The twenty years of long-standing so-called “War on Terror” surmounting the duration of the Vietnam War, which began with the invasion of the US-NATO Establishment and caused the bloodbath of the 243,000 people of Afghanistan and Pakistan, came to an end with the countrywide liberation offensive of Taliban Administration and withdrawal of the US-NATO forces in August 2021. After fighting the $2.313 trillion worth of US-NATO-sponsored war on terror, facing 85,108 bombs and missiles, and losing around 52,893 combatants, the Taliban Administration still subsists as a resistance force and now controls the whole of Afghanistan. Although the humanitarian and the economic situation of Afghanistan continued to corrode due to the US freezing of $9.5 billion reserves, and the fall of the border trade, however, the Taliban Administration showed unprecedented maturity and sensibility on the economic front by taking some positive economic steps.
The first challenge the Taliban Administration faced was the lack of money to pay the workers due to the freezing of $9.5 billion by the US administration. Therefore, to tackle the crisis of hunger and unemployment situation the Taliban Administration kicked off the “Food for Work Scheme”. The idea was to use hundreds of tons of humanitarian aid from different countries to pay the workers. According to an agriculture official, 40 thousand workers were paid 10 kg of wheat for working 5 hours a day. Furthermore, the Taliban government also shifted the custom revenues to pay the salaries of the civil servants and other workers.
The second challenge which the Taliban Administration faced was the threat to the Afghan banking sector as the return of the Afghan Taliban was captioned by the media as the return of monsters, barbarians, and terrorists, which panicked the Afghan citizens, businessmen, and traders and hence, they had to run to the banks to withdraw their dollars. This situation is called the “Bank Run” which is a finance terminology for a circumstance when hundreds of depositors run to the banks to withdraw their money due to some uncertainty and such a situation can crash the banking sector of any country. Thus, to head off the crash of the Afghan banking sector, the Taliban Administration restricted the dollar withdrawal from the Banks to $200 per week.
Furthermore, the distress among the masses that emerged due to the Talibanophobia had created political and economic uncertainty, and therefore, anticipating the crash of the Afghani currency shoppers, traders, and businessmen chased down the dollars to secure the value of their wealth and investment. Similarly, those Afghans who wanted to flee the country also quested for dollars in exchange for the Afghani currency or any other asset. This situation created mammoth exchange rate pressure on the Afghani due to high demand for dollars and consequently, the Afghani (AFG) depreciated against the US dollar by 28.34% from AFG80.849/$1 on 15, August 2021 to AFG109.193/$1 on 20th December 2021. In order to put a brake on the depreciation of the Afghani, the Taliban Administration imposed a ban on taking the US dollar out of Afghanistan to avoid its short supply and also decreed all the citizens, traders, shoppers, and businessmen to conduct their transactions in Afghani. Hence, the Taliban Administration not only made Afghani the only legal tender for financial transactions but also regained the lost value of Afghani against the US dollar by 21.47% from AFG109.193/$1 20th December 2021 to AFG87.719/$1 on 2nd July 2022.
Another problem that Afghanistan has been facing is the Goods smuggling into the neighboring countries which causes the supply shortage and hike in the prices inside the country. Sheep smuggling is the best example to quote here which has been happening for the last 40 years and affecting the supply of sheep in the livestock market and the surge in the meat prices in Afghanistan. Since the rise of the Afghan Taliban into power stern action has been taken against the smuggling of sheep. That is why, the sheep dealers in Pakistan have reported the lack of sheep supply from Afghanistan, and subsequently, the prices of the sheep in Pakistan have increased by almost 40% as the cost of 25 kg of sheep increased from Rs. 25,000 to 30,000 on last Eid-Ul-Adha in 2021 to Rs. 35,000 to 40,000 on this Eid-Ul-Adha in 2022.
Finally, the most important challenge for the Afghan Taliban was presenting an appropriate budget for the country despite the frozen $9.5 billion by the Biden Administration. It is noteworthy to mention that for the first time in the last 21 years of history the Taliban Administration successfully forecasted the total annual budget of AFG231.4 billion without any foreign aid or debt. Deputy Prime Minister Abdul Salam Hanafi unveiled that the budget would be funded by AFG186.7 billion of the domestic revenues and consist of a fiscal deficit of AFG44 billion ($500 million). Hanafi further revealed that the majority of the chunk of the budget would be utilized in funding the sectors of education, health, development, defense, and the salaries of the male and female civil servants. The AFG231.4 billion budget has impressed many economic experts despite the AFG44 billion fiscal deficit and to fund it Taliban is going to count on the revenue from the customs duties, taxes, and levies from different ministries and the export of the mined coal on higher duty to Pakistan as recently reported.
