Taliban face critical need for international aid

Group has few funds to draw on as most of the country's reserves are held overseas

Members of the Taliban at a checkpoint in Kabul, Afghanistan, on Tuesday. Reuters

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The Taliban have promised to improve Afghanistan's economy, but to do that the new regime will need foreign aid and there is no guarantee of that.

Some major donors already stopped their support for the country, one of the world's poorest, and the World Bank and International Monetary Fund also may freeze aid if major governments fail to recognise the new leadership.

"Afghanistan is tremendously dependent on foreign aid," said Vanda Felbab-Brown, an Afghanistan specialist at the Brookings Institution, a Washington think tank.

"Foreign aid is about 10 times or even more than the Taliban has been able to obtain from its own finance.

"International economic aid and access to international economic funds will be crucial."

In 2020, aid flows represented 42.9 per cent of Afghanistan's $19.8 billion GDP, World Bank data shows.

"Afghanistan's economy is shaped by fragility and aid dependence," said the development lender, based in Washington.

The Taliban gets much of its revenue from criminal activities such as cultivating poppies used to make heroin and opium, and from drug trafficking, a May 2020 report from a UN Security Council sanctions committee said.

Extortion of businesses and ransom from kidnapping also provide income, said the report, which estimated the group's revenues at between $300 million and $1.5bn a year.

The Taliban is expert in taxing just about everything in areas they control, from government projects to goods, and "they will continue to use that as a source of funding", said Charles Kupchan, a senior fellow at the Council on Foreign Relations.

The international community has spent billions of dollars over the years to help Afghanistan eradicate poppy cultivation, but the country still produces more than 80 per cent of the world's opium.

The industry employs hundreds of thousands of people in a country with high unemployment after 40 years of conflict.

The Afghan economy has taken a hit during the Covid-19 pandemic, and the Taliban has acknowledged that it cannot improve the situation without foreign help.

"We have spoken to many countries. We want them to work on our economy. We want them to help us," Taliban spokesman Zabihullah Mujahid said on Tuesday.

But as they did when they ruled the country from 1996 to 2001, the group will ban opium production, Mr Mujahid said.

The reception the group received after its shock takeover of the capital Kabul appears less reserved than during the first stint in power.

Russia, China and Turkey have all welcomed the insurgents' first public statements. But many donor countries, starting with the US, are wary.

Washington has insisted that it expects the Taliban to respect human rights, including those of women.

Canadian Prime Minister Justin Trudeau said his country had "no plans" to recognise the Taliban.

Germany announced the suspension of its development aid on Monday. Berlin was going to provide €430m ($503.1m) in aid this year, including €250m for development.

"They have an interest in trying to preserve at least a measure of good standing in the international community, because they want ... political support and economic assistance," Mr Kupchan said.

It is not clear if neighbouring China, the world's second-largest economy, will fill the void should relations with western nations remain cold.

"The Chinese are very mercantilist. They tend to be more interested in countries with good business environments," Mr Kupchan said.

Beyond their cash on hand, the Taliban may have few other funds to draw on. Most of the country's reserves are held overseas, Afghanistan's central bank chief said Wednesday.

Most are in the US, where President Joe Biden's administration said the Taliban would not have access to them.

And Western Union announced it was temporarily cutting off wire transfers to Afghanistan, which are another vital source of cash for the people.

The World Bank's most recent estimates, from May, show remittances to Afghanistan from overseas were worth $789m in 2020.