Economic collapse in Afghanistan a risk to region as Taliban isolation continues

Economic collapse in Afghanistan a risk to region as Taliban isolation continues

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As economic collapse in Afghanistan is now an accepted reality, the ominous prospects of chaos seem irreversible. Foreign aid that accounted for over 40 percent of the national GDP is not forthcoming since the Taliban takeover of August 2021. The drought has added another troubling dimension to food insecurity. Foreign investment has stopped completely because the country is financially not connected with the international banking system. And to make the situation more precarious, the world has refused to release Afghan reserves held in foreign banks. The US has, until now, refused to release Afghan assets worth $7 billion held in American banks ostensibly to punish the Taliban for their military victory against the forces of the previous US-backed government. In 2021, the Afghan economy contracted by 20 per cent, according to the World Bank. This contraction of the economy is expected to continue. Imports like energy and food, critical for meeting the daily needs of households may drop by half if resources are not made available.

Prospects for the social sector are bleak even by Afghanistan’s standards as incomes shrink. According to a UN report, 23 million people need food assistance. That is more than half the country’s population. Prices of fuel and cooking oil have risen while wages have fallen. Unemployment is as high as 40 percent, and restricting female employment inflicts an immediate economic loss because a sizeable workforce will not make any contribution to the economy.

A humanitarian crisis has taken hold. According to one UN sponsored report, the cost to the economy of banning female employment could be as high as $600 million to $1 billion i.e 3-6 per cent of the GDP. Gender inequality has caused a fall in productivity. Most energy is imported. If this vital import is reduced in quantum, millions will be forced to live in the dark. 

With such daunting challenges facing the country and the government in Afghanistan, there appears to be a near absence of any strategy that could steer the country. At the root of an unsustainable situation is the government’s isolation, and that brings into focus the vision and capability of the current leadership of the country. With such a dismal scenario, there should have been a concerted and robust initiative to engage with the world and especially with more important and relevant countries to seek help and advice on how to get the regime recognized. The most urgent issue is poverty and international recognition. For recognition, the government will need to mobilize its resources and engage with the world, citing the many positive outcomes since the Taliban took control.

What the world does not realize is that a deteriorating economy and poverty could create chaos that overwhelms the government, and Afghanistan could plunge again into civil war.

Rustam Shah Mohmand

There is a long list of the Taliban’s achievements since they took control more than a year ago: The defeat of militias, the flight from the country of warlords, the end of a long conflict, the establishment of a government that by and large is supported by a large number of people fed up with an unending cycle of violence. These results would constitute enough credentials to claim recognition internationally.

After all, is the Taliban government not a ground reality? Does the new government not have legitimacy in terms of support of the population? What are the missing elements in the path to recognition?

Admittedly, the Taliban government will need to expand their cabinet and include ethnic minorities as well as some political groups other than their own. They will have to relax conditions for girls’ higher education as well as provide opportunities for female employment. But these are not stumbling blocks that should force international isolation on the country.

What the world does not seem to realize is that the deteriorating economy and deepening levels of poverty could create chaos that could overwhelm the government and its institutions. The country could then plunge again into a sort of civil war that could have devastating consequences for Afghanistan and the region.

Before it gets as bad as that, the Kabul government as well as regional countries must reappraise their options and policies. Any such reappraisal should incorporate the hazards of isolation and the fall-out on the country and the region. Taliban have to embrace the realities of living in a world that follows different systems. Equally important, the world and particularly the region has to recognize that losing this opportunity of dealing with a government that has brought a long conflict to an end, will entail a heavy cost. If the country slips into anarchy, the cost will be horrendous for the region. Many would then regret having forced an isolation on Afghanistan that results in the revival of violence and needless bloodshed.

At stake is the peace and stability of the country and the region and the future of CPEC trade with Central Asia. Regional countries as well as Taliban leaders should dispassionately take positions on the level of threats the situation in Afghanistan poses, and adjust their policies before it is too late.

– Rustam Shah Mohmand is a specialist of Afghanistan and Central Asian Affairs. He has served as Pakistan’s ambassador to Afghanistan and also held position of Chief Commissioner Refugees for a decade.

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