Afghanistan’s Looming CatastropheBy P. Michael McKinley - December 3, 2021
On
December 1, a United Nations official said that Afghanistan may be
facing the most rapid economic collapse in modern history. Since the
Taliban takeover in late August, government revenues have all but
disappeared and the country’s cash-based economy has shrunk at dizzying
rates. The World Food Program estimates that up to 23 million
Afghans—more than half the population—may not have enough to eat by the
end of the year. Public-sector workers have not been paid in months, and
three million children under the age of five face acute malnutrition,
an almost unfathomable number. As winter begins, Afghanistan is on the
brink of a humanitarian catastrophe.
The challenge is providing
relief on the necessary scale to meet the unprecedented needs of the
Afghan people. The United States and its allies rightly seek to deny the
Taliban government any legitimacy or funding until it provides
guarantees for the rights of women, girls, and minorities and
unequivocally cuts its ties to international terrorism. The U.S.
Treasury, international donors, and organizations have frozen billions
of dollars of Afghan assets and seek to channel humanitarian aid through
UN relief agencies and the nongovernmental organizations (NGOs) still
operating, with difficulty, inside the country. Meanwhile, despite the
growing crisis, the Taliban have shown little sign of changing their
behavior.
Confronted with this impasse, Western governments and
international organizations are being forced to reconsider how they can
deliver assistance more effectively. Doing so requires broadening the
definition of basic humanitarian activities that are permitted under the
sanctions regime and addressing the all-consuming question of cash
liquidity for emergency operations. The time for decision is now: the
window is closing for millions of Afghans as the humanitarian emergency
on the ground intensifies by the day.
A DIFFERENT KIND OF CRISIS
In
contrast to the Taliban takeover, Afghanistan’s humanitarian situation
has unfolded with far less media attention, in part because there are
not millions of refugees fleeing across the country’s borders; there is
no raging civil war; the country on the surface appears to be relatively
peaceful; and some members of the former political elite are still
inside the country.
The view from the ground, however, is very
different. Even before Kabul fell on August 15, the Afghan economy was
precarious. Under the democratically elected government, Western
governments and aid agencies provided billions of dollars in
humanitarian and development assistance, funds that amounted to more
than 40 percent of the country’s GDP and 75 percent of public spending.
Yet even with this support, per capita income remained one of the very
lowest in the world, declining from $642 in 2012 to $509 in 2020. Then,
large parts of the country were stricken by one of the worst droughts in
years as well as deteriorating security, and, by mid-2021, almost half
the population, or 18.4 million people, required humanitarian
assistance. The UNDP is now estimating annual per capita income could
drop further to a disastrous $350 by next year, which would place
Afghanistan at or near the bottom of the World Bank low-income country
rankings.
In the three months since the Taliban took power, these
problems have dramatically escalated. Millions more now require
humanitarian assistance. And with international aid flows cut off and
the banking system largely frozen, the International Monetary Fund
estimates that the economy will shrink by as much as 30 percent by the
end of the year. The financial collapse is compounded by a Taliban
government that seems to have no coherent plan for running the economy
and has devoted much of its sparse revenues to paying Taliban fighters,
as a recent report by the Afghanistan Analysts Network has suggested. At
the same time, the regime has been unwilling to make concessions on
human rights and security to receive international assistance.
Afghanistan’s financial links to the world have been severed, almost
literally from one day to the next.
The effects on the population
have already been stark. Noting that “food security has all but
collapsed,” a recent World Food Program report finds that millions of
Afghans will have to choose this winter between migration or starvation.
Across Afghanistan, there is a high risk of famine, both in cities and
in the countryside. In large urban centers such as Kabul, and in
provincial capitals, hundreds of thousands of civil servants, teachers,
and health workers are no longer being paid, leaving their families with
little or no basic income; in rural areas, drought, the lack of cash
and markets, and now the onset of winter threaten disaster.
MAKING ROOM FOR RELIEF
In
responding to the crisis, Western governments and international
organizations are faced with difficult choices. Any expanded assistance
to Afghanistan risks the charge that it is consolidating the Taliban in
power and weakening leverage to influence their behavior, thereby
provoking a likely political backlash in the United States and
elsewhere. There is also the risk of inadvertent sanctions violations as
international organizations provide emergency relief inside
Afghanistan.
Of course, diplomatic and political preconditions on
engagement with the Taliban can and should remain in effect. But it
should also be possible for the United States and its international
partners to augment their emergency response to help ordinary Afghans
without making concessions to Afghanistan’s new rulers. The pledges
already made by donors to UN agencies and NGOs are important to ensuring
humanitarian operations can proceed. Given the outsize dimensions of
the crisis, however, these organizations will need clearer authorization
and guidance from the international community if they are to respond
quickly and effectively to the country’s urgent and multiple needs.
To
address these challenges, the existing international framework for
dealing with the Taliban needs to be adjusted. UN Security Council
Resolution 1988, which established the Afghan sanctions regime, was
passed in 2011, but built on over a decade of measures targeting the
Taliban and their finances. In current circumstances, with the Taliban
now in control of the country, the UN could make it clearer that UNSC
1988, although still in effect, does not apply to humanitarian work.
Discussions
at the Security Council are currently underway, and the creation of a
humanitarian exception to the 1988 sanctions regime may soon emerge. But
to be effective, it must allow relief organizations to address the
collapse of the country’s health services and the Taliban’s systematic
restrictions on female education and women in the workforce, which have
added another terrible dimension to the crisis. Such action, however,
would require these organizations to deal with the Taliban regime in
these areas. To reach the girls and women who are most vulnerable in the
current crisis, there must be room for international aid efforts to
operate in the spheres that affect them most.
Some donors, such
as the World Bank, Germany, and the Netherlands, have suggested waivers
that would allow workers in the health sector to be paid, with the World
Bank reportedly considering releasing up to $500 million in funding.
The lack of salaries for medical personnel has deeply hampered the most
basic health services, a problem that has had a particularly direct
impact on vulnerable children.
In such a new resolution, the
“carve out” language could authorize UN agencies and NGOs to work in
these defined sectors as well as providing more traditional humanitarian
relief. Without such specified areas in which to operate, relief
organizations and the World Bank will be at continual risk of the
application of sanctions to their activities in Afghanistan. As the
humanitarian strategist and former senior U.S. official Sue Eckert
proposed in her recent testimony to the U.S. Senate Banking Committee,
the Department of the Treasury also has tools—General License Nos. 14
and 15—that could provide broader authorizations for humanitarian
operations in this situation. The Treasury Department has previously
used this approach in Yemen, Ethiopia, and Venezuela, defining
humanitarian relief to include working in multiple sectors such as
education and the provision of health services.
CREATING CASH FLOWS
But
it is not enough to broaden the scope of emergency relief. Getting
funds into Afghanistan has become extremely challenging in part because
financial institutions themselves are fearful of running afoul of
sanctions. Humanitarian operations require a regular cash flow to
sustain themselves: to pay for transport; to pay for shelter; to pay the
salaries of those who work with relief agencies or in the education and
health-care sectors; to pay for the establishment of distribution
centers; to pay for fuel and medicine. Yet in the current situation, it
has been tough for aid operations to access and distribute such funds.
The
challenge remains daunting. Afghanistan’s $9 billion in reserves will
and should remain frozen for the foreseeable future. Transferring any
currency into the country faces numerous difficulties, and engaging with
what remains of the private banking system is highly risky for
correspondent banks. And flying in U.S. currency is neither a safe nor a
sustainable option.
Cash could be brought in through Afghanistan’s private sector.
There
are, however, short-term options that could promote emergency
assistance for humanitarian relief through the winter. Safe payment
mechanisms to ensure the transfer of funds for humanitarian operations
are necessary. Among recent proposals to address the cash-flow problem,
those made by former World Bank economist William Byrd and former
Treasury official Alex Zerden stand out. They have both suggested, for
example, working through private banks that still operate in
Afghanistan.
Although not all their proposals may be feasible,
they suggest creative approaches to bring funds into the country by
working through the private sector banks and companies that still
operate in Afghanistan, introducing Afghan banknotes, using digital
transfers to individual households, and facilitating the commercial
imports of essential goods under the Treasury Department’s General
License No. 15. The Afghan-American Chamber of Commerce has also
proposed that the United States and the International Monetary Fund
unfreeze $1 billion in assets belonging to Afghan private citizens.
Whichever
approach is taken, the United States and other donors must act quickly.
In late November, the UN warned that the breadth of the Afghan
crisis—the lack of currency and inability to access private accounts,
take out loans, or pay for the imports that the economy depends on and
that were previously financed by external aid money—will lead to a
complete collapse of the country’s financial system within months.
A CHANCE TO ACT—BEFORE IT IS TOO LATE
Given
the deep and justified concerns about the Taliban deriving benefit from
international assistance, expanding the scope for assistance will not
be easy. The Taliban’s long—and recent—record of repressive actions,
their affiliation with international terrorist groups, and the presence
of sanctioned terrorists in their government cannot be waved away. For
the United States and its allies, which only recently evacuated their
troops, embassies, and citizens from Kabul, there is a strong sense that
a humanitarian response to Afghanistan’s crisis must coincide with
corresponding pressure on the Taliban.
Without immediate action,
however, there is the risk of a humanitarian disaster of historic
proportions by mid-winter. Such an outcome would not only cause great
suffering to the Afghan people but also heighten the contradictions of
the 20-year international engagement in Afghanistan. We should not wait
for that disaster to respond to the challenges that are evident now. The
United States and its allies cannot undo the failures that led to the
fall of Kabul in August. But they can ensure that ordinary Afghans know
we will not turn our backs on them at a time of extraordinary need.