Taliban rely on former technocrats as Afghan economy on the brink
BY ASSOCIATED PRESS
KABUL
ECONOMY
OCT 19, 2021 11:25 AM GMT+3
Vendors (C) wait for customers at their shop in Kandahar, Afghanistan, Oct. 9, 2021. (AFP Photo)
Afghanistan’s economy was already approaching the brink of collapse when the Taliban swept into power amid harrowing predictions of growing poverty and hunger.
To solve the problem, they ordered the financial managers of the collapsed former government back to work.
In the 20 years since the Taliban last ruled,
Afghanistan evolved from an economy dealing mostly in illicit enterprise to a sophisticated, multibillion-dollar system fueled by donor aid and international trade. The Taliban, a movement borne out of the rural clergy, struggled to grasp the extent of the transformation.
Four employees from financial institutions told The Associated Press (AP) how the Taliban commanded bureaucrats from the previous government’s Finance Ministry, central bank and other state-owned banks to return to work. Their accounts were confirmed by three Taliban officials.
“They told us, ‘We are not experts, you know what is better for the country,
how we can survive under these challenges,'" recalled one state bank official, who like others spoke on condition of anonymity because he was not authorized to speak on record.
They told him, “Do what you must,” but warned, “God is watching you, and you will be accountable for what you do on Judgment Day.'"
Quietly, these technocrats are advising the Taliban leadership in the running of the crippled financial sector. They tell them what to do and how to do it. But, as seasoned experts, they see no way out of Afghanistan’s economic quagmire: With billions in international funds frozen, the best they can muster in domestic revenues is $500 million to $700 million, not enough to pay public salaries or provide basic goods and services.
The Taliban are buttressing relations with local businesspeople to keep them operating, while the leadership makes its case for international recognition in meetings with foreign officials.
The Taliban’s seizure of power in mid-August resulted in an abrupt halt to most donor funds. These disbursements accounted for 45% of GDP and financed 75% of state expenditures, including public sector salaries. In 2019, total government expenditures were nearly $11 billion.
With the ongoing drought as well,
the United Nations predicts 95% of the population will go hungry and as much as 97% of the country risks sinking below the poverty line.
The United States froze billions in dollar reserves in line with international sanctions against the Taliban, eroding the liquidity of both the central bank and commercial banks and constraining their ability to make international transactions.
This has undermined international trade, a mainstay of the Afghan economy.
Intermediary banks abroad are reluctant to engage in transactions given sanctions risks. Informal trade, however, continues. The International Monetary Fund (IMF) predicts the economy will contract sharply.
In the Finance Ministry and central bank, near daily meetings revolve around procuring basic staples like flour to ward off hunger, centralizing customs collections and finding revenue sources amid critical shortages in household goods. In Afghanistan, all fuel oil, 80% of electricity and up to 40% of wheat is imported.
The technocrats’ frustrations are many.
Never mind dollars, there isn't enough of the local currency, the afghani, in circulation, they said. They blame this on the previous government for not printing enough prior to Kabul's fall in August.
Hallways once bustling with employees are quiet. Some ministry workers only show up once or twice a week; no one has been paid a salary. A department responsible for donor relations once had 250 members and dealt with up to 40 countries; now it has 50 employees at best, and one interlocutor: the United Nations.
There are no women.
Many are growing exasperated with the Taliban leadership.
“They don’t understand the magnitude,” said one ministry official. “We had an economy of $9 billion in circulation, now we have less than $1 billion.”
But he was quick to excuse them. “Why would I expect them to understand international monetary policy? They are guerrilla fighters at heart.”
The returning government workers said the Taliban appear genuine in wanting to root out corruption and offer transparency.
They aren’t told everything. A closely guarded secret of the Taliban is how much cash remains in state coffers. Ministry and bank officials estimate this could be just $160 million to $350 million.
“They are very sincere about the country, they want to boost morale and create friendly relations with neighboring countries,” said another banking official. “But they don’t have expertise in banking or financial issues. That is why they requested we return, and that we do our work honestly.”
Mawlawi Abdul Jabbar, a Taliban government adviser, said the returning experts are “with the government. And they are working on the financial issues to solve these problems.”
The Taliban are strengthening relations with businesspeople who trade in basic goods with neighboring countries.
An active proponent of forging business relations is Taliban adviser Abdul-Hameed Hamasi. He was recently greeted with a warm embrace at the wedding of the son of prominent businessperson Baz Mohammed Ghairat.
Ghairat’s factories process everything from cooking oil to wheat. Hamasi said the Taliban were providing him with security, including permission to drive in bulletproof vehicles, so his dealings could continue.
But central bank limits on withdrawals are Ghairat’s chief concern. Without access to deposits, he cannot pay traders, he said.
The economic woes preceded the Taliban’s rise. Corruption and mismanagement were rampant in the former government.
In the first months of 2021, economic growth slowed and inflation accelerated. Drought undermined agricultural production as fuel and food costs spiked.
The Taliban’s capture of border posts and transit hubs ahead of
Kabul's fall exacerbated matters.
Government officials, schoolteachers and civil servants hadn’t received salaries for two to three months before the government collapsed. Many sold household goods or accumulated debts with neighbors and relatives to make ends meet.
Sayed Miraza, an Agriculture Ministry employee, arrived at the bank at 4 a.m. one Saturday morning. People had already lined up to access their weekly withdrawal limit of 20,000 afghanis, or $200.
Miraza’s account is empty. He came to pick up a Western Union transfer from a nephew in the U.S. “We ran out of food, so we had to ask for help,” he said. By 9 a.m. he was still waiting.
In a Kabul flea market, Hematullah Midanwal sells the items of people who have run out of funds.
“They come sometimes with their entire living rooms, everything down to spoons,” he said.
Many hope to leave Afghanistan. Given the chance, the technocrats running the country’s finances would also leave, every single one interviewed by the AP said.
One central bank official said he was waiting on his asylum papers to go to a Western country. “If it comes, I will definitely leave. I would never work with the Taliban again.”
Afghanistan’s economy was already approaching the brink of collapse when the Taliban swept into power amid harrowing predictions of growing poverty and...
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