Following the Taliban takeover in August, Western states froze all development aid, worth 75% of the Afghan government’s budget
. Many civil servants, including doctors and teachers, have not been paid since August. Western powers froze $ 9.5 billion
in Afghan assets in foreign banks — the vast majority of which is held in the US. Meanwhile, sanctions on the Taliban have become de facto bans on private-sector engagement with the government, despite exemptions for humanitarian activity.
This would have caused problems for any economy. But foreign aid represented over 40% of GDP for Afghanistan
. The international house of cards that was Afghanistan’s economy has come falling down.
Afghanistan has risen to the top of the International Rescue Committee’s 2022 Emergency Watchlist
as it nears economic collapse and the breakdown of virtually all basic services. The United Nations Development Programme predicts that in just a few months, a staggering 97% of Afghans
could be living below the international poverty line of $ 1.90 a day. Only 2% of Afghans
have enough food to eat today, with 9 million people
at risk of famine, including 1 million children
at risk of dying from starvation.
At this rate, not only will precious development gains be lost, but the current humanitarian crisis could kill far more Afghans than the past 20 years of war.
There is an obvious moral rebuttal to letting ordinary people starve in an effort to deny political credit to a regime. But there is also a political and practical one. The prospect is not just mass misery but more desperate people fleeing to Europe as well as neighboring states and an indelible stain on the reputation of the US and other Western countries.
Humanitarian aid alone cannot fill the gaps that have been left in Afghanistan. The economic withdrawal following the military withdrawal is indefensible; Afghanistan doesn’t just need more humanitarian aid but a shift in the mindset of the West, led by the US and governing bodies of World Bank and International Monetary Fund (IMF), to get at the heart of the international economic and legal restrictions driving suffering today.
Here are five key steps. These measures should be combined with a clearly defined diplomatic strategy from the US and West that has thus far been lacking. The US has a disproportionate and inescapable role to play given its direct control of Afghan financial assets, the wide-ranging impact of US sanctions and its leverage as the largest contributor to key international financial institutions.
The Afghan banking system needs liquidity to start functioning again. The first step should be releasing the assets of private individuals and corporations frozen in overseas banks in Europe and the US — which sources have privately told me could be hundreds of millions of dollars. Ordinary Afghans need access to money to pay for food and basic items; businesses need to pay employees and each other. All of this takes cash.
Second, the World Bank’s release of $ 280 million
from the Afghanistan Reconstruction Trust Fund (ARTF) to prop up NGO-run health care services and allow the UN to deliver food is critical but insufficient. As the largest shareholder, the US should support the World Bank to urgently release the remaining more than $ 1.2 billion sitting in the ARTF
. This should now be directed to a wider set of programs to resume essential services, including paying civil servants such as teachers, nurses and other essential workers.
Third, the US and other donor governments must also help enable the engagement of international financial institutions with Afghanistan. This should include support for a joint World Bank/IMF mission to Afghanistan and pathways for technical assistance for the Afghan central bank. Afghans need a functioning economy, and it begins with a functioning central bank. There should be an urgent convening of a World Bank/IMF meeting on the Afghan economy to map a path forward and create a channel of communication between the international financial community and Taliban authorities.
Fourth, foreign businesses are running from Afghanistan because they fear running afoul of sanctions. The blurred line between the preexisting sanctions on the Taliban and its leaders and their application today on the whole governing system needs to be clarified. The US has taken vital steps to provide humanitarian exemptions in its own sanctions while leading the UN Security Council in doing the same. But current guidance for the commercial sector is woefully insufficient. There is precedent for a better approach. One of the first actions of the Biden administration upon taking office was to offer new legal guidance on Yemen, temporarily allowing commercial transactions while the US reviewed the crippling impact of its sanctions on the commercial sector. Humanitarian response cannot replace a functioning commercial sector.
Finally, donor states must urgently meet the short-term UN humanitarian aid appeal of $ 5 billion
— the largest single country appeal of its kind ever. The historic figure serves as a testament to the sheer scale of need that is required to avert complete humanitarian catastrophe this year. The US announcement of over $ 300 million this week
is both meaningful for aid operations and a symbolic effort that should be leveraged to galvanize other donors. With winter underway and the risk of famine looming, there is no time to waste.
Given the severity of the crisis, leveraging this wider set of financial tools is not about supporting the government but about saving lives. There is no shortage of technical ways forward — but there is a shortage of political will to act on them. After 20 years of war and 40 years of instability, Afghan civilians cannot afford to wait.