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The Economic Disaster Behind Afghanistan’s Mounting Human Crisis
The Economic Disaster Behind Afghanistan’s Mounting Human Crisis
As New U.S. Envoy Appointed, Turbulent Afghanistan’s Hopes of Peace Persist
As New U.S. Envoy Appointed, Turbulent Afghanistan’s Hopes of Peace Persist
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 residents walk near destroyed houses after a Taliban attack in Ghazni on 16 August 2018. AFP/Zakeria Hashimi
Commentary / Asia

As New U.S. Envoy Appointed, Turbulent Afghanistan’s Hopes of Peace Persist

The new U.S. adviser on Afghanistan, Zalmay Khalilzad, has a tough assignment: fostering peace between the Afghan government and the Taliban. Crisis Group’s Borhan Osman says that recent violence has soured the public mood, but that leaders on all sides still appear committed – at least rhetorically – to peace talks.

On 4 September 2018, Secretary of State Mike Pompeo announced that former U.S. ambassador to Afghanistan Zalmay Khalilzad would join the State Department as an adviser on Afghanistan. Khalilzad will, in the Secretary of State’s words, “assist in the reconciliation effort”; his appointment is a welcome signal of Washington’s renewed intent to find a negotiated settlement to the war pitting the Afghan government and its international allies against the Taliban insurgency. For now, a formal peace process still seems some way off. Indeed, Khalilzad’s appointment comes as optimism that swept the country during an unexpected ceasefire in early June has withered, as levels of bloodshed again soar. But confidence-building steps between the parties that reduce the war’s horrific civilian toll, could be within reach and are worth Ambassador Khalilzad pursuing with insurgent leaders.

I saw the shift in mood first hand during two trips to Ghazni, a city 140km southwest of the capital Kabul. Visiting on 21 August, at the beginning of the religious holiday, Eid al-Adha, I witnessed turbaned men weeping with grief after prayers in the busiest mosque in the city. The men hugged each other, sobbing as they exchanged greetings. The religious holiday is usually a time of celebration, but the mood in Ghazni was sombre. The men finished their prayers and walked home past bullet-riddled walls and burned buildings. They saw none of the usual Eid festivities: no hollering youths, no children wearing new clothes, no folk dances to the sound of drums. Hundreds of bodies had been recovered from the streets only a week earlier, after one of the largest Taliban offensives in recent years saw insurgents occupy much of the city and engage in fierce street battles with Afghan security forces. Ghazni mourned.

The Taliban mounted the attack on 10 August, taking most of the city. Fighting engulfed all neighbourhoods, as the insurgents also had dismantled the government’s remaining presence in nearby towns, allowing them to surround the city and enter from four directions at once. The Taliban’s operations also involved a five-day siege of the city, cutting off the city’s electricity and telecommunications. Most civilians were trapped amid shortages of clean water and food. Taliban fighters used homes and markets as fighting positions, presumably leading to many civilian deaths. For their part, government forces were accused by residents of indiscriminate shelling. Airstrikes by U.S. and Afghan warplanes forced the insurgents to retreat, but further contributed to the destruction of the city and loss of life. “Everybody stuck in the city during the fight experienced a death”, said one resident, recalling how his neighbour’s three children were killed in an airstrike. “They were the darkest days of my life”, said another resident. “It was like a doomsday”. A former teacher who had fought the Soviets in Ghazni in the 1980s told me that the latest fighting was more intense than the battles of any previous war.

The change of public mood over a period of two months indicates how quickly hope can thrive, then fade away.

The sadness that marked Ghazni at the start of Eid al-Adha stood in sharp contrast to the scenes I had witnessed in the city only two months earlier, when worshippers had shed tears of joy following an historic ceasefire. The previous Eid holiday – Eid al-Fitr in June – had been a moment of wild celebration. In Ghazni, as across much of the country, Taliban and Afghan government forces had laughed and joked together, performing traditional dances to the beat of patriotic songs. Afghan special forces had posed for selfies with Taliban fighters. Many believed then that peace was imminent.

These days, Afghans wonder in despair if the war will ever end. The change of public mood over a period of two months indicates how quickly hope can thrive, then fade away. A majority of people do not remember peace and easily lose sight of prospects for ending the seventeen-year war between the Afghan government and international forces, on one hand, and the Taliban insurgency, on the other.

The disappointment sharpened when the government failed to start another truce at the end of August. Building on the June ceasefire and subsequent Taliban-U.S. talks, President Ashraf Ghani sought a three-month halt to fighting that would have started on 21 August. His government reached out to the Taliban in hopes of reaching a bilateral cessation of hostilities, but the insurgent movement ramped up its attacks instead, with Crisis Group estimating (based on a tally from officials and journalists in major hotspots) the dead on all sides at more than 1,000 combatants and civilians in the second week of August.

The most brazen offensive was the Ghazni onslaught in mid-August, contributing to half of the deaths nationwide that week. For the Taliban, this escalation of violence seems to reflect the group’s intent to respond with military pressure of its own to counter the government and U.S. forces’ ramped-up military efforts. The Taliban appears bent on hitting the government hard and expanding the territory under its control, to show strength and demoralise its enemy. The insurgents are conducting a war of attrition, chipping away at government enclaves and inflicting unsustainable casualties among pro-government forces.

The escalation in violence has raised questions about whether the Taliban are genuinely interested in peace. An insurgent commander I met outside Ghazni, who led a company-size group during the attack on the city, felt differently. He framed the recent offensives as part of the Taliban’s effort to accelerate “the broader plan” for ending the war. His remarks in some ways mirrored those of the outgoing senior U.S. commander, General John Nicholson, who in his final statement to the media on 22 August said that U.S. military efforts have resulted in “progress” toward a political settlement. In other words, both sides of the war believe that pressure on the battlefield has helped make their opponents more willing to negotiate.

Yet this “fight and talk” strategy carries serious risks. The successful June ceasefire was seen by many as a potential game changer, paving the way for U.S. officials to sit down with Taliban representatives for two full days in late July. But a widening trust gap emerged in subsequent weeks, with missteps by all parties: the Taliban, the U.S. and the Afghan government. The Taliban, arguably first and foremost, spoiled the mood by escalating attacks at precisely the time when others were working toward a renewed ceasefire. This decision was the most significant contribution to the reversal of momentum toward a peace process. An increase in insurgent attacks lead to an uptick in civilian harm, particularly in densely populated urban areas. The movement’s major attacks against Afghan forces in the north, west and south of the country in August came only a month and half after it had scaled down its campaign following the June ceasefire. It would have been ideal to extend the détente into the summer fighting season to allow the diplomatic process to get started. 

The leaderships of all sides still appear committed to – or at least show rhetorical support for – peace talks

For its part, the U.S. continued its escalating campaign of airstrikes, which have more than doubled since last year. The growing air campaign contributed to a 52 per cent increase in civilian casualties from airstrikes this year, according to the UN, though the biggest cause of civilian harm remains insurgent attacks. The airstrikes could make it hard for the Taliban to justify peace talks with the U.S. when bombs are falling among its grassroots supporters. Furthermore, assertions by U.S. officials that military pressure on the Taliban made the insurgents more receptive to talks have added to the atmosphere of mistrust. Conversations I had in Ghazni and elsewhere suggested that Taliban military planners might have ordered the August offensive at least in part to push back against any impression that U.S. military action was forcing them into negotiations, and to demonstrate that they can outdo the Americans in exerting pressure on the battlefield.

There were missteps by the Afghan government, too. In early August, the Afghan intelligence service, the National Directorate of Security, rescued around 250 self-declared Islamic State fighters from imminent death or capture by the Taliban in the northern Jawzjan province. The Taliban’s elite forces were pushing to eliminate the small pocket of militants nominally fighting under the black flag of the so-called Islamic State Khorasan Province (IS-KP). Taliban leaders were angry and suspicious when the government thwarted their offensive, whisking away IS-KP cadres in helicopters and sheltering them in government guest houses. The Taliban saw this operation as evidence that the Afghan government, and by extension the U.S., were using the terrorist group to undermine the Taliban at any cost rather than making genuine peace. This misperception was strengthened by the U.S. bombing of Taliban fighters engaged in the subsequent offensives against IS-KP elsewhere in the country. In reality, the U.S. military and Afghan forces have engaged in determined efforts to decapitate IS-KP and reduce its strength. An airstrike against the IS-KP leadership on 25 August reportedly killed one of the group’s top commanders.

It now appears that the three-month ceasefire on which President Ghani was banking will not materialise. It will now be harder to hold the parliamentary elections scheduled for 20 October and – given that insecurity is often linked to disenfranchisement or fraud – raise the risk of a contested vote.

Still, it is too early to write off the peace process. The leaderships of all sides still appear committed to – or at least show rhetorical support for – peace talks. President Ghani’s ceasefire offer despite the recent carnage showed political bravery; on 21 August, he reiterated his call for peace, his speech not faltering even as mortars started falling nearby, punctuating his words with explosions. From the U.S. side, Ambassador Khalilzad’s appointment signals the U.S.’s intent regarding peace talks. As for the Taliban, it issued a statement in the name of its leader just before Eid al-Adha committing themselves to “bringing peace and security”, insisting on the importance of direct talks with the U.S. and paying more attention to peace than any similar statements from the insurgent leadership in the past. Despite the Taliban’s escalation, the belief direct talks can deliver apparently remains high within different Taliban quarters. Formal peace negotiations remain a distant prospect, but leaders on all sides of the conflict have rarely devoted so much attention to peacemaking.

That the Taliban appears intent to continue fighting even while talking with the U.S. does not necessarily mean those talks are futile

What does not appear likely, however, is a major military de-escalation between the parties. The U.S. and Afghan governments are seeking respite from a barrage of Taliban attacks this year, but that aim may be too ambitious for now.

The Taliban commander I met outside Ghazni, who was well informed about the peace talks with the Americans, told me he saw nothing wrong with escalating attacks. I asked him if the Taliban should halt or reduce violence to signal good faith in negotiations.

“No”, he answered. “A ceasefire or stopping attacks on government centres [cities] would be premature before a peace deal”.

“But what happens to peace talks then?” I asked.

“Those in charge of talks [from the Taliban] will talk while we do the fighting. As the last ceasefire showed, when our leader instructs us to halt fighting, everybody will immediately obey. We will become brothers with the government soldiers”.

“Does that mean you seek military victory?”

“No. There has not been a political solution so far because our enemies wanted to eliminate us. They wanted a military solution. I am 100 per cent sure that when there are direct talks with the Americans, we would certainly reach a political solution if they are honest”.

This and other conversations I have had in recent months with Taliban interlocutors suggest that it will be hard to reach agreement on de-escalation between military forces in the short term. Warfare has long been the Taliban’s defining characteristic and the movement is unlikely to scale back operations until a political deal is reached. The Taliban are thus likely to confound U.S. and Afghan governments expectations that peace talks will come after incremental reductions in violence. The Taliban view such proposals with suspicion, saying their enemies are not interested ending the war but in “peeling off” elements of their movement to weaken them.

That the Taliban appears intent to continue fighting even while talking with the U.S. does not necessarily mean those talks are futile, but it undoubtedly complicates efforts for peace. Negotiations under current conditions will almost certainly involve setbacks of the kind witnessed in recent weeks. They will test the patience of the Afghan public, fuelling the scepticism of some members of the political opposition about a peace process. Small demonstrations have already occurred as young protesters demand an end to what they call the government’s “appeasement policy”.

But even if a de-escalation is not possible, shifts in tactics by both sides that reduce civilian casualties might be a realistic confidence-building measure.

But even if a de-escalation is not possible, shifts in tactics by both sides that reduce civilian casualties might be a realistic confidence-building measure. Crisis Group’s interlocutors among the Taliban claim that the insurgents have adopted more cautious rules of engagement since they detonated an ambulance packed with explosives on a busy street in Kabul in January. The attack, a clear violation of the laws of war, killed more than 100 people, provoked widespread outrage and brought condemnation from the UN and other quarters. In the following months the Taliban appear to have reduced suicide attacks within cities, particularly truck bombs, making IS-KP the largest contributor to civilian casualties in suicide and complex attacks thus far in 2018.

Still, there is far more the Taliban can and should do. They continue attempting to encroach on urban areas, where the risk of civilian casualties is often highest. In the early weeks of his diplomacy, Ambassador Khalilzad could seek confidence building steps involving the Taliban avoiding such attacks, in return for the U.S. tamping down airstrikes and the Afghan forces refraining from shelling villages. Measures along these lines could significantly reduce the scale of carnage, even if only among civilians. If those steps are not feasible, at a minimum the Taliban may be willing to engage in three-way discussions with the U.S. and Afghan governments about alternatives for mitigating civilian harm and about improving access for the delivery of basic services in areas contested or controlled by the insurgency. Even those steps could help create a better atmosphere for talks.

The Ghazni bloodshed will not be the final setback, the last horrific spate of violence that Afghanistan will suffer on its long road toward a negotiated end to the conflict. But all stakeholders in Afghanistan should try to keep faith that peace remains possible. That means continuing to talk even as fighting persists.

This text was corrected on 6 September 2018. An earlier version incorrectly stated that the Taliban issued a statement at the end of August, when in fact it was issued just before Eid al-Adha in mid-August.