Less large-scale corruption and the aid cutoff mean the adverse impact of the economic shock and subsequent adjustment has been disproportionately felt at the upper end of the Afghan income scale which benefited most from corruption, with smaller percentage reductions in incomes at the lower end. However, there are signs of some petty corruption in Taliban-controlled government agencies, extortion of nongovernmental organizations and the like. Also helping are the much-reduced financial inflows into the country which had previously enabled enormous corruption and waste. As a result, the overall burden on the private sector has been reduced even while formal tax receipts have held up. Taliban actions have greatly reduced corruption in customs and at road checkpoints (most of which have been removed). Private firms have sometimes negotiated successfully with the Taliban over tax rates and other business issues of direct concern to them. Total revenues are on track to fall but by far less than the decline in the economy.Īrguably, the Taliban have taken a more positive (albeit simplistic) approach to the Afghan private sector than the previous government. Revenue collection at border crossings has been remarkable despite the steep drop in imports. How have the Taliban handled economic management over the past year? What have they done well? The new equilibrium leaves most of the Afghan population - up to 70%, according to a World Bank survey - unable to afford food and other necessities, a “famine equilibrium” where many people would starve in the absence of humanitarian help. This is not to say the economic situation is at all good, just that the free fall has stopped. Mining has been a bright spot, with coal output and exports (mainly to Pakistan) on track to double this year to some four million tons. Inflation remains high but is now the result of rising global food and energy prices not exchange rate depreciation or other domestic factors as was the case earlier. Internally, Afghan businesses appear to have stopped further job losses and closures (while not coming anywhere near restoring pre-2021 levels of activity), goods are generally available in markets and wages seem to have stopped declining. Treasury announcements, culminating in General License 20 in February 2022, belatedly clarified that existing sanctions do not apply to Afghanistan as a jurisdiction, the Afghan government or government agencies, and public and private banks or firms. Imports have declined sharply (reflecting the economic collapse and lack of international aid to finance imports) while exports have doubled in recent months. There is no prospect for the economy to resume high growth let alone recover to pre-2021 levels in the foreseeable future.Įxternally, the Afghan currency’s exchange rate has bounced back and is no lower than a year ago. The economy has shrunk by 20% to 30% since August 2021, a great many people have lost jobs and livelihoods, social services have been decimated, poverty and hunger as well as the humanitarian crisis have greatly worsened, hundreds of thousands of people have left the country, government agencies have been denuded of managerial and professional staff, many Afghan businesses have closed or downsized and the bottom has dropped out of already low investment.Īfter a free fall that lasted many months, the Afghan economy is stabilizing but at a much lower equilibrium, leaving people poorer and more vulnerable to privation, hunger and disease. What is the state of the Afghan economy today? USIP’s William Byrd discusses the economic situation in Afghanistan a year since the Taliban came to power the Taliban’s economic management performance the economic, humanitarian and aid outlook and priorities for the United States and other countries. Taliban fighters guard an aid site and give instructions to survivors of the earthquake, in the Gayan district of Afghanistan, June 24, 2022. No country in the world could have absorbed such an enormous economic shock - exacerbated by sanctions, the freezing of Afghanistan’s foreign exchange reserves and foreign banks’ reluctance to do business with the country. Then came the abrupt cutoff of civilian and security aid ( more than $8 billion per year, equivalent to 40% of Afghanistan’s GDP) immediately after the Taliban takeover. and other foreign troops left, human and capital flight, and Taliban advances on the battlefield. Afghanistan’s economy was already deteriorating before the Taliban takeover of the country on August 15, 2021, suffering from severe drought, the COVID-19 pandemic, declining confidence in the previous government, falling international military spending as U.S.
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