IMF says it will halt remittances to Afghanistan after Taliban takeover

The Taliban have promised to improve the Afghan economy, But without access to international aid and with monetary reserves held abroad, the future of the country, one of the poorest in the world, looks complex.

Some countries have frozen their financial support. The IMF also announced on Wednesday that it would suspend funding to Afghanistan because “There is a lack of clarity within the international community regarding the recognition of a government” in that country, a spokesperson for the agency told the agency AFP.

“Afghanistan is hugely dependent on foreign aid”, underlines Vanda Felbab-Brown, Afghanistan specialist at the Brookings Institution, for whom the amount of aid is at least “10 times higher” income from the Taliban.

In 2020, the Afghan gross domestic product (GDP) stood at 19,810 million dollars, while the aid flow represented 42.9% of GDP, according to the World Bank.

“The Afghan economy is characterized by its fragility and its dependence on aid“International,” says the World Bank, noting that economic development and the diversification of the private sector have been “Hindered by insecurity, political instability, weak institutions, inadequate infrastructure, widespread corruption and a difficult business climate. “

The Taliban’s current income is estimated to be between 300 million and over $ 1.5 billion per year by the UN Security Council Sanctions Committee, which published a report in May 2020.

Opium and taxes

The Taliban are funded primarily by criminal activities like the culture of amapola for the manufacture of opio and heroin, that is to say drug trafficking, but also extortion of local businesses and ransoms obtained after kidnappings.

“Much of their income also comes from tax collection», Explains Charles Kupchan of the Council on Foreign Relations. They became experts in taxing almost everything that passed through the territories they controlled, whether it is government or commercial projects, he adds.

“Afghanistan will no longer be an opium-producing country,” however, the Taliban spokesman assured Tuesday. Zabihullah Mujahid. Production will again be practically “reduced to zero”, He added in reference to the ban in effect when they controlled the country, until 2001.

For now and despite the billions spent over the years by the international community to eradicate poppies, AAfghanistan produces over 80% of the world’s opium.

Hundreds of thousands of jobs They depend on this company in a country plagued by unemployment after 40 years of conflict.

The Taliban recognize that improving the economy depends on foreign aid. “We have had exchanges with several countries. We want them to help us, ”Mujahid said.

Good reputation

The Taliban seem to enjoy a better international reception than under their previous regime, from 1996 to 2001. Russia, China and Turkey welcomed his first public statements. But several donor countries, led by the United States, remain vigilant.

Washington insists it hopes the Taliban respect human rights, especially those of women.

Canada said he did not intend to recognize them, while Berlin announced Monday the suspension of its development aid to Afghanistan, which was awaiting the disbursement of 430 million euros this year.

For Charles Kupchan of the CFR, the Taliban have “interest“Have a good image if they want to get financial aid. Especially, he argues, because China, second largest economy in the world, it would not financially replace Western countries.

“The Chinese are very mercantilists. They tend to be interested in countries with a good business environment, where they can build their new Silk Roads, ”he notes.

“Are the Chinese settling in Syria? Iraq? Lebanon? Not. Therefore, I would not overestimate the role of China in Afghanistan, ”he concludes.

Build a Good reputation Receiving international aid is strategic since “the assets of the Central Bank that the Afghan government has in the United States will not be made available to the Taliban”, a Joe Biden administration official warned on Monday.

The Taliban have access to 0.1% or 0.2% of Afghanistan’s total currency reserves, the president of the Afghan Central Bank (DAB) said on Wednesday in a series of tweets, Ajmal Ahmady, who left the country.

Afghan international reserves “They have never been in danger”, assured the official.

The volume of reserves of the Afghan central bank has reached “About $ 9 billion last week”, most of them deposited in foreign institutions, including the American Federal Reserve or the BIS (Bank for International Settlements, a kind of bank for central banks).

Afghans have the remittances relatives abroad, which in 2020 amounted to $ 789 million according to the World Bank. Western Union announced the suspension from Monday of money transfers to Afghanistan.

(With information from AFP)

Read on: