Afghanistan Is Facing a Total Economic Meltdown
Traveling around Kabul a few weeks ago, the city felt worlds apart from my last visit in 2019 — and not just because a 20-year war had finally ended. The economy is spiraling out of control. And unless money starts flowing soon, a total economic collapse will plunge Afghans into a humanitarian catastrophe.
The desperation is everywhere. Mothers I sat down with in makeshift tents told me their families have no income and no reserves, and they’re worried that their children will starve and freeze to death this winter.
I met teachers, health workers and water engineers who have not been paid since May. They can no longer support their extended families or keep vital public services afloat. Without functioning banks and liquidity, ordinary Afghans are cut off from their life savings and have no way of surviving.
When the Taliban toppled Afghanistan’s government in August, the country suddenly lost access to more than $9 billion in central bank reserves, frozen by the Biden administration. This sent shock waves through the banking system and prompted capital control measures by the new Taliban leaders, triggering a lethal domino effect that closed banks and paralyzed economic life.
The political conflict with the Taliban must not punish the civilian population. The international community must urgently broker multilateral agreements to stabilize the economy and fund public services. This means finding safe payment channels to get aid flowing and safeguarding humanitarian action from international sanctions and other counterterrorism financing measures.
Our organization, the Norwegian Refugee Council, is one of many trying to provide assistance in this new and challenging environment. We have been unable to securely move aid money into the country to buy emergency supplies for families who face homelessness and hunger this winter. The banking crisis has left several Afghan banks closed and others operating at limited capacity. This has left us struggling to pay our staff and suppliers in Afghanistan. Instead, we are forced to purchase tents, blankets and food in neighboring Pakistan.
Now imagine this dilemma multiplied for every employer across Afghanistan.
In addition to the liquidity emergency, a donor funding freeze has contributed to crippling public services. Some 75 percent of Afghanistan’s public expenditure had in recent years been funded by foreign aid. This lifeline has been largely cut off because the international community is grappling with how to work with a Taliban-run government — including ministers on international sanctions lists.
New mechanisms need to be urgently launched to directly pay hundreds of thousands of municipal and state public servants by channeling the frozen World Bank money through United Nations agencies. This is what I raised in a letter to the heads of the United Nations and the World Bank urging action — suggesting that U.N.-administered trust funds be set up to pay public workers directly. Since the resources already exist within the World Bank and the trusted U.N. channels already are available in the country, these types of transfers can be established quickly.
We need more out-of-the-box thinking, so that banks can reopen and social services can restart.
The World Bank suspended $600 million in funds that form the backbone of the country’s health system. If doctors and nurses are not paid, hospitals will be forced to shut their doors. The alliance recently formed by key aid groups to address the health crisis is a step in the right direction. A special agreement was signed by four agencies to set up mechanisms that would allow direct funding to hospitals and clinics in Afghanistan — but that won’t be enough. Aid groups have nowhere near the capacity to plug the enormous gaps that remain in the health system.
We also need financial instruments that enable donors to pool large sums of relief money, to help us navigate the complexity of international sanctions and restrictions that make it hard for our aid to reach those who need it most.
Even before the latest seismic political shift in Afghanistan, the country faced a dire humanitarian crisis. More than 18 million people urgently needed humanitarian aid. Some 3.5 million Afghans were internally displaced. Failed rains drove hunger levels up — one in three people did not know where their next meal would come from.
Some countries and individual actors have suggested that the Taliban must meet certain conditions in exchange for funds. As a humanitarian organization, we do not advocate the conditionality of aid. We are not here to weigh in on political issues or political solutions to the current crisis. We need the international community to realize the urgency here: The economic crisis will only exacerbate humanitarian needs.
I told Taliban leaders I met with in Kabul that for humanitarian action to be most effective, we need both our female and male colleagues to have equal rights, just as it’s important for both girls and boys to be able to go to school. We have been given verbal assurances on these issues in most parts of the country — and will continue to press the Taliban to adhere to humanitarian principles and ensure we can reach those in greatest need.
Whether we will succeed in our race against time to scale up before winter will depend not only on the Taliban’s willingness to turn their words into action, but also on the international community.
Trillions of dollars were spent over the past two decades on the war in Afghanistan that ended so monumentally when the United States evacuated, leaving some 40 million people to fend for themselves. While many were caught off guard by the rapid change of power, the international community cannot continue to stand idly by and watch the country’s free-fall.
We must avert Afghanistan’s full economic meltdown, regardless of who controls its territory. Otherwise millions of Afghan children, women and men will pay the heaviest price.
Jan Egeland (@NRC_Egeland) has 30 years of experience in human rights, humanitarian crises and conflict resolution. Currently the Secretary General of the Norwegian Refugee Council, he previously served as a United Nations Under-Secretary-General for humanitarian affairs.
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