Name: What Taliban rule means for Afghanistan’s economy | CNBC Explains
Uploaded: 2021-09-09T18:55:08.000Z
Duration: 9 min 34 s
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For more than four decades, Afghanistan has been in the midst of conflict.

The human and financial cost of the war in Afghanistan has been devastating.

In August 2021, in a matter of weeks, the Taliban seized control of key cities in the

country, causing the democratically-elected government to collapse and a mass exodus of

After a 20-year absence from power, the Taliban had taken control of Afghanistan, a move

that was met with outrage by most of the international community.

Losing that support will be costly for the Taliban, the nation's economy and its people.

To make sense of what's happening, I called Natasha Turak, a correspondent in our Middle

East bureau, who's been covering the Afghanistan crisis since the news broke.

Honestly, it's nothing in comparison to what people on the ground are dealing with,

So what does the Taliban takeover mean for Afghanistan's economy?

The situation we're looking at, it means that Afghanistan's formal economy is likely to crash.

This would mean a humanitarian crisis, a refugee crisis and political instability that is far

The key reason being that Afghanistan's economy is heavily, heavily dependent on foreign aid.

Nothing will make up for the sheer volume of funding that Western countries have been

providing Afghanistan for the last 20 years.

Afghanistan is staring right at a liquidity crisis.

80% of the Afghan government budget was funded by the U.S. and other Western institutions.

40% of the country's GDP came from foreign aid.

Importantly, 4% of Afghanistan's GDP comes from remittances, that's money from overseas

That's one of the highest rates in the world and those remittances have not been able to

reach Afghans in the country who need it.

The Biden administration froze all of Afghanistan's foreign assets that are in the U.S., which

includes more than $7 billion of the Afghan Central Bank's $9 billion.

This could leave the Taliban to impose capital controls.

Capital controls are regulations taken by governments or central banks to limit how

These include restrictions on money transfers and cash withdrawal limits at banks.

Losing access to foreign currency is a big deal because Afghanistan's economy is heavily

Afghanistan's currency has fallen to record lows, the prices of basic commodities like

flour and gas spiked 50% within just two weeks of Kabul's fall to the Taliban.

International organisations like the World Bank and the International Monetary Fund also

$12 billion in foreign aid from more than 60 countries was also under scrutiny.

Afghanistan's financial future depends heavily on whether the Taliban government gets internationally

And that, in itself, will depend on what concessions it is willing to give to the international

community, whether it be on human rights guarantees, whether it be guarantees that it will not

harbour terrorist groups as it did in the 1990s.

As Afghanistan faces the risk of economic collapse, what will this mean for its citizens?

Nearly 70% of Afghanistan's population is below the age of 25.

That means an entire generation of Afghans has grown up with not knowing Taliban rule.

So, this is an entire generation of young Afghans, tens of millions, who grew up being

able to play soccer, being able to work in media, women being able to participate in

politics, in the private sector, in art, in entrepreneurship, in international organisations,

The United Nations have also called women's rights in Afghanistan “on a fundamental red line.”

While female presence in the workforce has still not been huge, what the country risks

losing is not just the progress that's been made in the last two decades, but the future

productive potential that would be lost if it chooses to lock half of its population

And to take this away from all of these people, first of all, it's devastating for the people

who've enjoyed these rights and who've experienced these freedoms for the last 20 years.

According to the World Food Bank, it needs $200M by the end of the year to aid millions

of Afghans who are facing the risk of starvation.

In a country of almost 39 million people, nearly half of the Afghan population lived

below the national poverty line in the last year.

It is a perennial dilemma for countries that provide aid, when the governments of those

countries are committing human rights abuses.

Do you cut off funding to ensure that the government itself doesn't get to enjoy those funds?

Or do you continue funding to support the people who will likely be hurt the most?

And that is continuing to be deliberated, and I think will probably be deliberated for some time.

Most of their independent funding comes from criminal activity.

So, the Taliban, for decades, funded itself on illicit opium trade, on extortion, kidnappings,

there's illicit timber trade, there are some illicit mining activities going on around

The thing is: they were able to fund themselves, they were able to fund an insurgency for many,

Their net opium revenues ranged from between $40 million US dollars - $400 million in recent years.

Do you think we will see a lot more of these activities to fund Taliban operations in Afghanistan?

The funding of the Afghan government budget in the last year was $5.3 billion.

And there is no way frankly, from all the analysts, the economists I've been speaking

to, that the Taliban can fill that enormous gap, with the activities it's been partaking

in, in the last 20 years, to fund itself alone.

Afghanistan's strategic, landlocked location has also brought up discussions of its potential,

especially for countries with geopolitical interests.

Economists say that Afghanistan has more than $1 trillion in untapped mineral wealth.

That's everything from copper and iron ore, and gold and gemstones, to lithium, which

is exploding in price on the market today, because of the demand for electric vehicles.

Now China is working to be a world leader in electric vehicles.

And this is something very interesting to them.

However, Afghanistan is very underdeveloped in terms of infrastructure.

So it's going to take a while, I think, before Afghanistan as a country can take advantage

of these minerals and the natural resource wealth that it has.

It simply doesn't have the volume and the scale and the level of roads, railroads, power

lines, infrastructure in general, to move this kind of technology around the country.