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The Economic Disaster Behind Afghanistan’s Mounting Human Crisis
The Economic Disaster Behind Afghanistan’s Mounting Human Crisis
What Will Happen if the U.S. Military Pulls Out of Afghanistan Without a Peace Deal?
What Will Happen if the U.S. Military Pulls Out of Afghanistan Without a Peace Deal?
An Afghan woman and her children carry bags on their heads as they walk along a path on the outskirts of Mazar-i-Sharif, 5 November 2015. AFP/Farshad Usyan
Statement / Asia

The Economic Disaster Behind Afghanistan’s Mounting Human Crisis

Donors and Afghan state agencies must urgently tackle an economic crisis building up since 2014, when foreign troops started leaving and political instability worsened. The starting point must be a socio-economic assessment of just how big the problems are.

­As Afghanistan’s international donors meet in Brussels in a summit co-hosted by the European Union and the Kabul government on 4-5 October, Afghanistan’s rapidly deteriorating economy must be their central concern. Before this and an escalating humanitarian crisis merge to reach a dangerous critical mass, all must agree on several priorities – alongside renewed efforts to bring peace and political stability: realistic planning based on a thorough new socio-economic assessment, currently absent; adequate aid and support for state policy implementation, especially to help an alarming rise in numbers of displaced and shelterless people; halting repatriation of Afghan refugees, especially from Europe and Pakistan; and boosting investment and above all job creation in the country.

Afghanistan’s impressive average annual growth of nine per cent from 2002-2013 has declined rapidly since 2014. According to the World Bank’s World Development Indicators, annual GDP growth fell from 14.4 per cent in 2012 to 2 percent in 2013, and 1.3 and 1.5 per cent in 2014 and 2015 respectively. This drastic economic decline is mainly the result of the post-2014 international military drawdown and the year of intensified political instability that followed the 2014 election. Foreign troops once brought hundreds of millions of dollars into the Afghan economy, and their departure from 800 bases, large and small, deprives the country of what was after 2002 its largest single source of revenue. By one estimate, more than 200,000 Afghans have now lost jobs in logistics, security, and other sectors of a war-driven economy.

Heightened security concerns, political uncertainty and the erosion of the rule of law since 2014 have added to a devastating loss of confidence by consumers, producers and investors. Pervasive fears of a political meltdown have led to a surge in capital flight, with both wealthy and middle-class Afghans moving assets to the Gulf States, Pakistan, Iran, Turkey and Central Asia. Afghanistan’s human capital shrank too, especially among the urban middle class that had emerged after 2001 to play a stabilising role in Afghan politics. Hundreds of thousands of Afghans, mostly young and educated, left the country in 2014 and 2015, often to seek refugee status in Europe.

This sudden economic reversal has considerable political, security and social implications. Rising unemployment and widespread poverty is already widening the legitimacy gap between the National Unity Government (NUG) and the Afghan public, and expanding the reservoir of grievances that insurgents as well as hardline ethnic and regional players could further exploit. Unfortunately, it is not the NUG’s only pressing problem.

An Underestimated Humanitarian Crisis

The economic crisis may have been predictable, but its impact remains poorly understood and insufficiently reflected in strategic thinking and policies about the country’s future. The most revealing indication of such gross underestimation of the situation is the absence of any current, reliable socio-economic data. Three years after the economic reversal began, neither the NUG nor the international community have conducted any substantial assessment of the impact of the collapse of the war economy on the Afghan people and state.

The available figures show that the most vulnerable segments of the population are bearing the brunt of the burden. According to the Afghanistan Living Conditions Survey, the unemployment rate rose from 9.3 per cent in 2011-12 to 24 per cent in 2014. During the same period, the number of people who were not engaged in gainful employment increased from 26.5 per cent to 39.3 per cent of the labour force; among women, the rate increased from 42.4 per cent to 49.8 per cent. Those who manage to find work have to provide for a large number of dependents, with 47 per cent of the population under the age of fifteen. Although no such figures are available for 2015 and 2016, anecdotal evidence makes it abundantly clear that these negative trends are worsening. With Afghanistan’s estimated 32.5 million people growing by perhaps three per cent annually, adding half a million people to the work force every year, the decline in employment opportunities can only worsen.

Even without reliable Afghan government statistics for 2015 and 2016, the trends indicated by anecdotal evidence and UN figures point to a silently evolving, increasingly alarming humanitarian crisis. According to UNHCR, the total numbers of “people of concern”, including Internally Displaced Persons (IDPs), refugees and returnees, nearly doubled between 2013 and 2015, rising from 985,197 to 1.77 million people. UNOCHA estimates that 265,141 more were displaced from their homes in 31 of 34 provinces between 1 January and 15 September 2016.

On top of this has come an unprecedented rise in recent months in the return of registered and unregistered refugees from Pakistan, averaging 5,000 people daily in early September. Combined with the new internally displaced, an alarming one million (57 per cent of whom are children) could be on the move just as winter sets in between September and December 2016. All will require urgent food assistance, health, shelter and other essential services. This spike in the numbers of IDPs and returnees will increase the percentage of the population facing seasonal or permanent food insecurity beyond the current estimate of 40 per cent, and will further strain already meagre economic and employment opportunities and public services.

As Budgets Shrink

The decline in economic opportunities has long-term consequences for overall political stability. Over the past three years, state institutions have become by far the largest source of employment and providers of essential public services, but available economic resources are shrinking fast. Reductions in donor assistance and international contracts are increasing the fragility of the post-2001 political order, which is largely based on networks of patron-client relations in which powerful political players have become dependent on the continuous flow of international largesse. As international military spending and contracts shrink, these networks will rely even more on the proceeds of the informal economy including corruption, criminality, the opium trade and the illegal exploitation of resources such as mines.

The decline in economic opportunities has long-term consequences for overall political stability.

The NUG’s inability or unwillingness to respond to these challenges has profound implications for both its legitimacy and the future of the post-Taliban political order. In the Asia Foundation’s 2015 Survey of the Afghan People, citizens who believed the country was going in the right direction declined to 37 per cent from 55 percent in 2014. After insecurity, worsening economic conditions were cited as the main reason for such pessimism. While the NUG inherited problems that were already mounting before it was formed in September 2014, the Afghan public increasingly links the worsening economy with the government’s policies and/or inability to perform. While the NUG has prioritised the economy in its policy reform agenda, popular expectations created by such rhetoric have yet to be matched by a track record in forging or implementing reforms, let alone actual economic benefits. Aside from some major infrastructure projects such as energy transit routes, which depend on good security and may take years to make a tangible impact on the economy, the NUG has done little to respond to immediate asks such as job creation or the protection of the private sector against rising criminality and insecurity. 

The potential gains of some of the government’s most important infrastructure projects, including CASA 1000, which aims to carry power from Central Asia to South Asia, are threatened not just by insurgent violence but also by increased social and political discord over the distribution of national resources. For instance, in mid-2016 a persistent, predominantly Hazara Enlightenment protest movement emerged to oppose the government’s decision to change the route of another power transmission line bringing electricity from Turkmenistan to Afghanistan, from a route passing through the Hazara-majority Bamiyan province to one running through the Salang Pass. Absent transparency and accountability, such policy decisions could further escalate ethnic tensions.

The government’s ability to implement economic reforms is hampered by internal political gridlock, bureaucratic hurdles and pervasive corruption. Capacity constraints in most government ministries continue to adversely affect the execution of development projects. Payments are delayed to private sector contractors, suppliers and even the state’s own personnel. As of September 2016, nine months into the current Afghan fiscal year, the NUG has spent only 30 per cent of a $2.5 billion development budget. This slow pace in spending and execution is depriving a cash-starved economy of much-needed funds.

The government’s ability to implement economic reforms is hampered by internal political gridlock, bureaucratic hurdles and pervasive corruption.

Despite its many weaknesses and shortcomings, the NUG has succeeded in maintaining a degree of macro-economic stability and addressing the budgetary shortfalls it encountered in 2014. It has also raised domestic revenues above targets set by the International Monetary Fund. However, the new Afghanistan National Peace and Development Framework, 2017 to 2021 is based on an unproven assumption that the three-year economic decline has been stemmed and that over the next five years the economy will grow by an average of five per cent. Domestic revenue mobilisation is in fact a poor indicator of the economy’s overall health, and the current effort to raise more money runs the risk of further shrinking an already fragile and struggling formal tax base.

While taxation rates remain low in comparison to other countries in the region, there is a widening mismatch between what the government demands in terms of revenue and the services it offers. Meanwhile the costs of doing business are increasing, and rising violence and weakening government control is exposing an already shrinking private sector to extortion and other acts of criminality, including kidnapping for ransom. Those responsible may be the Taliban, urban criminal networks or a range of other actors, some with links to the state. 

Despite a rise in revenue collection in 2015, the U.S. Special Inspector General for Afghanistan Reconstruction (SIGAR) estimated that over half of the country’s customs revenues were lost to graft that year. Public sector appointments, including critical security sector positions, are often casualties of infighting and nepotism. All this indicates the complicity of powerful political networks at the highest levels of government, costs the state and Afghan people hundreds of millions of dollars in revenues, and curtails the delivery of even basic services. Astonishingly, corruption within the security sector extends to the sale of military hardware and ammunition to insurgents.

Recommendations

As international donors and the Afghan government devise their responses to address the deteriorating situation in Afghanistan, they should prioritise – alongside coordinated efforts to bring peace and political stability – a comprehensive and robust approach to an escalating humanitarian crisis, and adopt a more realistic vision of economic recovery and growth. They should:

  • Conduct a thorough national assessment of post-2014 socio-economic conditions and challenges to serve as the basis of more realistic strategic planning;
     
  • Urgently respond to the fast-growing humanitarian crisis, pledge adequate resources for the immediate needs of IDPs and refugee returnees for shelter, food, health and sanitation, and support the NUG in devising and implementing a coordinated policy to meet their longer-term needs for access to gainful employment;
     
  • Halt the deportation of Afghan refugees and asylum seekers from Europe; encourage the Pakistan government to end coercive, involuntary returns of all Afghan refugees, registered or unregistered; and provide financial and other incentives to sustain the millions that remain; 
     
  • Create new momentum in the fight against fraud by (i) tackling politically connected corruption networks within government; (ii) integrating robust anti-corruption policies with current revenue collection efforts; and (iii) ensuring robust oversight over payments in government contracts to private contractors and suppliers, while also streamlining these payments;
     
  • Ensure that funds reach the provinces, to promote more equitable distribution regionally and improve the writ of the government, while also prioritising the most under-developed and isolated regions;
     
  • Consider boosting private sector investment through guarantees and other protections and incentives; in particular encourage job-generating and long-term investments by the private sector through tax incentives; and provide, as far as possible, access to public services, including electricity, to firms that create jobs;
     
  • Take immediate, coordinated measures to ensure the security of private investors and business persons, including by targeting criminal networks, some containing elements within or linked to government institutions.  

CORRECTION: An earlier version of this article wrongly stated that the Enlightenment protest movement emerged to oppose the government's decision to change the route of the CASA 1000. This has now been updated to correctly cite that the opposition was towards the government's decision to change the route of another power transmission line bringing electricity from Turkmenistan to Afghanistan.

President of Afghanistan Ashraf Ghani (R) receives U.S. Secretary of State Mike Pompeo (L) in Kabul, Afghanistan on March 23, 2020. AFGHAN PRESIDENCY PRESS OFFICE / / ANADOLU AGENCY / ANADOLU AGENCY VIA AFP
Briefing Note / Asia

What Will Happen if the U.S. Military Pulls Out of Afghanistan Without a Peace Deal?

This is the first in a series of three Briefing Notes that discuss and analyse the nascent peace process in Afghanistan while focusing on frequently raised questions.

The U.S. stated in a 29 February agreement with the Taliban, signed in Doha, Qatar, that it would immediately begin a fourteen-month phased military withdrawal. The agreement made the withdrawal contingent on Taliban compliance with anti-terrorism commitments but not explicitly contingent on a successful Afghan peace process. The deal commits the Taliban to starting peace talks with other Afghans but does not speak to scenarios in which talks might fail to begin or to generate momentum, or in which they fail to proceed for practical reasons such as the COVID-19 pandemic.

The 23 March statement by Secretary of State Mike Pompeo strongly criticising the Afghan leadership for failing to come together and prepare for peace talks, and announcing that Washington will cut assistance to Kabul by $1 billion this year if they do not do so, makes prospects of an early, unilateral U.S. military withdrawal if not likely, at least more plausible if the process stalls at any point.

This note explores what might happen if the U.S. were to go beyond its partial military drawdown in Afghanistan, already in progress, and implement a full withdrawal in a context in which intra-Afghan negotiations do not reach a political settlement or fail to commence.

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What Would Happen to the Peace Process

It is unlikely that the U.S.-steered negotiations would proceed in the event of a full U.S. military withdrawal implemented before talks at least built substantial momentum. The Afghan government would have comparatively little leverage to attract or compel the Taliban to remain at the bargaining table, while the Taliban would have less incentive to negotiate if they feel they have already achieved their primary objective – expelling foreign forces from Afghanistan. The Afghan government might be able to keep the Taliban at the table should it be willing to offer highly concessionary terms, but at present such an offer seems unrealistic. 

U.S. military disengagement probably would be accompanied by at least a diminution in, if not a complete end to diplomatic activity aimed at pushing the peace process forward. Moreover, Afghan government and regional perceptions of Washington’s abandonment of Afghanistan would make it far more difficult for the U.S. to exercise political leverage. Other regional states or international organisations might attempt to step in to mediate, but they would have difficulties if the U.S. were executing a policy of disengagement. Afghan parties would question the neutrality of neighbouring states were they to seek a leading diplomatic role. Other states further abroad – in Europe, for instance – would likely lack sufficient influence over parties to the conflict to mount such an initiative on their own. The UN Secretary-General could in principle authorise some form of mediation, but it would be hard for him to achieve broad consensus. Although the UN Security Council’s five permanent members formally supported the U.S.-Taliban agreement, a sharp pivot from that framework almost certainly would complicate further UN action.

Why the U.S. Would Withdraw before a Peace Settlement

U.S. domestic political considerations would likely play some part in any sudden decision to withdraw. The Trump administration has a track record of abrupt, if incomplete, foreign policy and military reversals, ranging from the announcement of a withdrawal from north-eastern Syria and the targeted killing of Iranian general Qassem Soleimani to the 2019 halt in talks with the Taliban, suggesting that a politically driven decision regarding the withdrawal timetable is not out of the question. A growing number of U.S. voices, both Republican and Democrat, have voiced opposition to so-called endless wars, focusing in particular on the intervention in Afghanistan – the longest war in American history. Most of the Democratic presidential candidates expressed support for withdrawal during their campaigns. There have also been mounting expressions of dissatisfaction with the U.S. agreement with the Taliban, with some voicing a preference for a unilateral withdrawal as opposed to one tied to what some consider a “bad deal”. In a U.S. presidential election year, it is difficult to know whether the security risks of a rapid withdrawal would outweigh President Donald Trump’s long-expressed political preference for bringing U.S. troops home or vice versa.

U.S. policymakers may also decide to pull the plug on their country’s military engagement if they come to believe that staying will not improve prospects of a political settlement. Already, several challenges have surfaced since the 29 February signing of the U.S.-Taliban agreement that – if they persist or if similar issues arise later – could give Washington pause. 

The intended starting date for intra-Afghan negotiations, 10 March, was delayed and no new date has been set so far. The delay is largely tied to domestic political turbulence in Kabul. President Ashraf Ghani’s chief rival in last year’s election, Abdullah Abdullah, continues to contest the results – to the point of holding a rival inauguration ceremony and declaring a “parallel government”. At the same time, Ghani has been slow to name a negotiating team for peace talks that represents the full range of Afghan power-brokers whose consent will be needed to negotiate from a position of consensus and strength. That issue appeared to have been resolved on 25 March, although it remains to be seen how effectively the team will function. The U.S. special representative for Afghanistan peace and reconciliation, Zalmay Khalilzad, shuttled between different factions of the Afghan political elite for weeks in an attempt to help form a compromise government and negotiating team. A surprise 23 March visit by Secretary of State Pompeo was designed to break the logjam but both sides held firm. That same day, Pompeo released his statement harshly reprimanding both Ghani and Abdullah for failing to reach a compromise and thereby impeding intra-Afghan talks, and declaring the U.S. would cut aid to Afghanistan by $1 billion this year and potentially by more in the future. Even if the aid cut decision is reversed, the announcement shows the extent to which U.S. patience is wearing thin.

The global COVID-19 pandemic could prompt decision-makers in Washington to rethink the U.S. troop presence in the country.

Meanwhile, just days after their signing ceremony with the U.S. in Qatar, the Taliban resumed offensive operations against Afghan security forces. Although not specifically prohibited by the agreement, the fresh attacks inevitably damaged the good-will established during February’s seven-day “reduction in violence” that preceded the signing. This in turn led some U.S. officials to claim publicly that the Taliban was not abiding by the deal and soured the mood in Kabul, according to civil society activists who spoke to Crisis Group. The two sides have also been deadlocked over the issue of a prisoner exchange, which is spelled out in the U.S.-Taliban agreement but does not appear to have the Afghan government’s full buy-in; in the wake of the renewed violence, the Taliban and Afghan government traded hardline rhetoric on this matter. Both the resurging violence and prisoners issue reinforced pre-existing scepticism in Kabul about the Taliban’s good faith and commitment to prioritising a negotiated political settlement over attempts to achieve military victory, despite their stated willingness to discuss the issue of a ceasefire once intra-Afghan negotiations actually begin. 

Finally, the global COVID-19 pandemic and its potential to wreak havoc on Afghanistan’s population, health services and economy could prompt decision-makers in Washington to rethink the U.S. troop presence in the country. Afghanistan shares a long, porous border with Iran, one of COVID-19’s global epicentres. The Afghan government has yet to shut down or restrict access through this border; tens of thousands of people have transited in both directions even as the virus spread across Iran. Afghanistan’s weak national health infrastructure means there is a dearth of testing and lack of reliable indicators, but observers fear that COVID-19 could cripple the country. Even dramatic steps by Kabul could prove insufficient to achieve social distancing fast enough; moreover, the country suffers from an acute shortage of medical facilities and equipment that cannot be adequately remedied in the short term. Under such conditions, the U.S. military might decide to redeploy soldiers out of Afghanistan, at least gradually, for health reasons, especially as the U.S. grapples with its own response to the virus. 

The Afghan Government’s Chances of Survival Should the U.S. Withdraw Absent a Peace Deal

In late January, President Ghani said decreasing the number of U.S. troops based in Afghanistan would have “no material impact” on the country’s “ability and willingness to move forward” in improving the security situation. In late 2019, his national security adviser, Hamdullah Mohib, told a Council on Foreign Relations audience that he believed military victory was attainable for the Afghan government, even should U.S. troops withdraw.

Whether or not the Afghan security forces could weather a U.S. withdrawal likely depends at least in part on how much financial assistance would be provided in its wake.

There are a number of reasons to question these assessments. Currently, the U.S. and other donors fund around 90 per cent of the Afghan security forces’ annual budget, with Washington alone providing more than $4 billion this year. Whether or not the Afghan security forces could weather a U.S. withdrawal likely depends at least in part on how much financial assistance would be provided in its wake. It is highly improbable that the U.S. would maintain this level of spending on Afghan security forces – significantly higher than U.S. military aid to any other country in the world – if the U.S. military disengages, certainly not for an extended period of time. 

Furthermore, Afghan forces remain reliant on back-up, including air support, from the U.S. military in fending off major Taliban offensives. U.S.-provided contractors also deliver critical services and technical support for the Afghan air force, special operations units and more. The 29 February agreement between the U.S. and Taliban specifies that all foreign contractors would be included in a full withdrawal as defined by the deal; in any event, it is unlikely that such contractors could safely remain behind in the wake of a U.S. pullout. 

The impact of a U.S. military withdrawal on the Afghan government would extend beyond its security forces’ fate; any negative shift in the country’s already tenuous security situation could prompt an end not only to civilian and humanitarian assistance but also to vital foreign commercial investments. Some Afghan political analysts have told Crisis Group that they fear this scenario and worry that too many of their fellow citizens ignore it as a real possibility: “Those who say the fight can continue are thinking about the conflict today, not what it might become”.

None of the above necessarily means that a U.S. withdrawal would precipitate the total collapse of the Afghan state or a Taliban takeover of Kabul. A Taliban push to take the capital and other urban centres would surely encounter strong resistance, even if anti-Taliban political forces fragment – an entirely possible scenario. While commentators have noted superficial historical similarities between today’s Islamic Republic and the Soviet-backed Democratic Republic that fell apart shortly after the Soviet Union dissolved in 1991, substantive structural and institutional differences exist: for instance, the country’s current constitutional system enjoys wide support, notably in urban areas, and today’s security forces do not suffer desertion rates akin to those in the 1980s.

Even partial erosion of government control and functionality could deprive millions of essential services, humanitarian aid and disaster relief.

But even in the most optimistic scenario in which the Afghan government were to survive, the withdrawal of U.S. forces and end to any peace effort would likely see the country’s conflict remain high on the list of the world’s deadliest wars. Even partial erosion of government control and functionality could deprive millions of essential services, humanitarian aid and disaster relief. The loss of feasible options for a peaceful settlement to the conflict might well send into overdrive regional states seeking to hedge their bets by backing various factions and armed groups, further exacerbating domestic political fragmentation. For a country where 10,000 civilians – along with tens of thousands of combatants on both sides – have been killed or injured annually for the past several years, such a U.S. withdrawal would probably ensure a continued enormous, and tragic, human cost.