Imtiaz Gul
As continued violence and uncertainty around the reconciliation process dominate the Afghan discourse, the 49th Quarterly Report by the US Office of the Special Inspector General for Afghanistan Reconstruction (SIGAR) paints a gloomy picture of the country’s frail and struggling economy.
The SIGAR quotes a State Department report which projects the Afghan government expects tax revenue to contract by $715 million to $1.99 billion in 2020 – nearly 26% short of the $2.7 billion in revenues projected before the emergence of COVID-19. While government revenues began to recover from the impact of COVID-19 this quarter, the Afghan government’s sustainable though insufficient domestic revenues declined by 17.2%, year-on-year, over the first nine months of 2020.
As a whole, the country has made great progress in comparative terms; In 2018, for example, its total revenue was almost 90 percent higher than in 2014 in nominal Afghan currency (Afghanis), and rose to 13.4 percent of gross domestic product 2019 from its nadir of 8.5 percent in 2014, the year of the completion of the drawdown of U.S. and international troops. With this a half-decade of progress on the revenue front was lost. As the economy seemed to recover from the shock triggered by the drawdown, COVID-19 struck.
SIGAR reports that Afghanistan’s urban areas have been the hardest hit by the pandemic, with more than half of Kabul’s population of five million estimated to have contracted the virus.
The pandemic will also precipitate Afghanistan’s poverty rate, and expected to push it to 68% of the population in 2020 from its pre-pandemic level of 55%, according to an estimate from the United Nations Development Programme.
Nearly half of Afghanistan’s $20 billion economy comprises foreign aid provided by the international community. It is one of the largest aid programs globally. (http://gandhara.rferl.org/a/international-aid-is-key-to-sustaining-peace-in-afghanistan/30334282.html).
But, according to a New York Times report, “the country’s $11 billion in public expenditure each year is a far cry from its modest revenues, which even after recent improvements barely reach $2.5 billion, officials and analysts say. The difference, about 75 percent of expenses, is footed by grants from international partners, particularly the United States.
A 2019 World Bank report, titled “Financing Peace warned that “even after a settlement with the Taliban the country would still require financial assistance at near current levels, as much as $7 billion a year for several years to come, to be able to sustain its most basic services.
This means Afghanistan’s long-term reliance on external resources regardless of how much can it improve in the next 5-10 years. Sustaining a cumulative army and police force of over 350,000 as well as the entire public sector requires much more than the country generates.
No matter how much Afghan government revenue can feasibly improve, the country will continue to rely on international assistance to support its budget, wrote William Byrd; M. Khalid Payenda in a US Institute of Peace paper.
“Any sudden halt or abrupt cut in aid would precipitate a fiscal crisis, which would lead to dissipation of the Afghan security forces when soldiers aren’t paid and the likely collapse of the state.” (http://www.usip.org/publications/2019/08/afghan-government-revenue-critical-peace-grows-2019)
That is why all regional countries – including China and Russia – want all Afghan stakeholders to iron out their differences peacefully. Outsiders can help only if the Afghans first create conducive conditions for that.
“We must build a joint regional security platform to fight terrorism and ensure public security.” Said Chen Zhimin, the president of the China Friendship Association(CAF) during a recent Afghan-Pakistan-China webinar on counter-terrorism. Only through such a platform can we all ensure stability and economic development.
Other Chinese officials assured continued support to Afghanistan- both bilaterally as well as through multi-lateral platforms such as the Shanghai Cooperation Organization (SCO).
Fearful of another round of instability , participants also underlined the need for a “responsible US withdrawal from Afghanistan” in order not to jeopardize the reconciliation process.
