Afghan economy has crumbled since Taliban takeover

Afghan economy has crumbled since Taliban takeover

The Wall Street Journal reports:

Until a few months ago, Mohammed Wahid Haykalyar owned a busy restaurant in the heart of Kabul, where people came from all over the city for steaming plates of saffron rice and braised lamb. His monthly earnings of $3,000 were more than enough to pay for his children’s English-language lessons and after-school soccer practice.

These days, he doesn’t even have money to buy food for his family.

“I never imagined I would find myself here. I feel ashamed,” said Mr. Haykalyar while he queued at a United Nations food distribution center to collect a sack of rice, beans and a bottle of sunflower oil. “I used to give food to poor people, now I am begging for food myself.”

Mr. Haykalyar’s restaurant started losing money right after the Taliban took over Afghanistan in August, when many of his clients left the country and others could no longer afford to eat out. He shut down his business two months later and is now trying to make a living as a casual laborer, earning $10 on a good day.

The government’s ability to manage the economy has largely broken down. The inexperienced Taliban leadership, which overthrew the republic when U.S.-led troops left the country, is isolated and under sanctions, and knows little about running a state.

The international financial assistance that had covered the majority of the government’s public spending for years has been cut off. The central bank’s $9 billion in foreign assets are frozen abroad, blocking its ability to mitigate the crushing inflation that hit 15.5% in April, and day-to-day operations of the banking system for individuals barely function. Even the country’s paper money is disintegrating, since no new afghani notes, which are manufactured abroad, have been sent to Afghanistan since the Taliban takeover. Some are now so damaged money exchangers won’t accept them.

The private sector is struggling to do what it can. Yet traders and manufacturers say that, with the banking sector largely paralyzed, importing goods and raw materials has become a huge challenge. Restrictions imposed by Afghan banks on cash withdrawals to avoid a bank run have made it difficult for businesses to pay for goods and services or even pay wages.

Afghanistan’s gross domestic product is expected to decline by around 34% by the end of 2022 compared to 2020, the last full year of the republic, according to projections by the World Bank.

The U.N. says over 90% of the Afghan population isn’t eating sufficiently and that nearly half of the population is facing acute hunger. Families have resorted to selling their children or their organs to survive. The worst drought in decades has compounded the crisis. [Continue reading…]

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