- Elvis Trujillo
The Afghanistan Economy after the Afghan Conflict
The war in Afghanistan ended this year with more than 2,000 lives lost among American soldiers and more than $2 trillion (about $3,100 per person in the US) spent. The Afghan conflict has been one of the costliest wars in American history. What is more striking is that this figure is just the American cost. According to a report by Brown University, the estimated cost of the 20-year war on a global scale is $8 trillion and more than 900,000 deaths.
Images of the Taliban taking control of major cities are now a reality. But what will happen to the economy of Afghanistan under Taliban rule? Less than a month ago, essential living conditions were cheaper for the general population compared to now. An analysis conducted by CNN has reported that the cost of petrol soared upwards of 140% this month, cooking oil up 63%, rice up 33%, flour up 21%, and sugar up 27%. Afghanistan has been in economic turmoil for many years and signs point to it not coming to a halt anytime soon. Unemployment rates have gone up and cash reserves have diminished. Banks have also continued to shut down amid turmoil. But why has the economy been facing such difficulties?
Before the Taliban surged to power, the Afghan government relied heavily upon aid from outside sources. In 2019, 42% of the GDP consisted of aid from outside countries. Now that the Taliban has gained control of the country, many organizations, non-profits, and world banks have pledged not to give any more aid to Afghanistan. Due to unstable relations, many businesses are reluctant to the idea of foreign investment. This brings problems not just for the population but the Taliban as well. If the Taliban wants a stable economy and to at least achieve some level of legitimacy, they need to revive the economy. But what can be done to improve this failing economy?
To know how to improve the economy, we need to learn what makes up the economy. The GDP composition of Afghanistan's economy is divided into four sectors: Agriculture at 25.77%, services at 55.47%, industry at 14.06%, and manufacturing at 7.04% (figure exceeds 100% due to fluctuations). However, an estimated 79% of Afghans rely on agriculture and agriculture-related businesses for income. What a huge problem! You cannot have a country where over 26.8 million out of 34 million people (about twice the population of New York) rely solely on agriculture as a livelihood. There needs to be diversification. For a country to be productive, there must be a sense of security for a good standard of living. When an attainable standard of living is met, business, entrepreneurship, jobs and foreign investment will follow.
The best way for the Taliban to achieve legitimacy is to establish a regulated, capitalist market economy. Afghanistan’s three largest trade partners are Pakistan, Iran, and China. Why not other selected countries? Because demand needs to be increased. Different industries need to be established so that Afghanistan can be on the world stage in terms of economic productivity. Afghanistan is the perfect place for outsourcing due to competitive wages, the number of people available due to high unemployment rates. The opportunity could increase GDP growth for Iran and India since there is a shipping port agreement between India, Iran and Afghanistan. The takeaway for a good economy is stability. Currently, the Taliban needs to get on board to achieve a successful takeover and provide that sense of security that millions of Afghan citizens search for.