In its latest report on Afghanistan under Taliban rule, the UNDP says that ten years of Afghan economic growth have been reversed in just 12 months – and the situation is worsening due to rising inflation and the restrictions imposed on women.
OWSA Contributor in Kabul
A year after the Taliban takeover in Afghanistan, the country faces “cascading crises” and a crippled economy that humanitarian aid alone cannot address, according to a new report by the United Nations Development Programme (UNDP).
The report titled, One Year in Review-Afghanistan since August 2021, draws upon available data from various sources to provide a snapshot of changes in peoples’ socio-economic situation since August 2021. It calculates that the already-declining regular Afghan economy lost nearly $5 billion after August 2021 and is reversing “in 12 months what had taken 10 years to accumulate.”
“The Afghan people have been relentlessly subjected to extremely difficult circumstances. They have survived numerous challenges in the last 40 years and shown enormous resilience.”, the report states.
The situation has worsened due to inflation and unemployment. The cost of a basket of essentials needed to avoid food poverty has risen 35 per cent. Simultaneously, nearly 700,000 jobs have vanished, further threatening a population reeling from impacts of the COVID-19 pandemic, the conflict in the country, a worsening drought, and war in Ukraine.
With the knowledge that there are few drivers for a sustained economic recovery in the light of reduced volumes of international aid, sanctions and restricted access to international payment systems, the UNDP report has called for unfreezing assets of Da Afghanistan Bank or DAB.
(The seizure of US-based assets DAB owned about US$7 billion in assets held at the Federal Reserve Bank of New York. These assets have been frozen after the 2021 Taliban seizure of power.)
“It is imperative that the issue of unfreezing DAB assets is resolved as soon as possible. However, in the absence of being able to print its money, the unfreezing of assets will not go far in addressing the resource constraint,” the report says.
The picture on the food security front is equally grim. Afghanistan has a persistently high magnitude and severity of food insecurity that seems largely immune to seasonality and conflicts have let to nearly 11 million people experiencing acute food insecurity since 2018.
Poorer households have been forced to go deeper into debt or sell off assets just to survive. Some three out of every five households in the country have used crisis or emergency livelihood coping techniques like moving to cities, distress sale of livestock, reducing planting area, skipping meals, or eating poor quality food, the report says.
“Half of all children under five years of age are facing acute malnutrition and UNICEF estimates that 11. Million children may suffer from severe acute malnutrition, nearly double the number in 2018 and up from just under 1 million last year,” the report says, pointing out that the number of hospital admissions for children under five suffering from severe and acute malnutrition (SAM) has increased sharply since August 2021.
“Yet the last 12 months have brought cascading crises: a humanitarian emergency; massive economic contraction; and the crippling of its banking and financial systems in addition to denying access to secondary education to girls and the restrictions on women’s mobility and participation in the economy”.
The report paints a bleak fiscal picture of the country, dating back more than a decade before the Taliban ascendency.
With GDP in steady decline since 2008, Afghanistan had come to rely on international aid to sustain its economy, which accounted for a staggering 75 percent of total Government spending and nearly 40 percent of GDP at the time of transition. But foreign donors largely suspended aid after the transition, UNDP notes.
“The GDP, already on a declining trend since 2009, contracted by 20 per cent between 2020 and 2021 with an estimated loss of about US$ 5 billion in one year alone,” the report says, explaining how a decade’s worth of hard-won economic gains were wiped out. “This staggering economic shock has resulted in near-universal poverty.”
Without support from outside, Afghanistan must now rely on limited domestic revenue from agriculture and coal exports.
Corruption, opium, girls and women
Authorities have sought to address revenue shortfalls by cracking down on corruption in key revenue streams, such as customs, and by reaching out to the private sector and foreign investors.
“Two decades of heavy dependence on international aid and imports, a lack of industrialization and competitiveness, and limited mobility and connectivity among regions, among other factors, have hindered Afghanistan’s forward momentum,” the report says.
Further, the report says that illicit opium cultivation continues to be a key part of the Afghan economy. Opiates generated up to US$ 2.7 billion of gross income in 2021. “The shrinking of the illicit economy after August 2021 has increased the share of the illicit economy in Afghanistan’s GDP to 12-18 per cent, up from about 9-14 per cent one year ago.” (The Taliban took over the reins of power on 15 August 2021.)
UNDP analysis forecasts that restricting women from working can result in an economic loss of up to $1 billion – or up to five percent of the country’s GDP.
Women’s participation in the workforce was 22 per cent in 2019. However, this is expected to slip due to newly imposed restrictions on their economic participation.
“In the private sector, several organisations have reduced the number of female staff, either due to a financial crunch, indirect coercion or as a precautionary measure to avoid controversy.”
UNDP Resident Representative Abdallah Al Dardari said “Afghans are running out of time and resources. Afghanistan needs support from the international community to bring back to life local markets and small businesses which are the backbone of Afghanistan’s economy.”