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The Economic Disaster Behind Afghanistan’s Mounting Human Crisis
The Economic Disaster Behind Afghanistan’s Mounting Human Crisis
Afghanistan’s Low-turnout Election, Insecurity and Unsettled Prospects for Peace
Afghanistan’s Low-turnout Election, Insecurity and Unsettled Prospects for Peace
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 election commission workers count ballot papers of the presidential election in Kabul, Afghanistan on 28 September 2019. REUTERS/Mohammad Ismail
Q&A / Asia

Afghanistan’s Low-turnout Election, Insecurity and Unsettled Prospects for Peace

Afghanistan’s fourth presidential election since 2001 brought perhaps 26 per cent of the electorate to the polls. In this Q&A, Crisis Group consultant Graeme Smith and Senior Analyst Borhan Osman explain the weak participation rate and explore the contest’s implications for the country’s stability.

What happened in Saturday’s Afghan presidential election?

Results will emerge slowly in the 28 September Afghan presidential election – the country’s fourth in its short post-2001 democratic history. Although both leading campaigns have already claimed a first-round victory, official preliminary tallies are not expected to be released until mid-October. Even then, the vote count will be subject to certification, which will come after electoral bodies adjudicate complaints about the process. If the official count shows no candidate gaining more than 50 per cent of the vote, a second round will be required. It is unlikely that a second round could be held until the spring, because winter weather makes voters’ access to polling places too difficult.

The contest features an incumbent, President Ashraf Ghani, who enjoys a high degree of control over the state apparatus and a strong likelihood of fending off the dozen challengers seeking to replace him. Ghani’s strongest rival, Chief Executive Abdullah Abdullah, had become his reluctant partner in a unity government after disputed election results in 2014 led to a political crisis. That crisis ended with a U.S.-brokered power-sharing arrangement.

Election day came after an unusually muted campaign period. Campaigning ahead of previous presidential polls saw contenders charter aircraft, fill stadiums and deliver speeches across the country. In contrast, the 2019 season was relatively quiet, with few rallies, and with candidates who seemed uninterested in spending money or risking lives on large-scale campaigns.

How many people voted?

Turnout was low. Although preliminary results will not be out for weeks, election officials are already estimating that about 2 or 2.5 million voters came to the polls. Those numbers may decrease as some ballots are deemed fraudulent and other votes are thrown out for technical violations. The likely number of final valid votes is hard to forecast because this is the first time Afghanistan has used biometric systems for voter verification in a presidential election. The top end of the current estimated turnout range is 26 per cent of 9.6 million registered voters, a lower turnout than in any other election in Afghanistan – and, in fact, among the weakest turnouts for any national election around the world in recent history. (The largest database of turnouts is maintained by the International Institute for Democracy and Electoral Assistance, which contains only a few examples of voters staying away from the polls on such a scale.)

Afghanistan is a divided country, with all major urban zones under the central government’s control and a large portion of the countryside in the hands of the Taliban insurgency.

The turnout figures are likely to be weaker still when considered as a percentage of the eligible electorate. Registration efforts have had disappointing results, capturing only about half of the voting-age population. Approximately half of Afghanistan’s estimated population of about 35 million is eighteen or older and therefore eligible to vote. (Afghanistan has never had a complete census, so these figures are not precise and total population estimates vary by several million.)

Why was participation so low?

Afghanistan is a divided country, with all major urban zones under the central government’s control and a large portion of the countryside in the hands of the Taliban insurgency. The Taliban – who regard the Afghan government as a U.S. puppet and therefore see presidential elections as illegitimate – threatened to disrupt the polls violently and pressed their supporters to boycott. After reports of low turnout emerged, the Taliban issued a statement thanking Afghans for shunning a “staged” process. Election authorities kept almost a third of polling centres closed, attributing their decision to security concerns. Voter frustrations with politicians and apathy might have been factors as well.

The Afghan government blamed Taliban violence for keeping Afghans from reaching the polls, and to some extent this may have been the case. A New York Times tally suggested that casualties on election day so far appear to be roughly in keeping with recent daily averages for the war, which ranks as the deadliest armed conflict in the world (measured by people killed directly in fighting). Although there were no mass-casualty incidents, the Afghanistan Analysts Network has so far counted about 400 smaller attacks that appear to reflect a pattern of voter intimidation by the Taliban. A burst of gunfire or a few mortars landing near a polling station appeared to be sufficient in many places to dampen enthusiasm for the process. Although Afghan security forces were deployed in large numbers to secure the voting process, the Taliban probably could have done more both to disrupt the polls and to inflict greater casualties if the group had decided to mount full-throttled attacks on polling sites – along the lines, for example, of the 17 September Taliban suicide attack at a Ghani campaign rally that killed 26 people.

What does the election mean for stability?

The election does not have immediate consequences for the likelihood of success of the on-and-off diplomacy to end the war, although it might affect its timing.

Elections are usually a slow burn in Afghanistan, as results trickle out, how well (or not) the electoral bodies performed becomes clearer and politicians size up their opportunities. Street demonstrations or other forms of instability can occur weeks or months after voting. That said, the risk of a serious disruption to Kabul politics appears somewhat lower than in 2014, as Abdullah’s ability to challenge an unfavourable result may be weaker. As in the 2014 election, Abdullah quickly declared himself the winner, flanked by prominent supporters at a 30 September press event. This time around, however, Abdullah was missing his biggest supporter from 2014: the former governor of Balkh province, Atta Noor, a wealthy northern power-broker whose coterie has voiced support for President Ghani in recent days. Ghani himself has not declared victory in public, but one of his senior aides in Kabul told Crisis Group that the Palace is confident of a first-round win, and his running mate, Amrullah Saleh, has said so publicly.

What does the election mean for the peace process?

The election does not have immediate consequences for the likelihood of success of the on-and-off diplomacy to end the war, although it might affect its timing, especially in the case of serious contestation over the results. But the key question for now is whether and when the U.S. intends to revive its own efforts to negotiate a settlement of the conflict, and in particular its talks with the Taliban.

The U.S. suspended the peace process in early September when President Donald Trump declined to move ahead with an initial U.S.-Taliban deal aimed at opening the way to broader talks among the Taliban, Afghan government and other Afghan power-brokers. The ball remains in Trump’s court: Taliban officials have told Crisis Group they are still open to resumption of the process. Senior Afghan officials said they would be willing to explore a diplomatic short-cut after the election process is completed, skipping the U.S.-Taliban deal and moving directly to intra-Afghan negotiations – but this has been a longstanding red line for the Taliban, who refuse to negotiate an Afghan political settlement without first resolving with the U.S. the question of foreign troop withdrawal. The Afghan government will be no better able to get the Taliban to erase that red line after the election, even if the announcement of results and reactions to them cause little or no political disturbance. Still, the Afghan government has renewed its commitment, at least rhetorically, to forging ahead with the peace process. On the day after the election, Ghani’s regional peace envoy Omar Daudzai tweeted optimistically that peace would be “accomplished within 2019”.

Contributors

Senior Analyst, Afghanistan
Consultant, Afghanistan