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The Economic Disaster Behind Afghanistan’s Mounting Human Crisis
The Economic Disaster Behind Afghanistan’s Mounting Human Crisis
Interpreting the U.S. Talks with the Taliban
Interpreting the U.S. Talks with the Taliban
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.

Afghan president Ashraf Ghani (C) talks with US special representative for Afghan Peace and reconciliation Zalmay Khalilzad (top L) during a cabinet meeting at the presidential palace in Kabul. Handout / Afghan Presidential Palace / AFP
Q&A / Asia

Interpreting the U.S. Talks with the Taliban

Talks with the Taliban in the Qatari capital Doha have raised hopes that the U.S. could end its involvement in Afghanistan’s war. Our Asia Program Director Laurel Miller and Afghanistan analysts Borhan Osman and Graeme Smith break down what was achieved and what remains unresolved.

How significant were the U.S.-Taliban talks?

Last week’s six-day talks between the U.S. and Taliban were the clearest sign yet that the U.S. is intent on withdrawing its forces from Afghanistan, and that the Taliban and its regional allies perceive that intent as an opportunity. It is early to draw conclusions but the signals from Doha inspire optimism about ending America’s longest war. A U.S. and NATO troop withdrawal has long been the Taliban’s top demand and the driving rationale for the insurgency. The Doha talks also were the first time that the U.S. has publicly acceded to the Taliban’s insistence that bilateral negotiations on terms for a troop withdrawal precede any peace negotiations involving other Afghans. The Taliban have made no evident concessions, but hints are emerging of some consensus on key issues. Ultimately, the significance of the talks depends on what happens next: if the framework of a deal reportedly sketched out in Doha leads to substantive negotiations among a wider array of stakeholders on future political and security arrangements, then these talks will have produced an important breakthrough.

What has been agreed upon?

U.S. envoy Zalmay Khalilzad told The New York Times that the U.S. and Taliban have agreed in principle on a framework for a deal under which the Taliban would prevent Afghanistan from becoming a “platform for international terrorist groups or individuals” and that the U.S. would pull out troops. Khalilzad also said that, as the framework is further fleshed out, Taliban concessions will need to include a ceasefire and agreement to talk directly with the Afghan government. The Taliban appears now to be considering whether it is prepared to make such concessions.

How do you get all sides sitting around a table, after decades of war?

An exchange of commitments between the Taliban and U.S. on counter-terrorism and troop withdrawal may be enough to end American military involvement in Afghanistan, but without a more complete peace deal it will not end what is now the deadliest conflict in the world. At the moment, the U.S. reportedly is taking the position that a troop withdrawal would only be part of a bigger package including settlement of political and security issues among Afghans. Whether the U.S. sticks with that position will be important to watch.

What are the unresolved issues?

A major unanswered question is how to structure an intra-Afghan dialogue. How do you get all sides sitting around a table, after decades of war? Also unclear is what the Taliban is willing to accept on timing and sequencing of such dialogue – that is, do they see dialogue launching before a foreign troop withdrawal commences, or only later, after a troop withdrawal that diminishes Afghan government and U.S. leverage is underway? The Taliban have long been willing to negotiate openly with the U.S., as has now happened, and they have more vaguely indicated willingness to talk subsequently with other Afghans, but the specifics of an intra-Afghan negotiation format that can attract the support of all sides remains uncertain.

Details have not yet emerged regarding the counter-terrorism assurances the Taliban offered in Doha and how definitively acceptable they are to Washington. The U.S. may be looking for the Taliban to say something that goes beyond what they have declared in the past. Since at least 2010, the Taliban have promised that they will not let Afghanistan be used to threaten other countries, in a veiled reference to preventing transnational jihadist groups from sheltering in their territory. That kind of oblique language may or may not be sufficient in a peace agreement; its acceptability will depend in part on how anxious the U.S. is to exit Afghanistan. One question is whether the Taliban might be willing to go further now, committing for the first time to actively counter jihadist groups. From the Taliban perspective, they need to see a firm U.S. commitment on complete troop withdrawal with no ambiguity in the wording.

Taliban officials say the aim of the previous ceasefire was to show the world that if they want to stop fighting, they can.

Would the Taliban agree to a ceasefire?

A comprehensive ceasefire is, unfortunately, more unlikely than not at this early stage of negotiations. The Taliban worry about losing their battlefield momentum if they agree to a ceasefire, and their battlefield momentum has won them considerable leverage. A first, brief ceasefire in June 2018 was unusually successful, revealing a groundswell of popular support for an end to the conflict. The scenes of Taliban fighters celebrating in the streets with their opponents caught the insurgent leadership by surprise. Taliban officials say the aim of the previous ceasefire was to show the world that if they want to stop fighting, they can. Until now, however, a long-term ceasefire has been conceivable to the Taliban only in the context of an imminent transition to a negotiated peace involving other Afghan parties. The Taliban are undoubtedly aware that a ceasefire would be a significant political win for the government in Kabul and morale booster for government forces, and thus undoubtedly are disinclined to enable those gains.

In the meantime, the Taliban seem poised to continue fighting. The group is configured to draw strength from its performance on the battlefield, not from politics. As a Taliban fighter told Crisis Group recently: “The reason everyone is talking about us is our military power and fighting ability; otherwise, nobody would have been talking about peace and reconciliation.” In some respects, the prospect of a peace agreement threatens the Taliban’s existence in its current form. They do not seem likely to give up the fight prematurely.

What is the U.S. doing differently in these talks?

Previous rounds of U.S. talks with the Taliban raised the prospect of negotiating a troop withdrawal but did not address that issue head on. This time the Americans seem to have acceded to Taliban insistence on front-loading discussions on a U.S. troop withdrawal, before details are established on intra-Afghan political dialogue. This step reflects U.S. interest in winding down its military involvement in Afghanistan that has been building for years but has spiked sharply in the second year of the Trump administration.

The fact that the U.S. has openly been negotiating bilaterally on substantive issues with the Taliban is another change from past discussions. There have been intermittent U.S.-Taliban contacts since 2011, but never with as much publicity and as many expressions of urgency. How deeply the latest talks have delved into the core substantive issues will only be apparent once more details emerge.

Is the Kabul government on board with the U.S. approach?

U.S. envoy Khalilzad travelled to Kabul for a meeting with President Ashraf Ghani after the talks in Doha. Subsequently, on 28 January, Ghani made a formal address on state television about a future Afghanistan without international troops – something his administration has resisted envisioning for years. He mentioned recent air strikes that reportedly killed civilians and expressed his hopes that Afghan security forces would have a different role after a peace agreement. Still, the president was cautious in his comments on the talks. Ghani reminded his audience of the fate of his predecessor Mohammad Najibullah, who survived the withdrawal of Soviet forces only to be killed by the Taliban during the chaos that ensued.

The Taliban announced that their co-founder Abdul Ghani Baradar would [...] become responsible for the Taliban “political commission” based in Doha, making him their chief negotiator.

Whereas Ghani may view a deal with the Taliban as a threat to his position, some of his political opponents among the Afghan elite seem more positive toward the developments in Doha, perhaps hoping for roles in an interim administration that might be installed as part of a peace agreement. Still, the entrenched view among anti-Taliban political factions is that major compromises with their opponents – such as an entirely new constitution – are unacceptable. They also are concerned that the U.S. risks making a “separate peace” and leaving them behind. The U.S. will likely need to use its considerable leverage with these Afghan political factions to bring them to the table and encourage a deal with the Taliban.

What is the significance of the new appointment to the Taliban negotiating team?

As talks progressed last week, the Taliban announced that their co-founder Abdul Ghani Baradar would assume the title of deputy leader and become responsible for the Taliban “political commission” based in Doha, making him their chief negotiator. This development suggests the Taliban are serious about negotiations and may reflect a constructive role by Pakistan – which had imprisoned Baradar in 2010, releasing him only last October as U.S. negotiating efforts began to gain traction. The appointment also cemented the role of Qatar as the main venue for negotiations, despite efforts by other regional countries to serve as facilitators. The Taliban had been waiting for the right moment to make this announcement, once they believed that peace efforts had moved to a sufficiently advanced stage. Baradar is a senior and widely respected member of the movement who is probably empowered to test whether the group can achieve its goals through politics rather than fighting.

What would a settlement look like?

Details do not appear to have been hammered out yet, and, until results are shown in writing, it is also possible that U.S. and Taliban negotiators have somewhat different understandings about what has been agreed to so far. As details emerge from the talks, Crisis Group will be watching for answers to these and other questions: to what degree are the elements of the framework understanding part of a package deal that includes a ceasefire and intra-Afghan dialogue? How will implementation of a troop withdrawal be tied to these issues? Would the understandings so far – especially on troop withdrawal – be implemented regardless of how much progress is achieved in the subsequent stages of the process? To the extent that the Taliban agree to negotiate with their Afghan opponents, would they talk to the government or only to some yet-to-be-formed broader collection of Afghan power holders? What will be the agenda of intra-Afghan talks, and, specifically, will the current constitutional system be the starting point for hashing out future political arrangements, or will everything be up for grabs?

Contributors

Program Director, Asia
LaurelMillerICG
Senior Analyst, Afghanistan
Consultant, Afghanistan