Michael Hughes
June 1, 2024

It was easy to blame the 2021 collapse of the Afghan economy on the abrupt withdrawal of foreign aid after the fall of Kabul, which overnight effectively cut the country’s GDP nearly in half. In fact, even the most advanced economies would take years to heal from the type of blow Afghanistan took after the Taliban takeover. But Taliban 2.0 have so far only made Afghanistan’s financial situation worse with bad decisions and defective policies driven by a combination of ideological absurdities, corruption, and incompetence.

How bad is it? Afghan GDP continues to plummet while the poverty rate rises. The unemployment rate has escalated to an all-time high and deflation is at levels not unlike those seen during America’s Great Depression in the 1930s. The appreciation of the afghani discourages exports and fuels imports – the opposite of what is needed amid an alarming burgeoning trade deficit. The inflow of refugees from Pakistan is causing even more economic distress. Meanwhile, Save The Children in a report on May 27 said 3 out of every 10 Afghan children face crisis level hunger.

Afghanistan’s economic crises could be chalked up to decades of civil war, foreign military occupations, bombing campaigns, and previous crooked and inept puppet regimes (including Taliban 1.0 hatched by Pakistan). The U.S. has frozen billions in Afghan assets and the country has been cut off from the international financial system. The current regime in Kabul certainly could not prevent earthquakes and flooding (but could be blamed for disastrous responses).

Viewing the situation from the kindest of lenses, what could one say about the Taliban’s economic accomplishments? Some have argued the radical movement has displayed more business savvy than the previous regime and is less corrupt (although all Afghans are in trouble if the Ghani administration is the performance benchmark). 

One could credit the Taliban for facilitating private sector development and unveiling new initiatives. The Taliban are hoping to revive a number of rail projects. Rail is the most efficient and cost-effective means of transporting goods. Ex-World Bank economist William Byrd sees announcements of mining and infrastructure projects by the regime as “significant.” He also noted the Taliban has proven adept at mobilizing tax revenue, especially custom receipts. With more investment and fostering growth of the private sector, Byrd argues that greater economic stability is possible. However, the economist also admits the odds are not good. 

“Afghanistan’s economy will remain weak for the foreseeable future despite private sector activity and business interest in some projects. It would require major, unlikely actions to change this bleak picture,” Byrd wrote in a piece for USIP in early May.

Any economic pluses are easily wiped away by the Taliban’s destructive management of Afghan affairs. According to a UNDP report, Taliban restrictions on women cost the Afghan economy $1 billion annually. No country has ever prospered by sidelining half the population, the report added. The ban on poppy cultivation cost another $1 billion per year, the UN’s drug agency estimated. Taliban abuse of funding has cost the Afghan people tens of millions of dollars per year. The radical movement has shared gains from the mining industry with Al-Qaeda. AQ has made $194 million since gold and gem mines began operating in early 2022. 

Afghans no longer trust the banking system because of Taliban restrictions. Afghan banks lost around 11% of customers from 2022-2023, according to the World Bank. The Taliban’s shift to Islamic banking has also hindered the financial sector. The Taliban said Islamic banking forbids earning income via interest on investments, loans, or deposits. Experts told RFE/RL that Afghans closing bank accounts has helped further hinder the money supply and placed more stress on the economic system.

Taliban lack of transparency only sows more distrust. The regime has failed to disclose budget details publicly for the past two years. The finance ministry simply announced that the supreme leader has green-lighted this year’s budget which allegedly focuses on the priorities of the Afghan people.

“If these documents are not addressed through technical manners, they can cause serious problems in a country’s economy and also slow down the growth rate of gross domestic product,” economic analyst Siyar Quraisg told Amu TV.

Even Taliban hopes for rail projects will cost billions of dollars. The regime is in talks with several foreign countries and international institutions for potential support in building railways. For international donors there are no good options. Putting funding in the hands of the Taliban will not flow to the Afghan people, and yet total isolation will hurt Afghans as well.

In summation, Taliban policies are contributing to the establishment of a permanent state of economic malaise inside Afghanistan. Moreover, it has become evident that any positive economic developments that emanate from the Taliban will first and foremost benefit the regime and its terrorist allies, while some crumbs might occasionally fall onto the plates of a few lucky Afghans.