Updated: Jun 16
The Taliban have taken over Afghanistan after overthrowing the Afghan government following the US drawback. While they no longer face any military opposition, they now have an economy that is on the brink of collapsing, threatening to worsen an already devastating humanitarian crisis. Reviving Afghanistan’s shattered economy is going to be the biggest challenge for the Taliban. To top it all, Afghanistan is facing droughts and international isolation.
An aid-dependent economy is one in which more than 10% of its Gross Domestic Product comes from foreign aid. In the case of Afghanistan, this figure is around 40% of its GDP and the nation largely survives on foreign aid. Following the Taliban's takeover, some of Afghanistan's major donors, including the United States, the United Kingdom, the International Monetary Fund, the World Bank, the European Union, and Germany, have already halted development aid to the country. Rather than the Taliban administration, humanitarian aid is routed through organizations. As a result, the Taliban have a significant financing and economic challenge.
Amid this chaos, we have seen lines stretch for hundreds of meters outside the banks throughout the nation. After the take over the internal banking systems froze up. Banks shut down and ATMs are either having limited money or have been closed due to limited access to cash; people are becoming increasingly desperate.
So how has the Taliban run before and is it sufficient for the current economy? The answer is No. The Taliban have a few streams of income
One of its major sources is Foreign donations: Private donations from countries like Pakistan and Gulf countries. A classified US intelligence report estimated that in 2008 the Taliban received $106m from foreign sources, in particular from the Gulf states.
Another source of income is the drug trade. Afghanistan is the largest producer of opium in the world, which can be refined to make heroin. The Taliban collect a 10% cultivation tax from opium farmers Taxes, the laboratories converting opium into heroin, as well as from traders who smuggle the illicit drugs. Estimates of the Taliban's annual share of the illicit drug economy range from $100m-$400m the drug trade accounts for up to 60% of the Taliban's annual revenue.
Mines and minerals: The Taliban have taken over mining sites and are extorting money from both legal and illegal mining companies. The Taliban receives more than $10 million each year, according to the UN Analytical Support and Sanctions Monitoring Team.
Now obviously the government did not support these illegal activities. So, the Taliban used the hawala system to fund these activities. (Hawalas are informal lenders with a worldwide network. This network-enabled many Afghans to obtain funds from relatives in Doha, Istanbul, and London.) But for this system to work presently, Afghanistan must find steady sources of currency to lubricate the lines of credit to save the economy from collapsing.
Now the Taliban has seen support from governments like Pakistan, Iran and China. In fact, trade has already started up again with Iran, said David Mansfield, an independent consultant and an expert on rural Afghanistan. He has estimated that during its insurgency, the Taliban was able to raise more than $100 million a year, informally taxing goods from Iran and southern Afghanistan. However, this fund will not suffice as this won't be able to fill the big shoes i.e. the fund U.S used to lend.
Where do India and the world stand in this?
India closed its Kabul embassy and brought back 192 staff and security personnel. The Indian government can try to ensure that its interests are taken into account as the new government is formed by opening channels of communication with those who are in contact with the new Taliban regime.
India could help in the resistance of the Taliban by working with the leaders as India once did with the Northern Alliance that defeated the Taliban in 2001.
Many countries in the world have shown their dislike towards the Taliban. However, over the last few years, China is said to have proposed significant investments in energy and infrastructure projects in Afghanistan, including the construction of a road network, and is particularly interested in the country's massive, undiscovered rare-earth mineral reserves. Before the Taliban seized power in Afghanistan, Beijing was said to be planning to formally recognize the group. China is known for debt-trap diplomacy. To add on Afghanistan is part of the BRI project. Knowing that the country doesn't have the funds to support its economy, they will have to work harder in order to pay back China.
Speaking from a more humane perspective, one of the largest threats the world faces after the Taliban takeover is Women safety. The Taliban of the past were infamous for not allowing women to work, denying females the right to education, and carrying out public executions of minorities and opponents. Basic human rights are the least one can expect. The Taliban; a Deobandi Islamist religious-political movement and military organization in Afghanistan, in one way or the other, fail to respect this. In the current economic situation that the country is in, it is definite that the citizens are going to bear the consequences. The UN along with other intergovernmental organizations and countries needs to find a humane way to deal with this situation.
This article is Proof read by Elizabeth Annie Sleeba.
The New York Times. (2021, September 2). Afghanistan's Economy in Free Fall as Taliban Takes Control. Retrieved from https://www.nytimes.com/2021/09/02/business/economy/afghanistan-taliban-financial-crisis.html
The Economic Times. (2021, August 13). China preparing to recognize Taliban if Kabul falls, says report. Retrieved from https://economictimes.indiatimes.com/news/defence/china-preparing-to-recognize-taliban-if-kabul-falls-says-report/articleshow/85292773.cms
Shankar, R. (2021, August 14). 4 Reasons A Taliban Takeover In Afghanistan Matters To The World. NPR. Retrieved from https://www.npr.org/2021/08/14/1027375958/taliban-afghanistan-takeover-the-world-humanitarian-china-pakistan
BBC News. (2023, June 16). Afghanistan's economy in crisis after Taliban take-over. Retrieved from https://www.bbc.com/news/world-asia-58328246
CNN. (2021, August 22). Life for women and girls under Taliban rule. Retrieved from https://edition.cnn.com/2021/08/22/asia/life-for-women-girls-under-taliban-cmd-intl/index.html