A country that is one of the poorest countries in the world, Afghanistan’s economy is probably nothing to boast of. According to government research, 42 percent of Afghanistan lives below the poverty line. While 20 percent who can claim to live above it are highly likely into poverty.
However, the country has experienced considerable growth in the past decades. Many expats are returning to their homeland. They are actively involved in business, agriculture, stock market, and many other industries.
With the recent quick march of the Taliban into power, things are likely to go from better to worse. Where does Afghanistan’s economy stand now and what’s to be expected? Keep reading!
The menace of corruption
Afghanistan is among the most corrupt countries. Corruption has become a key driver of conflict in Afghanistan and has fuel instability and insecurity. This undoubtedly accounts for the very low foreign business investments.
Corruption has also given rise to many malpractices including production and trafficking of narcotics, illegal mining, smuggling and opium production.
It has adversely affected the ability of Afghanistan’s government to provide basic amenities and public services. 60percent of the household have to depend on farming and unemployment is the order of the day.
Afghanistan’s natural resources
Afghanistan is rich in natural resources. This includes copper, gold, precious and semi-precious stones, sulphur, lead, zinc, uranium, lithium, iron ore and many more. It goes without saying that the country boasts of significant natural resources which are able to transform the economy for good.
In 2010, the value of untapped mineral deposits were estimated to be about $1 trillion. The lithium and cobalt alone are crucial metals that are used in the batteries for electric cars and mobile devices.
This shows that the country would have thrived well if under favorable political conditions, better security and less corruption.
The impact of US intervention
Being a country that is highly dependant in foriegn aids, the economy prospect appears bleak now as financial assistance is no more certain.
Since the US intervention in 2001 by putting in millions of dollars, Afghanistan’s economy has experienced significant growth. Although, the aim was to help the military troops and train the Afghanistan’s police. However, not much of the fund has been directed on other initiatives. This includes the development of infrastructure that could have promoted economic growth.
The country’s growth slowed down in 2014 as the GDP fell from 14% in 2012 to an average rate of 2.5% between 2015 and 2020.
Afghanistan went to an economic recession in 2020 as a result of the global pandemic which plagued the whole planet. This, coupled with the political unrest have had a grave impact on the economy.
The previous Taliban rule
The sudden taking over of power by the Talibans have left many Afghans who remember their regime 25 years ago in fear. The Taliban first emerged in power after the collapse of the pro-Soviet government of President Najibullah in 1992.
The Islamic Emirate of Afghanistan was declared as the new rule. It was characterised by violence, brutality, oppression, restrictions of political and civil rights and what have you.
The rule makes various headlines. Women and girls are deprived of their right to education. Music and photography are prohibited. Religious minorities are oppressed and persecuted. Their opponents are publicly executed. These weaknesses led to its downfall following the US military led intervention in 2001.
Many fear that history might repeat itself. Women and girls are also likely to be banned from the workforce and schools again. This is likely to have an adverse effect on the economy.
Foreign power intervention
China, which was already involved in the former government, has been reported to take a keen interest in Taliban rule. With Americans withdrawal, rumour has been having it that China is likely to look into opportunities for benefits of the rich natural resources.
This is not to say China is pleased with the Taliban take over, but it doesn’t stop them from being pragmatic. There is, however, less chance of any country including China commiting to this. The security issues, political unrest and inadequate infrastructure might stand in the way.
The IMF in November approved $370 million to ease Afghanistan from the COVID-19 hit. But recently, the IMF announced Afghanistan will not be able to have access to IMF resources.
Moreover, the international Afghanistan reserves held in the world bank- $9.5bn has been frozen by the United States. More financial measures are likely to pop up with the aim of frustrating the Afghanistan’s government. With a country that is highly dependent on foreign aid, this is likely to affect the economy.
Not to mention that the previous Taliban rule was never favorable economically. There is no guarantee this will be. We look out for what’s next!