The Afghan economy is in turmoil. The World Bank has suspended its funding to Afghanistan in the aftermath of the Taliban taking control of the war-torn country. The World Bank says it is “deeply concerned about the situation in Afghanistan” and is looking for ways to preserve “hard-won development gains.” Since 2002, the Washington-based institution has disbursed about $5.3 billion for reconstruction and development projects in Afghanistan through the International Development Association.
Earlier last week, the International Monetary Fund halted Afghanistan’s access to the Fund’s resources, including nearly $440 million in new monetary reserves. IMF sought “a lack of clarity within the international community regarding recognition of a government in Afghanistan” saying Afghanistan cannot access SDRs or other IMF resources until the dust settles on the Afghan conundrum. It comes after the United States froze about $9.5 billion in Afghan reserves along with several other countries pulling developmental aid to Afghanistan.
The Taliban’s astonishing blitz into the Afghan capital took everyone by surprise but now the armed group stares in the face of the cruel realities of governance. The Afghan economy has been heavily reliant on foreign dollars for the last two decades and this influx accounts for three-quarters of the government spending. The Afghan treasury is all but bankrupt without the developmental funding as the Taliban is under titanic pressure to show Afghans and the world that it can run and develop a country beyond advocating for the doctrines of the Islamic Shariah.
The sanctions from the US, the European Union, and the United Nations among other countries mean that the Taliban faces a mighty challenge ahead to salvage the economy of one of the world’s poorest countries. Experts say that the Taliban can access only 0.1% to 0.2% of Afghanistan’s total international reserves.
Amidst the bleak circumstances, there is a way out as far as the Taliban is concerned. Weeks before the Fall of Kabul, China established dialogue with the Taliban and has since pushed the narrative that implores the Taliban to form an ‘inclusive’ government; protect basic human rights for women and minorities; and contain terrorist groups that may attack the US and China or any other country. The Chinese have promised nothing but Beijing can certainly offer what the Taliban so desperately need at the moment: an impartial political ally on the world stage and economic investment. In 2010, US officials estimated that Afghanistan has over $1 trillion in untapped mineral deposits like Tantalum, rare earth, Lithium, Copper, etc. Some of these materials are critical to the global green-energy transition and battery-materials supply chain.
Amidst the uncertainty, Pakistan says that the current situation in Afghanistan yearns for sustained international engagement, which may ensure stability and long-term economic development. On his ongoing trip to Tajikistan, Uzbekistan, Turkmenistan, and Iran, Pakistan’s Foreign Minister Shah Mehmood Qureshi will look to gather support to facilitate an inclusive political settlement in Afghanistan. Islamabad should be commended for initiating the multi-national dialogue, calling on the international community to step in and reconstruct and rehabilitate the war-torn country. Islamabad understands the looming humanitarian crisis in Afghanistan and the urgent need to avert it. The policy also coincides with the interests of its primary ally in Beijing.
The next fortnight is extremely significant for this scenario to come to fruition as the EU and the UK have called to extend the August 31 exit deadline while US President Joe Biden says he is committed to the agreed-upon pull-out date. The Taliban have threatened the US and its allies if they were to extend their presence in Afghanistan, calling it an extension of the occupation. The armed group also says that the process of the new, inclusive government will not begin until the complete departure of the western troops.
This is quite certainly the new, more mature Taliban given the political realities, economic crisis, and the opportunity to form beneficial alliances. The group is arguably desperate to prove that it has changed. It stands to reason that the circumstances present opportunities for unprecedented growth in the Afghan economy. Although the Taliban remains unpredictable, there is no plausible reason the group will not walk the talk.