Afghanistan’s economic crisis in 2022 persists

Afghan currency traders have been hit hard following the fall in the value of the Afghan currency, driving up food prices in Kabul, Afghanistan on July 16, 2021. /Getty

Afghan currency traders have been hit hard following the fall in the value of the Afghan currency, driving up food prices in Kabul, Afghanistan on July 16, 2021. /Getty

Editor’s note: Hamzah Rifaat Hussain, a former visiting scholar at the Stimson Center in Washington and a former research assistant at the Islamabad Policy Research Institute, is a television presenter at Indus News in Pakistan. The article reflects the views of the author and not necessarily those of CGTN.

While it is undoubtedly true that humanitarian agencies have largely averted a looming food crisis, as the World Food Program predicted in its 2021 assessments in Afghanistan, the struggling national economy continues to struggle with the residual effects. of war in 2022. The roots of Afghanistan’s economic stagnation run deep, and international aid can only partially address demands such as widespread hunger and starvation.

A concerted attempt to resurrect the foundations of the national economy based on the political will of the Joe Biden administration has failed and if current trends persist, an irreversible decline becomes imminent in the post-US withdrawal era.

Fighting hunger is an immediate concern in Afghanistan, but helping people in the long term requires policies to boost business, attract foreign direct investment and invest in a struggling agricultural sector that is the backbone of the agrarian economy. Afghanistan, however, continues to suffer from the effects of donor cuts in financial aid that otherwise made up 70% of total government spending following the US withdrawal.

In addition, growth-oriented policies remain hampered, with the United States brushing aside or ignoring United Nations warnings of impending famine that demanded an immediate response.

The response, however, was anything but immediate, but rather unbalanced and deceitful. Note the sharing of $7 billion in Afghan funds frozen by the Biden administration in 2022, which has angered and alienated locals as they face cash shortages, unemployment and hunger in the post-war scenario. Other issues also remain unresolved, such as a massive liquidity crisis compounded by restrictions on the functionality of the Central Bank in Kabul. International payments were also halted, meaning the Afghan economy was shut out of the global financial system.

A boy pushes an empty wheelbarrow along a market on a cold day in Kabul, Afghanistan, January 19, 2022. /CFP

A boy pushes an empty wheelbarrow along a market on a cold day in Kabul, Afghanistan, January 19, 2022. /CFP

The Biden administration’s inability to lead and implement policies that address these realities has contributed to the country’s predicament. According to UN Special Representative Deborah Lyons, six months of indecision, unstructured political engagement, the erosion of vital social and economic coping systems, and the persistence of sanctions have contributed to this economic collapse.

Perhaps the Biden administration and those advocating for Afghanistan’s economic resilience after the US pullout in 2021 should consider how the respective governments in Kabul have historically relied on foreign aid for fiscal purposes. . 80% of the Ashraf Ghani administration’s funds came from international aid and with a huge chunk of the budget cut after the US withdrawal, the delivery of public services remains compromised.

Hospitals, ministries, schools and factories have been underfunded, allowing an educational, economic and health crisis to deepen with a COVID-19 pandemic, widespread malnutrition and debilitating drought . The US Treasury Department granting licenses to facilitate business activity by working with government institutions in Afghanistan is simply not enough as it does not address the weak demand in the absence of FDI or restrictions on international payments. There is still a lot to do.

Alarmingly, of the $7 billion cut by the Biden administration and the $3.5 billion that needs to be allocated, none of the funds can be released immediately, as the Deputy US Ambassador has said. United at the UN, Jeffrey DeLaurentis, who said funds for Afghan aid can only be disbursed after broader consultation. In such scenarios, countries should refrain from delaying the release of assets as post-conflict recovery processes are highly dependent on variables beyond mere humanitarian assistance.

Nation-building and institutional strength require unconditional international support that has continued to elude Afghanistan in the present day. The inability to separate politics from economics contributes to a widespread malaise that affects the most vulnerable segments of the population, like women and children, whom countries like the United States have sought to protect.

The solution lies in putting in place a comprehensive framework for economic recovery that can address structural and financing issues. Preventing the exodus of Afghan refugees through job creation and regional connectivity is the only way to revive the national economy. The Biden administration still has a long way to go before it can boast that the US intervention and subsequent pullout has resulted in a brighter future for average Afghans.

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