Afghan economy on the brink of collapse as pressure mounts to ease US sanctions

MAZAR-I-SHARIF, Afghanistan – Driving down cratered highways at dawn, Mohammad Rasool knew his 9-year-old daughter was running out of time.

She had been battling pneumonia for two weeks and he ran out of money to buy his medicine after his rural town bank closed. So he used his last dollars for a taxi to Mazar-i-Sharif, a town in northern Afghanistan, and joined an unruly crowd of men climbing up to enter the last functioning bank out of hundreds of kilometers.

Then at 3 p.m., a cashier shouted to the crowd to go home: There was no more cash in the bank.

“I have the money in my account, it’s right there,” said Mr Rasool, 56. “What am I going to do now?”

Three months after the reign of the Taliban, the Afghan economy practically collapsed, plunging the country into one of the world’s worst humanitarian crises. Millions of dollars in aid that once supported the previous government have disappeared, billions of state assets are frozen, and economic sanctions have isolated the new government from the global banking system.

Today, Afghanistan faces a severe cash shortage that has crippled banks and businesses, pushed up food and fuel prices and triggered a devastating food crisis. Earlier this month, the World Health Organization warned that around 3.2 million children were at risk of acute malnutrition in Afghanistan by the end of the year, of whom one million were at risk of dying. because of the drop in temperatures.

No corner of Afghanistan has been spared.

In the capital, desperate families have peddled furniture by the side of the road in exchange for food. In other large cities, public hospitals cannot afford to buy much-needed medical supplies or pay for doctors and nurses, some of whom have left their posts. Rural clinics are overrun with weak children whose parents cannot afford to eat. Economic migrants have flocked to the Iranian and Pakistani borders.

As the country is on the verge of collapse, the international community scrambles to resolve a politically and legally difficult dilemma: how can it meet its humanitarian obligations without strengthening the new regime or putting money directly into the hands of the Taliban?

In recent weeks, the United States and the European Union have pledged $ 1.29 billion in additional aid to Afghanistan and Afghan refugees in neighboring countries. But there is little aid can do to ward off a humanitarian catastrophe if the economy continues to collapse, economists and aid organizations warn.

“No humanitarian crisis analysis should be managed by humanitarian aid alone,” said Abdallah Al Dardari, resident representative of the United Nations Development Program in Afghanistan. “If we lose these systems in the next few months, it will not be easy to rebuild them to meet the country’s basic needs. We are seeing rapid deterioration to the point of no return.

Under the previous government, foreign aid represented around 45% of the country’s GDP and financed 75% of the government budget, including health and education services.

But after the Taliban took power, the Biden administration froze the country’s $ 9.5 billion in foreign exchange reserves and stopped sending shipments of U.S. dollars that the Afghan central bank relied on.

The scale and speed of the collapse is one of the biggest economic shocks a country has experienced in recent history, according to economists. Last month, the International Monetary Fund warned that the economy is expected to contract by up to 30% this year.

Thousands of government workers, including doctors and teachers, went without pay for months. The wartime economy that employed millions of people and supported the private sector came to a standstill.

By the middle of next year, up to 97 percent of the Afghan population could fall below the poverty line, according to analysis by the United Nations Development Program. Many people who were already living from day to day were pushed to the limit.

One October morning in Mazar-i-Sharif, dozens of men gathered in the city center, carrying shovels tinkered with rough wood and rusted metal.

For years, day laborers have gathered there to seek work digging wells, irrigating cotton and grain fields, or doing construction work around the city. The salary was modest – a few dollars a day – but enough to buy food for their families and pay other small bills. These days, however, the men stay in the square until sunset, hoping for even one working day a week. Most cannot even afford to buy bread during lunch.

“There was work one day – and then suddenly it wasn’t,” said Rahmad, 46, standing in the crowd. “It was so sudden that I didn’t have time to plan or save money or anything.”

Even before the Taliban takeover, Afghanistan’s fragile economy was ravaged by slow growth, corruption, extreme poverty and severe drought.

Afghanistan has long relied on imports of basic food, fuel and manufactured goods, a lifeline that was cut after neighboring countries closed their borders during the Taliban’s military campaign this summer. Trade disruptions have since caused shortages of essential goods, like medicines, while the collapse in financial services has strangled traders who depend on US dollars and bank loans for imports.

At the port of Hairatan, along the Afghanistan-Uzbekistan border, a team of workers unloaded bags of flour from a shipping container onto trucks, sending clouds of white dots into the ‘air. Since August, their company has halved its imports; people can no longer afford basic necessities.

At the same time, the cost of doing business has skyrocketed. Customs and traffic officers, who have not been paid for months, are asking for more bribes, according to a company official, the Bashir Navid Group.

“Everything is disorganized,” said manager Mohammad Wazir Shirjan, 50. “Everyone is completely frustrated.

To avoid a total currency collapse, the Taliban limited bank withdrawals to $ 200, then $ 400 a week and called on China, Pakistan, Qatar and Turkey to fill its fiscal hole, which represents billions of dollars. So far, none have offered the financial support that Western donors provided to the former government.

The Taliban have also urged the United States to loosen its grip on the country’s finances or risk famine, as have Afghan migrants flocking to Europe in search of work.

“The humanitarian crisis we are currently experiencing is the result of these frozen assets. Our people are suffering, ”said Ahmad Wali Haqmal, spokesperson for the Ministry of Finance, in an interview.

At the end of September, the Biden administration granted two exemptions from sanctions to aid organizations to ease the flow of aid, and it is considering further adjustments, according to aid officials involved in the negotiations. But these exemptions do not apply to paid employees like teachers in public schools and doctors in public hospitals, and the decision not to include them risks the collapse of public services and a further exodus of educated professionals from the country. , according to humanitarians.

And the scope of the exemptions is limited in other ways. Many foreign banks that aid organizations rely on to transfer funds to Afghanistan have severed relationships with Afghan banks for fear of breaching sanctions. And the liquidity crisis severely limits the amount that organizations can withdraw to pay vendors or aid workers.

“The current policy of economic restrictions and sanctions, if maintained and not adjusted, is poised to harm the Afghan people – through deprivation and famine – more than Taliban brutality and poor governance,” he said. said John Sifton, director of advocacy for Asia at Human Rights. To concern.

Already in hospitals across the country, there are signs of a hunger crisis that could overwhelm the fragile health system.

In the malnutrition ward of a hospital in southern Afghanistan, Shukria, 40, sat with her one-year-old grandson Mahtab with her mouth wide open but her body too weak to cry out.

For weeks, the boy’s father had returned empty-handed from his machine shop as business dried up, and the family resorted to bread and tea for every meal. Soon her mother stopped producing milk to breastfeed, so she and Shukria supplemented her diet with their family’s goat’s milk. But when they ran out of money to buy food, they sold the animal.

“I asked this hospital to give me a job,” said Shukria. “Otherwise, after a week, a month, he’ll just end up sick and come back here. “

Kiana Hayeri has contributed reporting for Mazar-I-Sharif and Yaqoob Akbary from Kandahar.

Comments are closed.