JURIST EXCLUSIVE – Law students and lawyers in Afghanistan are filing reports with JURIST on the situation there after the fall of Kabul to the Taliban. Here, a lawyer in Kabul offers his latest observations and perspective on the country’s current economic predicament. For privacy and security reasons we are withholding his name and institutional affiliation. The text has been only lightly edited to respect the author’s voice.

Finding a sustainable source of growth was and still is a major economic challenge for Afghanistan. In the past this obstacle was partially/wholly removed/filled in by significant projects and the cooperation of entities such as the World Bank, Asia Development Bank (ADB), USAID, and many other donors/partners in Afghanistan. Almost all of these donors have either left Afghanistan or have suspended their projects in the country at the moment.

In light of this, here are some things that might happen in the not-too-distant future:

1: Afghanistan is losing many of its strategic partners/donors through which the country has witnessed growth in agriculture, mining and energy, banking and finance, trade, transit, etc. Any suspension and/or closure of activities of one or more of the aforementioned areas will lead to unemployment and lack of contribution to the economic growth in the country.

2: Afghanistan derives a large part of its revenues from agriculture and some of the biggest agricultural projects were funded by World Bank, Asia Development Bank, and some other developments banks as well as funds established through the past 20 years in the country. Because WB and ADB have stopped funding any projects at the moment, there will be no development projects concerning agriculture in Afghanistan.

3: Banking and finance: The banking system is formed and supervised by the central bank of Afghanistan. The central bank also determines the financial and monetary policies for the country.  Furthermore, money service providers and foreign exchange dealers also provide the services of a commercial bank, but in a more traditional manner. The currency, the Afghani, underwent a rapid inflation in the month prior to the second rise of the Taliban in the country. Just three months back 1 USD was AFN 77 and now it is AFN 88. This has resulted in the increase of prices, as almost all needs of the country are imported from abroad.

World Bank’s projects are processed through a specific division at the Afghanistan Central Bank. This division is not working at the moment.

A sanction imposed in 1999 by UN against the Taliban government froze government accounts abroad and closed the few branches of Afghan banks in other countries. Since 1999 a large group of Taliban leaders and their partners are still in on the black list of the UN and many other international agencies.  The US Federal Reserve has also frozen an amount of $9.4B USD used to invest in many sections and which had brought benefit to Afghanistan. This is because the Taliban are still in their sanction list.

A large number of the Taliban, Haqani Group, Al Qaeda leadersand others were on the sanction list of the Afghan central bank and suspicious transactions by commercial banks as well as money services providers were closely monitored to prevent money laundering and terrorism finance. This means that now that they have the Government, they will have power to control where to send money and who can or can’t do it. Domestically, nothing is preventing them at the moment.

When it comes to the supervision of the commercial banks and development of the banking sector in Afghanistan, it seems that they have no plan. This is due to many reasons. Firstly, the central bank governor has no academic and professional experience. He was only the Finance Manager of the Taliban. Neither the First Deputy Governor nor its Second Deputy Governor has sufficient financial knowledge.

Another challenge is that the Taliban are removing some people who worked for many years at the central bank and have sufficient banking and finance capacity/skill. I personally see no one economist in their team.

4: Private Sector: this is damaged critically and some of the biggest national and international companies have already left the country. The private sector is adversely affected by insecurity, political instability, weak institutions, inadequate infrastructure, widespread corruption, and a difficult business environment (Afghanistan was ranked 173rd of 190 countries in the 2020 Doing Business Survey).

5: Legislative Reform: Previously, the Afghan government has started many legislative reform projects, but none of them are currently under any progress. I had the honor of working with ____ on some major legislative reform projects through which we renewed 40 to 60 years old laws and regulations in areas such as a) municipality law, b) mining law and its regulation, c) hydrocarbons law and its regulation, d) commercial procedure code, e) state-owned corporations’ law, etc.

All of the above partially and/or in whole results in unemployment, lack of interest by the private sector in investment, increase of poverty, and makes the economic sustainability of the country more and more dependent on foreign aid. More importantly, as we see right now, Taliban officials such as the central bank governor, minister of industry and commerce, etc are only aware of the Islamic and Sharia law, and I actually doubt they have any official certification in sharia law. Therefore, the impact of international donors on the economic development of  Afghanistan over the past two decades will be demolished. The situation will get even worse because of a lack of human resources and expertise.