Image Credit: New York Times

The United States President Joe Biden’s decision to withdraw troops from Afghanistan closes an over two-decade-long chapter of U.S. intervention. During the Cold War, both the U.S. and the Soviet Union gained footholds in Afghanistan through infrastructure investments and then military intervention. Once they withdrew in the late 1980s, the country entered a civil war with the rise of the Taliban. In 2001 the U.S. invaded after the 9/11 terrorist attacks and ousted the Taliban from power. Over the years, NATO and allied forces in Afghanistan backed the Government into power under a United Nations (U.N.) Security Council mandate.

After 20 years of war, the Taliban swept to victory by capturing Kabul on August 15th, 2021, killing tens of thousands of people and displacing millions, creating a dangerous situation in the Middle East. President Ashraf Ghani fled the country to the United Arab Emirates. Initially, the focus was to ensure the safe departure of personnel from Allied and partner countries and at-risk NATO-affiliated Afghans. More than 120,000 people were evacuated in the Allied airlift from Kabul airport as part of the coalition effort.

On August 17th, 2021, Gulbuddin Hekmatyar, the leader of the Taliban-affiliated Hezb-e-Islami Gulbuddin party, met with both Hamid Karzai, the former President of Afghanistan, and Abdullah Abdullah, the Chairman of the High Council for National Reconciliation and former Chief Executive. They met in Doha, Qatar to form a government.

Chaos and violence impeded the evacuation at Kabul’s airport, where only small numbers were allowed to depart. Taliban forces in several provinces have carried out reprisals, including summary executions of some former officials and security force personnel. The Taliban have conducted raids on the homes of journalists, activists, and human rights defenders. Security forces have used excessive force to break up protests in several cities. Taliban authorities have also increasingly restricted the rights of women and girls. Authorities have fired all women from leadership posts in the civil service, announced restrictions allowing only boys to attend schools from grade 6 and above, and banned coeducation. The conflict lasting throughout August resulted in thousands of civilian casualties, including from targeted Taliban and Islamic State attacks and the U.S. and former government airstrikes. Fighting and drought have caused increases in displacement, which has overwhelmed humanitarian efforts. The country’s economic system and health and education sectors are near collapse.

Recent political developments have pushed Afghanistan into an economic crisis. Rapid reduction in international grant support, government expenditure, disruptions to trade, and dysfunction of the banking sector, loss of access to offshore assets, and disruption to financial linkages are expected to lead to a significant contraction of the economy, increasing poverty, and macroeconomic instability. Prices for essential household goods, including food and fuel, increased substantially as the Taliban captured border posts and key transit hubs, disrupting supply chains. Inflation further accelerated, reflecting depreciation, hoarding, and disruptions to international trade.

In the financial sector, the liquidity of both commercial banks and the central bank was substantially eroded due to a high volume of cash withdrawals and intensified U.S. dollar auctions. Banks ceased operating immediately following the Taliban takeover. Since reopening, have faced major difficulties in processing international transactions due to the central bank’s restrictions on capital outflows and reluctance of corresponding offshore banks’ to engage in transactions due to concerns associated with sanctions. Firms and households have been unable to access bank deposits, with strict limits imposed by the central bank on the withdrawal of U.S. dollars and local currency. Constrained ability to process international transactions has undermined formal sector international trade, with firms unable to transfer funds overseas to pay for imports.

The economic and development outlook is stark. Sharp reductions in international aid are driving a collapse in basic health and education services. The sudden loss of public sector activity will impact the economy, especially in the service and construction sectors (which account for 58 percent of GDP). Declining grants combined with a loss of access to foreign exchange are expected to result in a balance of payments crisis. Afghanistan historically relies on grant inflows to finance its huge trade deficit (28 percent of GDP in 2020). On the current trajectory, Afghanistan is likely to face depreciation of the Afghani, inflation, and shortages of critical household goods, including food and fuel.

A substantial share of the population is expected to move below the poverty line, reflecting adverse employment and price channels. Ten million Afghans are vulnerable to falling into poverty, living with incomes between one and 1.5 times the poverty line (US$0.94 per person per day). The food security situation will also deteriorate, with potential long-term negative impacts are given Afghanistan’s young population.

Under the current circumstances, NATO has suspended all support to the Afghan authorities. NATO demands that any future Afghan government adheres to Afghanistan’s international obligations; safeguard the human rights of all Afghans, particularly women, children, and minorities; uphold the rule of law; allow unhindered humanitarian access, and ensure that Afghanistan never again serves as a haven for terrorists.

The Taliban had promised an inclusive government that represents Afghanistan’s complex ethnic makeup. However, the interim Cabinet announced by the insurgent group last month was dominated by established Taliban leaders who fought against the US-led coalition forces since 2001. No woman has been named in the interim Cabinet.

Europe and America are offering stopgap humanitarian aid for a country on the brink of collapse, but larger decisions about the new Taliban government remain on hold.

The U.S. has agreed to provide humanitarian aid to a desperately poor Afghanistan on the brink of an economic disaster while refusing to give political recognition to the country’s new Taliban rules.

World leaders are discussing ways of preventing an economic and humanitarian disaster in Afghanistan. Still, the Biden administration maintains a cautious stance toward providing more support to the Taliban-ruled country and did not announce any new American aid. Some key leaders, including President Vladimir V. Putin of Russia and President Xi Jinping of China, are silent. The European Union pledged 1 billion euros, or $1.15 billion, in aid to Afghanistan and neighboring countries, as a group of 20 leaders separately affirmed their support for human rights and stability in the country.

In the months and years ahead, there will be a lot of questions about what’s next for Afghanistan? Millions of lives will depend on how Afghanistan’s new interim Government chooses to govern.

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