Afghanistan needs immediate support, cash. Inaction is untenable

By on October 7, 2021 0

The humanitarian situation in Afghanistan is degenerating into disaster.

Millions of Afghans now face severe economic stress and food insecurity following the Taliban takeover in August, triggered by widespread loss of income, cash shortages and rising prices foodstuffs. Officials at the UN and several foreign governments are warning of an economic collapse and the risks of worsening acute malnutrition and outright starvation.

Surveys by the World Food Program (WFP) show that more than nine in ten Afghan families do not have enough food for their daily consumption, with half saying they have run out of food at least once in the past two weeks. One in three Afghans is already very hungry. Other reports from the United Nations warn that more than a million more children could face acute malnutrition in the coming year.

One of the main causes of the crisis is that governments in August halted payments to the World Bank-administered Afghanistan Reconstruction Trust Fund, which had previously been used to pay the salaries of millions of civil servants, doctors and doctors. , nurses, teachers and other essential workers. Afghanistan’s health and education systems, among other sectors, are collapsing. Millions of Afghan families have lost their income.

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At the same time, Afghan banks and global financial institutions, including Western Union, MoneyGram, and the Central Bank of Afghanistan, are now running out of enough paper money to cover withdrawals. Account holders who receive foreign transfers or have “money in the bank” – ordinary Afghans, businesses, UN agencies, aid organizations – cannot access their money.

Donor governments are understandably concerned about actions that would strengthen or appear legitimate the Taliban authorities who arbitrarily arrest and attack activists, journalists and former government officials and adopt policies and practices that violate the rights of women and girls to life. education, employment and freedom. of movement. They have already imposed severe restrictions on activists, women and the media and resumed executions.

But Afghanistan’s underlying economic and humanitarian problems, which disproportionately affect women and girls, simply cannot be ignored due to the Taliban’s record.

On September 24, the US Treasury issued new guidelines and licenses authorizing electronic transfers with Afghan banks and other entities for humanitarian purposes. The problem is that electronic transactions alone cannot cope with the crisis. The Afghan Central Bank must be able to provide dollars and physical afghanis.

But after the Taliban takeover, the New York Federal Reserve cut off the Central Bank’s access to its U.S. dollar assets and its ability to settle U.S. dollar transactions with other banks – and its ability. to buy paper dollars from the Federal Reserve to ensure liquidity and monetary stability. . The World Bank also blocked the bank from accessing its assets held by the International Monetary Fund.

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Transactions in US dollars, including paper transactions, are an integral part of the Afghan economy. Most of the country’s gross domestic product comes from outside the country in the form of dollars – donor money, remittances, export earnings. If the Afghan Central Bank does not have a method of settling dollar accounts and securing new dollar paper money, liquidity problems and liquidity shortages will only worsen. Local currency issues also need to be addressed. Companies that print Afghan currency in Europe, concerned about sanctions, still cannot send new banknotes to Kabul. The Taliban authorities do not have the capacity to print money.

The Afghan economy has a limited capacity for resilience. The new Taliban authorities, like the previous government, do not have sufficient sources of revenue to finance basic government services. It is a country that has relied on external donors to provide such services for most of its modern existence.

The UN has announced a plan to send $ 45 million to support the health sector through UN agencies – but that won’t solve the paper and liquidity crises. It is not the role of the UN to send millions of physical US dollars to Afghanistan. Foreign governments must figure out how to restore funding to public services, not only health but also education, using the country’s banks and without making the Taliban rich or facilitating their abuse.

In doing so, the US government and other major donors in Afghanistan will need to adjust sanctions policies and enter into agreements allowing the central bank to process certain transactions and obtain paper money. Donors and the Taliban will also need to agree on methods to support vital services through independent organizations such as the UN or non-governmental organizations.

The Taliban will have to accept that concerns about providing direct budget support and preventing corruption will require independent financial oversight of transactions – something the UN and international financial authorities are already doing. The Taliban will also need to accept that donors will only support aid and services that are equitably distributed to women and men, girls and boys, and allow systems to monitor and ensure that services benefit all Afghans.

Inaction is untenable. The cruelties of the Taliban are horrendous, but moving away from past support for vital services, isolating the country politically and economically, and maintaining excessive and general financial restrictions, will not alleviate the abuses, but will only further harm the Afghan people.

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