Although they have dominated the country’s political scene, they do not have access to the billions of dollars it has in reserves.
The Afghan economy they have inherited this time is much more urbanized and has almost tripled in size since they came to power two decades ago. However, economic challenges remain.
Failure to get into the hands of these funds can lead the already battered economy into a crisis, which adds to civilian problems.
What was the state of the economy in 1996-2001
The Taliban ruled Afghanistan with an iron fist from 1996 to 2001, enforcing a harsh version of Islamic law, before being overthrown by U.S.-led forces.
Several years of civil war had completely ravaged the economy, infrastructure was destroyed, cities destroyed by bombing, and the central bank barely functioned for years.
The profits accumulated by commanders and traders were largely invested in illicit activities such as drug tracking and cross-border smuggling. Revenue was earned primarily through looting, banditry, transit neighborhoods, asset looting, and illegal trade regulation.
The first governor of the Taliban’s central bank, Ehsanullah Ehsan, was a military chief who declared the country’s (Afghan) currency useless and canceled the order for new banknotes.
Afghan economy since 2002
According to the World Bank, Afghanistan has witnessed an influx of international aid since 2002 that has helped it maintain rapid economic growth and improve social indicators.
Between 2003 and 2012, annual growth averaged 9.4%, mainly due to an aid-based services sector and a strong agricultural sector.
However, economic and social progress slowed down due to a number of factors and the economy only grew by 2.5% annually between 2015-2020.
The World Bank noted that aid flows declined from 100% of GDP in 2009 to 42.9% of GDP in 2020, leading to a contraction in the services sector, falling employment and income.
What was the situation just before the Taliban attacked again?
Compared to 1996, Afghanistan in 2021 is in a better economic situation, with nearly $ 9 billion in foreign reserves abroad.
However, the economy remains fragile and largely dependent on aid, with 75% of government spending financed by subsidies, according to the World Bank.
With a narrow private sector, 40% of employment was concentrated in the agricultural sector, while only 60% derived some income from it, according to the World Bank.
Weak institutions and property rights restrict financial inclusion and access to finance, with credit to the private sector equal to 3% of GDP.
Security spending (national security and policing) was high at around 28% of GDP in 2019, compared to the country’s low-income average at around 3% of GDP, which boosted total public spending in about 57% of GDP.
According to the World Bank’s Doing Business Ranking 2020, the country ranked 173rd among 190 countries, with a development marked by insecurity, political instability, inadequate infrastructure and weak institutions.
Why Afghan aid was declining
The Afghan economy was facing serious challenges and international support had begun to wane even before the Taliban took control.
One of the main reasons for this decline was the corresponding withdrawal of international troops from more than 1,30,000 in 2011 to about 15,000 in 2014.
The Congressional Research Service noted this year that 90% of Afghanistan’s population lived on less than $ 2 a day and warned that the loss of U.S. support would weaken one of the world’s smallest economies.
In late 2020, foreign donors gathered in Geneva pledged to help Afghanistan with $ 12 billion over the next four years, a 20% decline from the previous four years.
Some of the aid agencies based new conditions on obtaining money on human rights advances and advances with peace talks between the government and the Taliban.
Can the Taliban gain access to Afghanistan’s financial assets?
According to a statement issued by the country’s central bank, Da Afghanistan Bank (DAB), it owned assets worth 784.6 billion Afghans for the period ending June 21.
Assets included gold reserves worth 102.7 billion Afghans and cash reserves in foreign currency worth 28.7 billion Afghans.
As for assets held abroad, approximately $ 9 billion of DAB reserves are held in the form of treasury and gold, a considerable portion of which is maintained with the U.S. Federal Reserve by international standards, va reported DAB Governor Ajmal Ahmady in a series of tweets.
This thread serves to clarify the location of DAB (Central Bank of Afghanistan) international reserves. I am writing … https://t.co/OQx0MYrvqF
– Ajmal Ahmady (aahmady) 1629268812000
The U.S. has frozen all reserves so that the Taliban cannot access those reserves. It has also stopped sending dollars to the nation, pushing the Afghan currency to record lows.
The June DAB statement also indicates that the bank owned investments worth $ 6.1 billion. The June report did not provide details of these investments, but a breakdown of the year-end report showed that most were in the form of U.S. Treasury bills and bills.
This means that most Afghan assets are outside the country and the Taliban is on the list of international sanctions, it will not be able to impose any.
“Therefore, we can say that the funds available to the Taliban are perhaps 0.1-0.2% of Afghanistan’s total international reserves. Without Treasury approval, donors are unlikely to support the Taliban. Taliban government, ”Ahmady said.
In addition, the International Monetary Fund (IMF) planned to disburse about $ 460 million in emergency foreign exchange reserves, known as Special Withdrawal Rights (SDRs) in Afghanistan next week. But after the Taliban’s acquisition, the transfer has stopped.
As a rule, if a government is recognized as legitimate, it cannot access its existing or new SDRs.
Afghanistan currently has SDR 37.16 million according to the IMF, which equates to more than $ 52 million.
How many Afghan resources can the Taliban have access to?
DAB’s foreign currency cash holdings worth about $ 362 million are almost entirely in US dollars and were held at the bank’s headquarters and branches, as well as at the presidential palace, which is now in hands. of the Taliban.
The DAB year-end statement also detailed that gold bars and silver coins worth less than $ 160 million were kept around the bank’s vault at the presidential palace.
The vaults of the Afghan central bank also contain a treasure trove of 2,000-year-old gold jewelry, ornaments and coins known as the Bactrian Treasure, according to UNESCO.
It was presumed that the nearly 21,000 ancient artifacts were lost until 2003, when they were found in a secret vault in the basement of the central bank, as they survived the previous era of undiscovered Taliban rule.
In addition, they have regained control of the country’s natural resources that could be worth $ 3 trillion, Reuters news agency reported.
Afghanistan is rich in resources such as copper, gold, oil, natural gas, uranium, bauxite, coal, iron ore, rare earths, lithium, chromium, lead, zinc, precious stones, talc, sulfur, travertine, gypsum and marble .
What are the financial sources of the Taliban
A United Nations report in June highlighted the Taliban’s lack of economic credibility, detailing how its funding stems from criminal activities such as drug trafficking, opium poppy production, extortion, the kidnapping to rescue him and the exploitation of minerals.
It is estimated that the group’s revenue from these practices amounted to between $ 300 and $ 1.6 billion a year.
The report noted that the Afghan opium trade was one of the main sources of revenue with a 37% poppy growth even amid the coveted pandemic last year.
According to a 2008 report, the group imposes a 10% tax on all links in the drug production chain: poppy farmers, laboratories that turn the crop into narcotics and traders who move the product abroad. .
In addition, the Taliban also generates huge revenues from mining activities of iron ore, marble, copper, gold, zinc and other rare earth metals and minerals.
They tax people and industries: mining operations, the media, telecommunications and development projects funded with international aid. They also tax harvest and wealth.
In addition, the Taliban receive covert financial contributions from private donors and international institutions around the world, mainly in the Persian Gulf countries.
What is approaching
The fate of the Afghan economy will be determined by the decisions the Biden administration and other countries must make about whether to recognize the Taliban as a legitimate government.
The United States and the international community have already shut down the flow of money, leaving Afghanistan on the brink of sanctions aimed at cutting the Taliban out of the global financial system.
The value of the Afghan currency, the Afghan, fell to record lows last week; and the country’s most recent central bank governor, Ajmal Ahmady, warned that inflation would likely cause food prices to skyrocket.
Concerns about food insecurity are mounting and an impending drought is expected to make things worse.
The extent of the problem could be seen in the closed Afghan currency exchange market. Currency trading stopped on Sunday when the Taliban took control of Kabul.
Without the exchange capacity or the support of dollars flowing into the country, the value of the Afghan currency could collapse, inflation could accelerate and the mix of violence and chaos could prolong.
Although the Taliban still have access to revenue streams that sustained the insurgency, but that will not be enough for a centralized government that can do more complete control of the country.