UN warns of economic collapse in Afghanistan

Several agencies including the UNDP have noted that if the current situation continues, all basic services will collapse and almost all Afghans will fall below the poverty line by next year

September 10, 2021 by Peoples Dispatch
Afghanistan economy
(Photo: ADB/Jawad Jalali)

The UN on Thursday, September 9, demanded that the world start engaging with the Taliban to prevent the total collapse of Afghanistan’s economy and an impending humanitarian crisis. On the same day, a report released by the United Nation Development Plan (UNDP) claimed that if urgent measures are not taken to save the failing Afghan economy, the poverty rate in the country will rise to 97% by the end of next year. 

UN special envoy on Afghanistan Deborah Lyons told the UN Security Council on Thursday that Afghanistan is facing multiple issues such as rise in food prices, a falling currency, and lack of cash and payment of salaries. She demanded that billions of dollars of Afghanistan’s frozen foreign assets should be released immediately. 

Though she criticized reports of human rights violations by the new Taliban government, she said that the world needs to engage with the Taliban and give them a chance to “demonstrate flexibility and a genuine will to do things differently this time,” Al Jazeera reported.  

According to the UNDP, the current poverty rate in Afghanistan is 72%. A rise of at least 25% is expected by the end of 2022 due to contraction in the country’s total GDP by 13.2% caused by prolonged drought, wars, and the COVID-19 outbreak.

The UN had already warned that almost half of Afghanistan’s total population of 38 million is in dire need of some kind of humanitarian aid for food and other basic services. 

Release of Afghanistan’s foreign assets 

Lyons asked for the immediate release of nearly USD 10 billion worth of Afghanistan’s assets frozen by the US government and the IMF following the Taliban’s takeover of power on August 15. The IMF had blocked the Taliban government from accessing USD 440 million in new emergency reserves after the US froze nearly USD 9 billion worth of assets belonging to Afghanistan’s central bank.  

The UNDP report notes that Afghanistan is a heavily aid dependent economy with over one-third of its GDP coming from foreign aid. Given this dependence, it is necessary that the world engages with the new government announced by the Taliban earlier this week. 

China has recently announced USD 31 million emergency aid to Afghanistan. Russia and China have also demanded that the US and international agencies release Afghanistan’s frozen funds in order to prevent the country’s economy from collapsing. 

Talking to Al-Jazeera, Abdallah Al Dardari, UNDP’s resident representative in Afghanistan, claimed that due to the Taliban takeover, international agencies such as IMF, World Bank, and others have refused to take the necessary measures which are usually adopted in an economic crisis like the one in Afghanistan today, which has complicated the situation. 

He also appealed to the new Taliban government to let aid workers do their jobs in the country.

Doctors without Borders (Médecins Sans Frontières) has already warned of the possible collapse of the country’s health system, which had become completely dependent on foreign aid post 2001. Most of the health care workers have not received their salaries for months now. The World Health Organization (WHO), which through the World Bank supports more than 2,300 clinics in Afghanistan, has said that it may be forced to shut most of them soon due to lack of fresh funding in the last three months. The World Bank has also frozen funding following the Taliban takeover.