January 26, 2023
ISLAMABAD — The World Bank has delivered a surprisingly upbeat assessment of the Afghan economy in the first nine months of the fiscal year 2022, citing high exports, a stable exchange rate and strong revenue collection under Taliban rule.
The report stands in stark contrast to regular reports from U.N. agencies and NGOs of near-universal poverty and widespread hunger in the country since the Taliban takeover in August 2022 led to a cutoff of most international aid.
That and the strict enforcement of international sanctions on Taliban leaders and isolation of the Afghan banking sector had pushed the war-ravaged economy to the brink, but effective anti-corruption efforts and other measures seem to have enabled the Islamist rulers to contain the downward slide.
The World Bank assessment released this week noted that inflationary pressure has eased since July of last year, decelerating by half to 9.1 % in November, while most basic food and non-food items remain widely available. The report attributed the decline in inflation to lower global oil and food prices, along with a stable exchange rate.
In what may be a peace dividend from the end of fighting in the country, Afghanistan exported $1.7 billion worth of goods, an increase of approximately 90% compared to the full year 2021, the bank reported. Pakistan, with 65%, and India, with 20%, remain the two main export destinations for Afghan vegetable products, mineral products, and textiles.
The report noted that up-to-date import data was unavailable, but the January-June 2022 data shows the country imported $2.9 billion of goods. Neighboring Pakistan, China, and Iran are identified as the main import origins.
The World Bank assessment said revenue collection had remained strong, reaching $1.54 billion between March and December 2022, in line with 2020 results.
A major chunk of the revenues came from taxes collected at borders and non-tax sources. A rise in coal mining royalties and fees likely drives the increase in Afghan ministries’ revenue, the report found.
In other findings, the World Bank report said nominal and real wages rose slightly in December. It noted that most Afghan civil servants have received salaries regularly, with women reporting they are being paid more regularly than men over the last two months. The civil servants say in the survey the key challenges when trying to withdraw their salaries are the banks are crowded and short of cash, which makes it difficult for them to deal with on a regular basis.
The bank did not address recent reporting from the U.N. Office for the Coordination of Humanitarian Affairs, which said that 97% of Afghans live in poverty, two-thirds of the population need aid to survive, and 20 million people face acute hunger.
But Afghan analyst Torek Farhadi, a former adviser for the World Bank and the IMF, said the economy “is limping along” because of the injection in cash of humanitarian aid by the United Nations.
“It maintains the value of the Afghani [local currency] as U.S. dollars are converted into the Afghani currency in the Kabul exchange market,” he told VOA in written comments. “The U.N. aid has been able to maintain the status quo.”
Farhadi noted the country continues to face difficulty in attracting foreign investment, at least in part because the Afghan private sector has been suffering from a lack of transparency about Taliban economic policies.
“Private investment requires a climate free of pressure,” he emphasized. “Nobody dares to make long-term investment plans as Taliban trade and investment legal framework is non-published and unpredictable.” A thriving private sector is crucial to provide jobs to the educated Afghan youth to discourage them from leaving the country, Farhadi noted.
The Taliban have imposed their harsh interpretation of Islamic law to govern the country.
“Families with daughters also want to leave for countries where there is education if they can afford it. Afghanistan’s economy is depressed, and Taliban have difficulty creating confidence,” Farhadi said.
The Islamist rulers have excluded women from most areas of the workforce and banned them from using parks, gyms, and public bathhouses. They have barred girls from attending secondary schools beyond grade six.
Last month, the Taliban closed universities to female students until further notice, and they forbade women from working for national and international nongovernmental organizations.
The international community has refused to grant legitimacy to the de facto rulers over human rights concerns, mainly stemming from bans on women’s work and education.
The refusal by the Taliban to reverse the restrictions has prompted donor nations to withhold financial assistance and retain the economic sanctions, with exceptions for humanitarian aid.
Afghanistan’s population was estimated to pass 43 million in 2022, and a staggering 28.3 million people will need urgent humanitarian assistance this year in order to survive prolonged drought-like conditions, according to latest U.N. assessments.