Taliban seized Afghanistan but now faces money shortage
The Taliban face a frontal challenge to consolidate control of Afghanistan: money.
Despite their dominant military blitz over the past week, the Taliban lack access to the billions of dollars from their central bank and the International Monetary Fund that would keep the country operating during a turbulent reshuffle. These funds are largely controlled by the United States and international institutions, a possible leverage point as tense evacuations take place from the airport in the capital Kabul. Tens of thousands of people still need to be evacuated before the August 31 deadline set by the United States to withdraw troops from the country.
But the Taliban also currently lack the institutional structures to receive the money – a sign of the challenges they might face as they attempt to rule an economy that has urbanized and has since tripled in size. their last power two decades ago. The shortfall could lead to an economic crisis that would only fuel a deeper humanitarian crisis for the estimated 36 million Afghans who are expected to remain in the country.
“If they don’t have work, they don’t get fed,” said Anthony Cordesman, who has advised the US government on Afghan strategy and works at the Center for Strategic and International Studies. “The Taliban must find an answer.
The stranded funds are one of the few potential sources of pressure the US government is exerting on the Taliban. But Cordesman added, “To have a pressure point you have to be prepared to negotiate in a way the Taliban can accept.”
At present, the Taliban government does not have access to nearly all of the Afghan central bank’s $ 9 billion in reserves, most of which is held by the New York Federal Reserve. Afghanistan was also due on 23 August to access about $ 450 million from the International Monetary Fund, which effectively blocked release due to “lack of clarity” regarding recognition of a new Afghan government.
While the money would make it easier for the Taliban to rule, government officials said it is not clear who would be the points of contact in Afghanistan for financial matters. President Joe Biden conceded he was unsure whether the Taliban wanted to be a part of the wider global economy, which means he might be comfortable going without funds.
“I think they are going through some sort of existential crisis as to whether they want to be recognized by the international community as being a legitimate government,” Biden told ABC News on Wednesday. “I’m not sure they do.”
Even if the Taliban could get money from the IMF, Douglas Rediker, a member of the Brookings Institution, said the process “would take, I think, months at the earliest, if at all.” But he also predicted that the United States would find a way to block the release of any money through the IMF system.
“The United States still retains a lot of political clout in global, political and economic systems to twist some arms,” Rediker said. “The Taliban will not be popular.
When the Taliban last ruled Afghanistan two decades ago, the average Afghan survived on less than a dollar a day. Gross domestic product per capita nearly tripled during the war, according to the World Bank. Afghanistan has won cellphones, Coca-Cola and Airbnb lists – all of which need access to global economic institutions. The war effort also left the country heavily dependent on trade with imports of $ 8 billion a year, nearly 10 times what was exported.
The magnitude of the problem could be seen in the closed Afghan foreign exchange market. Currency trading came to a halt on Sunday when the Taliban took control of Kabul. Without the ability to trade or the support of the dollars flowing into the country, the value of the Afghan currency could collapse, inflation could accelerate, and the mix of violence and chaos could continue.
Aminullah Amin, a currency changer, said on Friday there were concerns about the looters and the structure of the new government. This feeling of insecurity felt by Afghans would run through the economy like a virus.
“We have not yet decided to reopen the markets.” said Amin, who witnessed the looting of a district police headquarters in northern Kabul after the capital was captured by the Taliban.
Taliban spokesman Zabihullah Mujahid reaffirmed Thursday that the group wants good relations with other countries and will not allow Afghanistan to be a base for attacks. But he said the Taliban would not tolerate any threat to “our principles and our independence.”
Laurel Miller, Asia program director at Crisis Group, an international think tank, said Afghanistan remains “a very poor country suffering from a complex set of humanitarian problems and challenges.”
The Taliban still have access to the sources of income that supported the insurgency, but that will not be enough for a centralized government that can exercise more complete control over the country. The movement must balance its image on a global scale with maintaining support from its own base, the ultra-conservative Muslim fighters who brought it to power.
“There is reason to believe that when the going gets going, the internal dimensions will take precedence over the external dimensions,” Miller said.
The Taliban may have more success with other nations wishing to project their influence in the region. China wants stability in Afghanistan and also maintains close relations with neighboring Pakistan, which itself has long worked to shape events there. A 2010 US government report estimated Afghanistan to contain around $ 1,000 billion worth of metals and minerals, including lithium and rare earths which are valuable in an increasingly computerized world.
“I think a real question mark in the financial situation is what China is going to do,” Miller said.