With a sinking currency and rising inflation, economic hardship is emerging as the biggest challenge to the Taliban’s rule.
Afghanistan’s economy is on the brink of collapse. Residents line up outside banks on the streets of Kabul for hours everyday. Prices of everyday essentials have surged, salaries have been stopped and businesses are at loss.
The country’s cash-based economy was already fragile and heavily dependent on aid before the Taliban takeover, but as foreign aid is halted and assets are frozen — since the group’s sudden seizure on August 15 — the country’s economy is seen to be headed towards collapse.
Malak Zafar, a taxi driver, is becoming increasingly desperate as it gets difficult for him to make ends meet, like many other Afghans.
The 40-year-old father of eight says the money he now makes is mostly spent on fuel.
“I use to make 800-1000 afghanis (9 USD-11 USD) a day and it was somehow enough for me. But now I make 300-500 Afghanis (3 USD – 5 USD) out of which half is spent on fuel,” Zafar told TRT World.
“Fuel is expensive now, everything is high priced. I am struggling to feed my family.”
READ MORE: Qatar envoy – Kabul airport reopens to receive aid, civilians to fly soon
Residents say the prices of vegetables have sky rocketed and petrol prices are up by 75 percent.
A 50 kg bag of flour was selling for 2,200 afghanis in Kabul, about 30 percent above its price before the fall of the city.
Zafar said people no longer have jobs or schools to go to which has contributed to misery.
“Usually I would pick up people in the morning who used to go to work and drop them to the city or to their offices or schools, but these days I hardly find anyone wanting a taxi.”
Since the Taliban took power in August, the afghani, the country’s currency, has dropped by almost 8 percent against the US dollar.
The Taliban are unable to access about $9 billion foreign currency reserves. Crucial donor countries like the United States and Germany, including the International Monetary Fund and World Bank have also stopped funding to Afghanistan.
Fitch Solutions said in a report last week that it expects the country’s real gross domestic product (GDP) to shrink by 9.7 percent this financial year. A further drop of 5.2 percent is seen next year.
Afghanistan is experiencing the mother of all “sudden stops”
i.e. economic collapse resulting from a sudden stop of foreign money that was financing a large trade deficit
Afghanistan was financing a trade deficit of ~ 25% of GDP
— Atif Mian (@AtifRMian) September 2, 2021
Analysts and aid groups say the country’s financial collapse could lead to serious implications for the Afghan economy.
“As a result of the takeover, critical macroeconomic functions of the state institutions such as the Central Bank and others came to a complete halt. This, in retrospect, has serious implications for the Afghan economy with a snowball effect – meaning the challenges will grow with every passing day,” Muhammad Sulaiman Bin Shah, the former deputy minister of Industry and Commerce, told TRT World.
Sulaiman explains that the banking sector of the country is faced with multiple challenges including scarcity of cash and the newest Taliban policy that have restricted cash withdrawals to $200 per week against each account holder.
“Food security is also considered to be a daunting challenge in the next few weeks and months,” he warned.
Economic challenges for Taliban
The growing economic hardship is emerging as the biggest challenge for the Taliban as the daily struggle of Afghans to put food on the table has become an overwhelming process.
On Sunday, senior Taliban leaders including Mullah Abdul Ghani Baradar, head of the Taliban’s political office met in Kabul with the UN undersecretary-general Martin Griffiths, who promised to maintain assistance for the Afghan people, Taliban spokesman Suhail Shaheen told media.
Shaheen said the Taliban assured the UN delegation of “cooperation and provision of needed facilities”.
UN Secretary-General Antonio Guterres urged early this month that countries need to provide emergency funding to Afghanistan as a “humanitarian catastrophe” looms following the departure of foreign troops on August 31.
“We are barely surviving with the meager amount of money I now earn. I am not able to feed my family and sometimes we go to sleep hungry,” Nasir Khogyaniwal, a construction worker, told TRT World.
“Since the Taliban took over, all construction work has stopped. There are days when I don’t even make any money. I even tried to ask people if they have any work for me at their homes but to no avail.”
Last week, Afghans were seen in Kabul selling their meager possessions that included pots, plates, old rugs, furniture, television and refrigerator in desperate measures to make some cash.
The Taliban is yet to announce its new government but the United Nations has resumed flights carrying humanitarian supplies to parts of Afghanistan, and Qatar is helping the Taliban to reopen Kabul airport.
Money transfer services Western Union and MoneyGram have also reopened in the country.
READ MORE: UN promises aid for Afghanistan, says a Taliban leader
Last week, a Taliban loyalist Haji Mohammad Idris, who has no formal financial training or higher education, was appointed to head the central bank.
“Taliban, to be successful in getting back the economy on track, have to protect the current investments made in the country including mega energy projects and installations,” Sulaiman said.
“In this regard, critical attention is needed when it comes to policy formulation. Any changes without due consideration to the industrial dynamics and business environment in Afghanistan can lead to serious issues.”
As the economy is at a standstill, the country is facing an exodus of people. Droves of people rushed to the airport to try and escape Taliban rule.
But the US-led operation to evacuate by air has ended with more than 123,000 civilians evacuated by US forces and its coalition partners. It is unclear exactly how many of those were Afghan nationals.
READ MORE: NATO to continue efforts for more Afghan evacuations
The US has said that it evacuated nearly 80,000 civilians out of the capital city Kabul which included about 5,500 Americans and more than 73,500 either Afghans or other foreign nationals.
The UK Ministry of Defence said it had flown out more than 15,000 people and some 8,000 of them were Afghans.
“With startups closing down, innovative Micro, Small and Medium Enterprises (MSME’s) have been hurt the most. With reluctant spirits and heavy chests, thousands of young Afghan men and women have left the country.
“But (now) it is the thousands of self-made and resilient Afghans who are going to go through long painful days and nights,” former deputy minister Muhammad Sulaiman Bin Shah said.
Many of those evacuated were qualified professionals from civil servants to doctors and lawyers including bankers and journalists.
This highlights the end of any hope they might have had in helping shape the country’s future.
Source: TRT World