions. The US Office for Foreign Assets Control (OFAC) has frozen the assets of the Afghan government. And the Taliban government is yet to be recognised by any country in the world.
Due to the sanctions, Afghanistan’s commercial banks face difficulties in transactions with correspondent banks and interbank placements. They are at risk of insolvency. Strict withdrawal limits have been imposed on depositors’ local currency/foreign currency accounts. This has undermined payments for general imports, leading to a shortage of critical imports such as food, fuel and electricity.
The OFAC, while upholding and enforcing US sanctions against the Taliban, the Haqqani Network, and other sanctioned entities, has issued General License (GL) 14 and GL15. Through GL14, the US Treasury will continue to work with financial institutions, international organisations, and the NGO community to ease the flow of critical resources, like agricultural goods, medicine, and other essential supplies, to people in need.
Through GL15, certain transactions related to exporting or re-exporting agricultural commodities, medicine, and medical devices are authorised.
Mexico, Ireland and Norway (UNSC members) and international NGOs support exceptions of humanitarian assistance as part of the UN sanction regime. Likewise, Switzerland, Chad and the Philippines (and a few others) have enacted national legislation to protect humanitarian assistance from material support offences. Despite the backing of the above-mentioned countries, and OFAC’s GL 14 & 15, routing US dollars funds transfer to Afghanistan is exceedingly complicated.
In September 2021, donors pledged $1 billion in response to the UN’s ‘flash appeal’ for $600 million. However, only one-third of those pledges could materialise. The European Union promised $1.15 billion in October. Yet 300 million euros of that had already been committed, and much of the rest will be provided to Afghanistan’s neighbours so they may send humanitarian assistance. The WFP requires around $220 million a month to avert a food crisis during the harsh winter months.
Pakistan may face the direct brunt of the evolving humanitarian crisis in Afghanistan. In case of an economic collapse (which may be quite soon under the existing scenario), Pakistan needs to be ready to host up to another one million, mostly non-vaccinated both for Covid-19 and polio, refugees. Sharing its essential imports (wheat, petroleum products, and vaccines) with the refugees would further increase the current account deficit, affecting the value of the rupee versus US dollar and the interest rate. On top of it, Pakistan would have no filter to distinguish foes (members of anti-Pakistan groups) from friends among the refugees. A few thousand miscreants among a half-million peaceful Afghan refugees would be enough to sabotage the peace that the people of Pakistan achieved after braving hundreds of suicide bombers during the last two decades.
The socio-economic security of Pakistan and, most notably, the dignified assistance of Afghan people, are linked with a resumption of foreign aid if not unfreezing of Afghan assets.
No one can disagree with the Western demands for fundamental rights for Afghans. However, punishing the intended beneficiaries and letting them starve to death because their rulers are not respecting their basic rights is akin to throwing the baby out with the bathwater and must be avoided.
The West can follow the Yemeni model, where Houthis – the de-facto rulers of Yemen – do not enjoy international recognition. However, the international community is funding Yemeni civil servants and the people of Yemen, calling it support to President Hadi’s government in exile (based in Saudi Arabia).
Finally, we don’t have to pay the Taliban to pay the salaries of staffers of basic services delivery departments or take care of food aid in Afghanistan. International NGOs and UN agencies can hire such civil servants as their short-term service providers and pay them directly, bypassing the Taliban. However, a functional banking system is a prerequisite for transferring such aid. The US would have to come up with an innovative solution for that.
Afghans are calling; one hopes the West is paying attention to their miseries.
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