Afghan economic crisis looms as foreign aid dollars depart
Afghanistan's fragile economy has lost around a third of its value in the past year as international aid organizations that poured in cash for more than a decade have drastically scaled back after Western forces effectively ended their 13-year war against the Taliban.
Kabul: Afghanistan's fragile economy has lost around a third of its value in the past year as international aid organizations that poured in cash for more than a decade have drastically scaled back after Western forces effectively ended their 13-year war against the Taliban.
Assuming power in September amid a continuing Taliban insurgency, President Ashraf Ghani inherited a moribund economy and an electorate weary of endemic corruption and soaring unemployment.
But economists, analysts and officials agree that the economic challenge has been compounded by the Western handover of security to Afghan forces, completed at the end of last month, whose knock-on effect has left key sectors lacking investment and struggling for funds.
Economic growth that was above 14 per cent in 2012 will fall to just 1.4 per cent this year, the World Bank predicts. In recent months, fears about the state of the economy have outstripped security concerns in opinion polls taken across the country.
The Central Bank spends tens of millions of dollars weekly to stem the fall of the afghani as money continues to leave the country, traders said, reflecting a general lack of confidence in the government's ability to introduce reforms, stimulate growth, guarantee security and cut corruption.
At Kabul's Saraye Shahzada money market, traders dealing in dollars, rubles, euros, rials, rupees and dirhams, are concerned about capital flight.
"At least twice a week, the Central Bank sells USD 40 million to USD 50 million to support the afghani," said Mohammad Khan Baz, the market's manager. "If the government doesn't pay attention to security and provide opportunities for investors, I am afraid that the economic situation for ordinary people will go from bad to worse."
Imports vastly outstrip exports, Ghani recently told parliament, exacerbating the country's dependence on financial support from international partners who are already spending billions annually on the military and police.
Afghan authorities had four years' notice that the US military, which spent more than USD 1 trillion between 2001 and 2014, would close most bases and withdraw combat troops at the end of last year.
About a third of Afghanistan's population lived close enough to a military base to benefit from its presence. On top of war costs, the US spent more than USD 100 billion on development.