The Economist - USA (2022-06-11)

The Economist June 11th 2022 37

Asia

Afghanistan’seconomy

Guns over butter

T

he medina bazaarneighbourhood in
Kabul  used  to  be  a  jolly  mess  of  con­
sumption  and  construction.  As  Afghani­
stan’s  economy  surged,  helped  along  by
billions of dollars in foreign aid, business­
men invested in property. Shopping plazas
and wedding halls sprang up. Shops selling
everything  from  women’s  fashion  to  gro­
ceries  were  busy  with  keen  customers.
Traders  prospered.  Today,  the  area  is  still
packed. But the throngs of people are there
for  handouts  of  food  from  the  un.  The
stores are empty. Mohammad Younis, a lo­
cal  tailor,  is  struggling  to  feed  his  11  chil­
dren. “I have a shop, but no one comes in. I
just sit there all day,” he says.
It was less than a year ago that the Tali­
ban took control of Afghanistan as Ameri­
can  troops  left,  the  government  collapsed
and security forces evaporated. The world
watched  in  horror  as  crowds  gathered  at
Kabul airport, desperate to flee. Some were
killed in bombings. Others clung to depart­
ing  aircraft  and  fell  from  the  sky.  Many
have left the country since.
Most  who  remain  face  penury.  In  the
last four months of 2021 the economy con­

tracted  by  more  than  a  third  compared

with the same period a year earlier. Private

businesses have laid off about three­fifths

of employees. Food prices are rising by 18%

year  on  year.  Families  that  were  middle­

class  a  year  ago  are  surviving  on  a  single

meal  a  day.  More  than  half  the  country’s

people face acute hunger. Some have taken

to selling organs or children. 

Part  of  the  reason  for  their  suffering  is

that Afghanistan was cut off from the glo­

bal economy the moment the Taliban took

control in August. The foreign funding that

had  propped  up  the  state  was  halted.  Af­

ghanistan’s  central­bank  reserves,  mostly

held in America, were frozen, then seized.

Sanctions mean Afghan banks can no lon­

ger transact with those abroad. 

When  the  Taliban  seized  power,  it

seemed  obvious  that  they  would  struggle

to switch from running a violent insurgen­

cy  to  administering  a  country  of  40m,  es­

pecially for lack of money. Yet the new gov­

ernment’s  finances  appear  to  be  in  much

better  shape  than  anybody  expected.  Last

month  the  group  announced  its  first  full­

year  budget,  forecasting  revenues  of

$2.1bn.The World Bank’s estimate is more

modest but still impressive: it reckons the

government  will  collect  about  $1.7bn  this

year  (about  12%  of  gdp)  in  domestic  rev­

enue, from things like taxes, customs and

fees for services.

That  is  nearly  three­quarters  of  the

$2.3bn the previous government raised do­

mestically  in  2020,  before  business

tanked, trade dried up and many taxpaying

Afghans left the country. (Its total funding

including foreign finance came to $5.7bn,

but  the  Taliban  do  not  have  access  to  the

grants and loans that made up the rest.)

That the Taliban have managed to keep

revenues  flowing  despite  the  obstacles  is

remarkable. One reason for their success is

that they have plenty of experience collect­

ing taxes. During their two decades as a re­

bel army, they collected traditional tithes,

such  as  oshr,  a  share  of  farmers’  harvests,

and  zakat,  religious  alms,  in  areas  under

their control. David Mansfield, a research­

er  who  has  studied  Afghanistan’s  illicit

economy for 25 years, estimates the group

made between $27.5m and $35m a year tax­

ing  the  drug  trade  and  roughly  another

$245m  at  checkpoints  along  main  roads,

K ABUL
The Taliban government has proved surprisingly good at raising money.
It is letting its people starve anyway

→Alsointhissection

38 AnothercatastropheinBangladesh

39 IndiaannoystheMuslimworld

39 NuclearenergyinSouthKorea

40 Banyan: America and Asia talk trade