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Economic Consequences Of The Taliban Dominating Afghanistan

In recent weeks, the Taliban have mounted a swift offensive across Afghanistan to take back the country they already dominated at the turn of the century. The peace commitments signed in 2019 and 2020 have remained on paper once the US announced the definitive withdrawal of its troops. The terrorist group seized Kabul on Sunday, which will decisively affect the failed state’s economy.

The IMF warned just over a month ago: “While sustained peace would raise development prospects, failure of the talks could exacerbate violence, leading to loss of life, destruction, and potentially a crisis of life. refugees, hamper the authorities’ ability to undertake the reforms that support the forecasts, and fuel the outflow of capital. “

On the one hand, according to data from the World Bank for 2019, approximately half of the country’s budget is financed with foreign aid despite the fact that it has decreased slightly in recent years. And although an agreement was signed in November for the country to receive 12,000 million dollars in the period between 2021-2025, most of these funds were conditional on the peace process between the Afghan government and the terrorist group.

In this way, it does not seem realistic to think that the West will maintain funding that goes to the coffers of the Taliban rather than to the development of the country’s institutions or the well-being of citizens.

On the other hand, a 2019 World Bank study showed that legal economic activity in the country declined every time there was an upsurge in the conflict, while illicit activities grew, especially opium production.

Although this did not weigh heavily on the country’s overall economic growth, the researchers stressed that illicit activities have “negative externalities, ranging from greater insecurity to greater corruption,” while the formal economy provides better jobs and contributes to revenue collection. taxes.

“With the change in the structure of the economy, a small drop in aggregate economic activity could be associated with a greater decrease in the welfare of the population,” they point out.

Of course, foreign investment will decline even more than it has been doing. Uncertainty and insecurity drive money away, especially if it comes from the very West that Taliban fundamentalism regards as an enemy.

Furthermore, the end of state institutions will not contribute to the necessary modernization of the economy. 40% of employment in the country is still linked to agriculture, which accounts for more than 20% of GDP, which equates to the industrial sector in terms of wealth generation.

A progress that could be reversed
Before the US intervention in 2002, Afghanistan’s economy was a centralized system. Since then, in just two decades, its GDP has increased fivefold from 4,000 million to 20,000 million (in stable dollars), with an average annual growth of 6.2% between 2003 and 2020.

GDP per capita has increased 166% to $ 509 and its population has almost doubled, from 22 million to 39, according to World Bank data.

To all the aforementioned, possible international sanctions against the country should be added once the Taliban take control of the nation, either for the war crimes that the US has already pointed out, for the treatment of women and minorities or for skipping the rules. UN resolutions, among other reasons.

In addition, the seizure of power by force can lead to the non-recognition of the Taliban government as a legitimate power, which would prevent any type of economic agreement – including humanitarian aid – with those countries that do not recognize it.

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