In our previous articles, we discussed Taliban’s takeover further leading to social media accounts being taken down. We shall now look at how the whole situation is affecting the economy of Afghanistan.

IMF Spokesperson Gerry Rice: “As is always the case, the IMF is guided by the views of the international community. There is currently a lack of clarity within the international community regarding recognition of a government in Afghanistan, as a consequence of which the country cannot access the Special Drawing Rights (SDRs) or other IMF resources”.

ECONOMIC history of Afghanistan:

Afghanistan is one of the low-income group countries. The economy slowed down post-2014. Even before 2014 largely sustained by international assistance. The biggest challenge of Afghanistan’s economy according to the World Bank is its inability to find sustainable sources of growth. Moreover, private sector growth narrowly followed by low productivity in agriculture, constrained with the following- 

1- Insecurity

2- Political instability

3- Weak institution

4- Inadequate infrastructure

5- Widespread corruption 

6- Difficult business environment

7- Weak competitiveness

Due to the above-mentioned constraints, there is a structural deficit, 75% of public spending comes from the grant inflows. 28% of the GDP spent on national security and police in comparison to low-income country average. Accounting for 2-3 % of GDP bringing down total public spending to 57%. 

Above all, the economy was standing strong because of aid influx at 9.4% average growth during 2003-2012, booming was due to aid–driven service sector and a strong economy. The social and economic slowdown took down the economic growth to 2.5% during 2015-2020.

The security situation deteriorated with the Taliban insurgency. We saw a decline in aids from 100% to 42%. As Taliban attacks on civilians and military increased the decline in the number of international troops were noticeable. There is much to unfold behind the critics that came from time to time. The withdrawal of troops started during Obama’s presidency in phases and use the resources to counter-terrorism on priority elsewhere. As an escalation on way, Trump signalled towards a prolonged war. Political gains were more important than assessing the true situation in Afghanistan today.

It was the United States and George Bush who after the 9/11 attack shared his will to reconstruct Afghanistan. The U.S. Congress appropriating over $38 billion in humanitarian and reconstruction assistance to Afghanistan from 2001 to 2009. 

THE GENEVA CONFERENCE 2020:

The commitment to aid the country renewed during this conference for 2021- 2024. The future support made conditional with single year pledges. Condition for the government was as follows-

1- Combating corruption

2- Reduction in poverty

3- Advancing peace talks

The daunting challenge:

The current economic situation in Afghanistan is fragile, with IMF blocking Afghanistan’s emergency reserve (SPECIAL DRWAING RIGHTS) worth USD 460 million. 

What is SDR–

An interest-bearing international reserve asset created by the IMF in 1969 to supplement other reserve assets of member countries. An SDR allocation is a way of supplementing Fund member countries’ foreign exchange reserves, allowing members to reduce their reliance on more expensive domestic or external debt for building reserves.

United States has also cancelled the bulk shipment of dollars headed to Afghanistan which was Afghanistan reserve with the U.S Federal Bank. An administrative official told “Any central bank assets the Afghan government has in the United States will not be made available to the Taliban” quoting Wall Street Journal.

Current scenario:

Political economy–

Significant natural resources are an attraction to international business with a lot of mineral potentials specifically “LITHIUM”. No wonder China’s interest in building a better relationship with the Taliban has a lot to do with resource sharing. During a press conference held by the Taliban, a spoke person stated, “assurance to bank owners, money changers, traders and shopkeepers that their lives and property would be protected”.

According to the World Bank, the illicit economy “accounts for a significant share of production, exports, and employment”. Many of the people employed in Afghanistan’s private sector likely associated with the heroin trade, illegal mining, or smuggling. 

Gender role in the economy–

Women employment was on the rise until 2019 at 22% was still low as per international standards. Further, the economic prospects can worsen under the Taliban since women tend to stand in a vulnerable position. The question is also of the physical security of women.

International trading–

The import and export from India has been stopped by the Taliban as they took over Kabul on Sunday. Imports are related and largely dependent on dry fruits. FIEO DG said, “We also import a little gum and onions from them,” quoting economic times. Due to the ongoing turmoil, the prices of dry fruits would rise. Amidst the rise in Covid-19 infection, the vaccination in eastern Afghanistan’s Paktia province was halted. 

Poverty–

“In Afghanistan, 47.3% of the population lives below the national poverty line in 2020. In Afghanistan, the proportion of employed population below $1.90 purchasing power parity a day is 34.3% in 2019” as per Asian Development Bank. 

The financial status is very uncertain with an economic collapse without international aid. The Taliban funds themselves with drug trafficking and opium poppy production, extortion, kidnapping for ransom, mineral exploitation, and revenues from tax collection in areas under Taliban control or influence.

The rich have fled away, the middle class and poor will be the real sufferers of the current situation. While ATM’s have stopped the money supply. The wealthy probably saw the financial disaster looming. Afghanistan is a landlocked country and getting money inside will not be easy until the system and administration are restored or stabilised. This gives us an idea of people running out of their grocery items and the urgent need to be careful with their daily usage.

“Of all the hardships a person had to face, none was more punishing than the simple act of waiting” Khaled Hosseini in Thousand Splendid Suns.

Also, Read| PAKISTAN SUPPORT TO TALIBAN

In many ways, the Taliban blitz through Afghanistan, saw the Afghan National Defense and Security Forces crumble. It took the militant group to the gates of Kabul and victory in days instead of weeks or months as the CIA predicted. It also heralds the return of Af-Pak, a hyphenation that Pakistan may no longer rile against.

Many in Afghanistan, India’s diplomatic and intelligence establishments believe that the Taliban’s victory couldn’t have come without active assistance from Pakistan.

HISTORY OF TALIBAN-PAKISTAN RELATIONS:

The assertion springs from the long relationship Pakistan has had with the Taliban. From birthing it in 1994, supporting its first takeover of Afghanistan in 1996, to sheltering the fighters and leaders in the aftermath of the post-9/11 US invasion. Even as it claimed to be supporting the US in the “war on terror”.

PAKISTAN’S STATEMENT:

Prime Minister Imran Khan said Monday that Afghanistan had “broken the shackles of slavery”. Many retired and serving generals are exultant that Pakistan will finally have “friends” in the driving seat in Kabul. They have expressed admiration openly for the Taliban.

HOW PAKISTAN HELPED TAKEOVER?

One reason for the Taliban’s swift advance is the ease with which they overpowered the Afghan security forces. Its leadership demoralized by the unseemly haste of the US troop’s withdrawal. But Afghan’s deposed Vice President Amrullah Saleh and other members of the Ashraf Ghani government. Also alleged the Pakistan Army’s Special Forces and the ISI were guiding the Taliban.

While this is not possible to verify, Pakistan’s undeniable contribution has been in providing the Taliban shelter on its territory. All that Pakistan would say in response is that its influence on the Taliban as “overstated”. The safe havens had existed from virtually the start of the US “war on terror” in 2001. The US was aware, however its need for Pakistan as a logistics back end for the war in Afghanistan was greater. Hence, it did not push the Pakistan military sufficiently to act against these safe-havens.

The political leadership of the Taliban camped in the Baluchistan capital of Quetta. It became the revolving door for fighters of Afghan Taliban. Its associated group the Haqqani Network, along with al-Qaeda and a gaggle of other jihadists. They crossed in and out of Afghanistan at will under the benevolent gaze of the Pakistan Army. In the recent Taliban fighting the same safe havens in Pakistan used to launch their attacks in Afghanistan.

Sheikh Rashid’s statement:

The Spin Boldak conquest by the Taliban saw celebratory motorcycle rallies by Taliban fighters and supporters in Quetta. Sheikh Rashid, a minister in Imran Khan’s cabinet, told Geo News last month that the Afghan Taliban wounded in the fighting were being treated in hospitals in Pakistan. Further, the bodies of dead are sometimes buried in Pakistan where their families live. A July Voice of America report, quoting villagers near Quetta, said funeral prayers were regularly being held for Taliban fighters killed in Afghanistan.

After a video clip of the incident went viral, Peshawar police officials confirmed a funeral rally for a Taliban fighter. There pro-Taliban and pro-Islamic Emirate slogans were also raised.

The Indian security establishment has held that fighters of the Lashkar-e-Taiba, a pet jihadist group of the Pakistan military, fought alongside the Taliban against US and NATO soldiers from at least 2017 onwards.

PAKISTAN AS PROXY:

Over the last three decades, Pakistan has viewed the Taliban as serving various purpose:

• Taliban regime in Kabul and its umbilical connection with Pakistan would ensure the Pakistan military a free pass over Afghanistan. The territory it coveted for “strategic depth” in its enmity with India. While still ensuring Pakistan agency over Afghan routes into Central Asia.
• Since 2001, Indian involvement in development activities there, and its increased diplomatic presence, a concern for the Pakistani establishment. This they alleged as “encirclement” by India.
• Post-2004 Afghan governments headed by Karzai or Ghani, not shy of saying out loud that Pakistan was sheltering the same militants it claimed to be fighting.
• In response to Pakistan’s denial of a land route to India for trade with Afghanistan, New Delhi began developing the Chabahar port in Iran, with a planned trade corridor via rail to the Iranian border with Afghanistan at Zaranj, with the India-built Zaranj-Delaram highway providing connections to the heart of Afghanistan.

CONCLUSION:

While there is smug satisfaction in Pakistan right now at the proxy victory in Afghanistan, many are also warning of “blowback”. All said and done, Pakistan views itself as a modern Islamic state. Although its generals and political leaders may welcome the second coming of Taliban in Afghanistan. Significant sections, including in the military, are quite clear that their own country must be shielded from the impact.

An immediate fallout would be an influx of refugees, which would be a drain on Pakistan’s slender resources. What is of more concern is that the Taliban’s rise in Afghanistan may fan the fires of extremism in Pakistan. Where an array of jihadist groups — anti-India, sectarian, pro-al-Qaeda, anti-Pakistan —continue to exist despite several purported crackdowns against them.

Also, Read| Taliban In Afghanistan: Threats To India