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The Economic Disaster Behind Afghanistan’s Mounting Human Crisis
The Economic Disaster Behind Afghanistan’s Mounting Human Crisis
U.S. Bombing of Afghan Drug Labs Won't Crush the Taliban
U.S. Bombing of Afghan Drug Labs Won't Crush 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.


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 policemen destroy poppy fields in Badakhshan province, one of Afghanistan's top opium producers, on 9 August 2017. NURPHOTO/Mohammad Sharif Shayeq
Commentary / Asia

U.S. Bombing of Afghan Drug Labs Won't Crush the Taliban

U.S. aerial bombing of drug laboratories in Afghanistan will solve neither the country’s Taliban insurgency nor its drugs problem.

On 21 November, the U.S. military began major airstrikes against what it described as Taliban drug labs in the north of Helmand province of Afghanistan. Yet a coercive counter-narcotics campaign will solve neither the country’s poppy boom nor the Taliban’s profiting from it, which has long depended to an extraordinary extent on very local dynamics.

It is no secret that the Taliban bankrolls its operations in part by drug money, with estimates of its annual share of the multi-billion-dollar illicit drug economy ranging from tens to a few hundreds of millions of U.S. dollars. The staggering 87 per cent increase in Afghanistan’s opium production in 2017, as reported by the United Nations Office for Drugs and Crime’s (UNODC) this month, also means more profits for the Taliban.

But it would be naïve to say the Taliban is fighting because conflict helps it gain control over the profits of the drug trade, or that Afghanistan’s drug production boom is because of the Taliban. The criminal economy thrives on weak state institutions, systemic corruption and poverty, while the insurgency represents, fundamentally, a political challenge. These are separate phenomena with distinct histories and different solutions.

The Taliban’s involvement in the opium economy today is in stark contrast to its complete proscription of narcotics as un-Islamic in the past. Ironically, its willingness now to earn from the opium trade is part of its broader evolution that includes increasing pragmatism and the relaxing of some of its religious puritanism and cultural conservatism.

The Taliban’s involvement in the opium economy today is in stark contrast to its complete proscription of narcotics as un-Islamic in the past.

In summer 2000, when the Taliban ruled most of Afghanistan, the movement’s late leader Mullah Omar issued a decree banning opium production and trade before the poppy cultivation season began. Even though this was not a formal fatwa, or religious ruling, stunned U.S. and UN officials reported from Afghanistan in the spring of 2001 that the Taliban had almost totally eliminated the cultivation of opium in the areas under its control. That year, Afghanistan’s opium production hit rock bottom, in stark contrast to the preceding two decades, when the country had been one of the world’s largest suppliers of illicit drugs. The UN described the ban as “one of the most remarkable successes ever” in the fight against narcotics.

The key to the ban’s successful implementation was its religious justification, I have heard repeatedly during field work among Afghan farmers and Taliban officials who followed the eradication campaign in the east and south of the country, where opium cultivation was most widespread. For years, clerics had debated the religious status of drug production and trading, and half-heartedly attempted a gradual prohibition. Sceptics within the Taliban deemed the absence of a conclusive ruling on the issue as insufficient to deprive impoverished people of their major source of livelihood. But in the end, the Taliban built consensus among local community leaders that since the use of any addictive drug was haram, or forbidden in Islamic law, so were activities that brought drugs into use, including the cultivation, production and trafficking of narcotics.

Mullah Omar’s effective prohibition in 2000 came amid growing pressure on the Taliban regime from the international community. Yet, those who worked closely with him are adamant that he was not driven by external pressure or the desire to earn international recognition, like some other Taliban leaders. His intense personal conviction tilted the balance on the drugs issue, as it did on other controversial decisions that followed, including the destruction of the Buddha statues of Bamiyan and the Taliban’s refusal to deport Osama Bin Laden. In any event, the Taliban felt its successful ban on drugs was unappreciated by the international community.

Opium cultivation resumed as soon as the Taliban regime fell. When the movement returned in the form of insurgency in 2003 in the opium heartland, it was limited in scale and could raise funds to sustain itself by capitalising on the anxiety about a long-term U.S. presence among Afghanistan’s neighbours and anti-Americanism in the Persian Gulf countries. As the insurgency grew larger, it needed more funds. The Taliban had to mobilize revenues domestically, including from poppy production, especially after the drawdown of international troops and the strengthening of the Islamic State (ISIS) in 2014 diverted the attention of its Gulf-based backers. Local commanders who took control of territories where opium production and trade were booming could not resist the lucrative business.

The decision to use poppy money to advance jihad is endorsed by some prominent Taliban clerics.

The decision to use poppy money to advance jihad is endorsed by some prominent Taliban clerics. Some argue that circumstances, specifically the “American occupation”, make it permissible, since defeating the greater evil requires embracing the lesser evil of drug money. Another rationalisation is that since the Taliban does not officially rule the country, it has neither the responsibility nor the ability to stop drug production or trading, which cuts across government and insurgency-controlled areas. If it cannot be stopped totally, the argument goes, why should the Taliban deny people under its control a profitable livelihood and risk losing support for its jihad. Also at work is a tacit logic that these drugs mainly harm infidels, and as long as infidels occupy Afghanistan or support the occupation, the Taliban need not care about their lives.

Despite these justifications, the Taliban’s embrace of the drug trade is limited both horizontally, with a small minority secretly involved in it, and vertically, since the involvement is mainly taxing, rather than running or controlling the trade. A small number of commanders in major opium hubs are involved in all stages of the drug trade. But there is no systemic involvement. The group is not the only player in this business, narcotics are not the Taliban’s institutionalized business, and without drug money, the movement would not fall apart.

The bulk of the Taliban – fighters, and commanders in non-poppy growing areas as well as leaders who do not deal with finances – are in the dark about the movement’s relationship to drugs. No one asks how the fighting is funded, and the finance chiefs and those who collect drug-related incomes try to keep the opium returns secret, since involvement with drugs is still ideologically unacceptable for many members. The rank and file dismiss as lies reports about Taliban participation in the drug trade that appear in Afghan and international media and in propaganda by the Islamic State group.

Nevertheless, the Taliban profits from the drug trade and in doing so opens itself to the charge of being profit-driven, rather than motivated by a political vision. Some Taliban leaders understand the negative impression this creates in the international arena. In November last year, the Taliban’s political emissaries in Qatar sent a message to the international community through independent Afghan political activists: if the government imposes a ban on drugs in its own areas, they said, the Taliban would return to a complete prohibition.

Soaring opium production is largely a symptom of rampant corruption on the state side, and the failure of the Afghan government and its international backers to give farmers viable new ways of earning a living.

Aerial bombing is a deadly new turn in coercive counter-narcotics operations. U.S. officials have hailed it as an effective element of the new U.S. strategy in Afghanistan and South Asia, part of a multi-pronged approach in fighting the insurgency. They claim the airstrikes have already had an impact on the Taliban, something that is difficult to measure on ground independently. It is also unlikely to weaken the Taliban financially, not least because its sources of funding are so diverse. The bombing campaign is much more likely to benefit the movement in other ways. This is because most drug labs being targeted are the primary livelihood of ordinary people, and are usually located in populated areas. Destroying them with no provision for alternative sources of income, and the probable killing of civilians in the process, will increase popular support for the Taliban. Accounts from areas affected by the bombing already indicate the airstrikes have mainly hurt civilians and their livelihoods rather than the Taliban.

The aerial bombing is also not going to help neutralise Afghanistan’s opium boom. Soaring opium production is largely a symptom of rampant corruption on the state side, and the failure of the Afghan government and its international backers to give farmers viable new ways of earning a living. Corrupt government officials and pro-state elite have long participated in the opium economy on a greater scale than any non-state actor.

The transformative reforms needed to tackle these challenges can only come through resolving the insurgency, which in turn can only be resolved through a political settlement. Dismissing the Taliban as a drug-running, criminal enterprise is not the answer. The group stands for a cause that has a popular resonance in non-marginal segments of society, and it is these genuine constituencies and popular roots that account for its continued survival, not the opium boom.