Arjun Raman, King’s College London
Jennifer Wen, Cherry Creek High School
Introduction:
What happens when you take a country already suffering from a lack of industrialization, famine, droughts, and various other economic crises and then introduce a government that bans women from working, restricts NGOs from operating, and faces sanctions by the states that once provided vital humanitarian aid?
Welcome to the Islamic Emirate of Afghanistan.
In 2021, the United States completed a full military withdrawal from Afghanistan, leading to the subsequent collapse of the Ghani administration and the return of the Taliban to power. In the two years since, the Taliban has been markedly unable to prevent Afghanistan’s economic implosion. International aid, which once comprised 80% of Afghanistan’s public expenditures, is all but gone. The nation is now marked by famine and destitution as the Taliban faces an uphill battle to restart the nation’s comatose economy. In this work, we will thoroughly investigate the state of Afghanistan’s economy, delving into instability, opium, and the socioeconomic implications of a regime that bars women from the workplace.
The pre-withdrawal economy: international aid dependency and opioids
Prior to the Taliban’s takeover, Afghanistan’s government was largely dependent on $8.5 billion in foreign aid grants that financed 75 percent of public expenditures (U.S Department of the Treasury, 2022). International aid broadly comprised “health care, education, energy, sanitation, shelter, and food assistance” (Weitz, 2022). Even when this aid was present, 72% of Afghans faced food insecurity (Loschky, 2021) and 90% found it challenging to get by on their ordinary income. Afghanistan has always possessed a largely “poor, agrarian economy with a small manufacturing base, few value-added industries, and a partially dollarized economy” (U.S Department of State, 2019). Most households in Afghanistan relied on agriculture and a combination of subsistence and commercial agriculture. A research paper by the IMF noted that in 2017, Afghanistan’s illicit opiate economy comprised between $4.1 and $6.6 billion, 6 to 11 percent of the nation’s GDP (Zeiler et al, 2019). Farmers in Afghanistan were largely choosing between the Taliban’s illicit and ever growing opiate economy, totalling 80% of the world’s production of the drug, or between farming crops that were often priced too low to be able to feed their families.
Despite receiving significant international aid, poverty rates in Afghanistan were already high at 47-50% before the withdrawal (The World Bank, 2023). Simply put, the nation produced too few goods and services. The state’s nominal GDP per capita was $508.8, barely over a dollar a day per person. The only shining star in Afghanistan’s economy is its vast natural resources. The Foreign Policy Magazine noted that the state is sitting on $1 trillion in a vast array of minerals ranging from copper to lithium (O’Donnell, 2022). The nation’s economic hopes and future once laid in exporting these minerals, but this has become more challenging following sanctions against the Taliban government.
The post-withdrawal economy: NGO workers, women, famine and mismanagement
The Taliban’s reclusive supreme leader, Hibatullah Akhundzada, is rarely seen and rarely heard. In a speech last July, responding to international calls for the Taliban to allow women to work beyond nursing and teaching, Akhundzada stood firm and proclaimed “I am not here to fulfill your [foreigners’] wishes, nor are they acceptable to me. I cannot compromise on Shariah to work with you or even move a step forward” (Gul, 2022). The ban on women working led NGOs to withdraw most international aid, further jeopardizing the state of the Afghan economy, (Felbab-Brown, 2023). Before the withdrawal, women comprised almost 22% of the labor force (Kumar & Noori, 2022). Today, most women are barred from working, and those that are allowed to be teachers or nurses must teach and heal in gender-segregated facilities. However, not all in the Taliban share his radical beliefs. Mullah Baradar, Afghanistan’s acting first deputy prime minister, and Mullah Yaqub, defense minister and son of the Taliban’s first leader Mullah Omar, have tried to persuade the supreme leader to abandon policies that harm women’s education and right to work in an effort to get NGOs and international aid back to the country. Still, Akhundzada resists any form of change.
In addition to the supply shock resulting from the ban on women in the workplace, Afghanistan lost a significant amount of its international aid. Foreign aid was withdrawn, and subsequently, the United States seized $7 billion of the nation’s $9 billion in central bank reserves (Cordesman, 2022). Unfortunately, this too has wounded the Afghan economy. As the Center for Strategic and International Studies notes, “The end result is that the U.S. now has frozen aid money in ways that have crippled the Afghan economy and banking system, making the Afghan immediate economic crisis far worse – at a time when the Afghan people face massive needs for emergency aid for food and basic services” (Cordesman, 2022). In September, the United States transferred $3.5 billion to the Taliban from the frozen reserves (Jabarkhalil, 2023). Yet still, the Taliban flounders, the Diplomat reports that “No policy or strategy has been announced that could provide a vision of economic development. Private sector activities are undermined by a lack of confidence and restrictions on cash withdrawals” (Jabarkhalil, 2023). Simply put, the state has no plan to attract any significant investment or create any substantive economic growth.
Afghanistan already lost most of the international aid that comprised so much of its GDP, and now it deals with both the supply shock of losing most women from the workplace, as well as the demand shock that resulted from lower incomes across households. The results have been catastrophic. As Chatham House notes, “mass unemployment, a collapse of the housing market, and increased rates of malnutrition are only some of the many tangible signs of an economic catastrophe” (Hakimi & Price, 2022).
The World Bank reported that in 2021 alone, Afghanistan’s GDP had declined by 20% (The World Bank, 2022). Droughts and famine have further devastated the nation as 20 million people struggle against hunger (Jabarkhalil, 2023). Funding cuts in international organizations like the World Food Programme that provide food assistance have further exacerbated the catastrophe. This year, the WFP was short of nearly $100 million during March and April, resulting in a 50% reduction in rations to 4 million Afghans and another 9 million people losing access to food aid completely (Greenfield, 2023). Even after scaling up assistance, for the rest of 2023, Afghanistan will need $4.62 billion in humanitarian aid (Faiez, 2023). Afghanistan’s “last lifeline” will be the WFP’s food assistance (United Nations, 2023). Climate change, particularly extreme temperatures and a poor rainy season, has led to a severe drought that has exacerbated the ongoing famine. The Secretary General of the Afghan Red Crescent noted how horrifying the “extent of hunger and resurgence of poverty” is in Afghanistan, despite years of international assistance (International Federation of Red Cross and Red Crescent Societies, 2022). Currently, an estimated 3 million children are at risk of malnutrition and diseases such as acute diarrhea and measles from their weakened immunity, and the World Health Organization has reported such disease outbreaks with Acute Watery Diarrhea with dehydration have surged, reaching a cumulative total of 283,005 cases (World Health Organisation, 2023).
The Afghan economy is now wholly dependent on two hopes. First is the nation’s $1 trillion in mineral reserves (O’Donnell, 2022). Unfortunately, much of the mining network is controlled by the Taliban’s acting interior minister, specially designated terrorist of renown Sirajuddin Haqqani. As divisions within the Taliban grow, his network is accumulating wealth to accumulate power (O’Donnell, 2022). Armed forces are already clashing over resources. The people shall see none of Haqqani’s wealth for themselves.
Opium values skyrocketed by 32% in 2022 (United Nations Office on Drugs and Crime, 2022). Prices have soared. Yet farmers see little of this money because inflation diminishes these earnings, and the Taliban persists in reaping the bulk of the profits. Even if the Afghan people were to reap the rewards of opium cultivation, the $1.4 billion would hardly make up for the billions in missing international aid.
The second is the potential of Chinese investment in oil extraction (Kumar & Noori, 2023). Al Jazeera reports that this January, the Taliban signed a deal with China worth “investment of $150m in the first year in Afghanistan and $540m over the next three years. However, there are concerns that China will only invest a substantial amount of money if they see that Afghanistan has become more stable. As intra-Taliban clashes persist, that is ever increasingly unlikely.
Conclusion
In conclusion, before the collapse of the Ghani government, Afghanistan’s economy was already marred by slow growth, poor investment, a dependency on opium and on international aid. Since their takeover, the Taliban haven’t just utterly failed to deal with famine and a lack of international aid, they have actively made the problem worse. First, they have prevented women from working and NGOs from operating, to the chagrin of their more rational ministers. Second, they have failed to secure their central bank reserves from the United States and investment from China. Lastly, greater factionalization has led to key stakeholders consolidating wealth in their own hands, further impeding progress towards alleviating the devastation endured by each and every Afghan citizen.
References (APA 7th)
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