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Afghanistan's Economy Has Worsened Since The Taliban Took Power

ARI SHAPIRO, HOST:

Afghanistan is one of the world's poorest countries. The pandemic caused the economy to contract. Fighting in recent years and uncertainty about the future made investors jittery. And this year, financial stress and a drought added to Afghanistan's woes. Then the Taliban took over in mid-August. As NPR's John Ruwitch explains, it created the perfect storm, and the country is on the brink of catastrophe.

JOHN RUWITCH, BYLINE: On the streets of Kabul and in markets, war-weary residents are setting up belongings - chairs, refrigerators, plates, electric heaters. Everything is for sale because people are running out of cash.

UNIDENTIFIED PERSON #1: (Non-English language spoken).

RUWITCH: And it's not just happening in the capital.

AHMAD: (Through interpreter) I sold my phone for 15,000 afghanis.

RUWITCH: That's a man named Ahmad in Herat, Afghanistan's third-biggest city. And he's talking about the local currency equivalent of $170.

AHMAD: (Through interpreter) I paid 8,000 of it to my landlord and bought rice, flour, oil and things like that with the rest - and also some diapers and milk for my child.

RUWITCH: And then the money was gone again. Ahmad asked NPR not to use his full name out of fear of reprisals from the Taliban. He works for a state-run university, but he hasn't been paid in three months.

AHMAD: (Through interpreter) They only give us promises about paying our salaries. They say they're doing paperwork, but I know it was done a long time ago.

RUWITCH: Ahmad's wife, a schoolteacher, hasn't been paid either. And to add insult to injury, the Taliban has told her she's no longer allowed to work. There are countless families facing similar conditions in an economy that has never been strong.

HAROUN RAHIMI: The fact is that Afghanistan, I mean, very much was a renter economy, meaning that everything was dependent on foreign money.

RUWITCH: Haroun Rahimi is an assistant professor of law at the American University of Afghanistan.

RAHIMI: Seventy-five percent of public spending was coming from outside. Half of the government budget was coming from outside. Total aid to Afghanistan, I think, roughly figured half of GDP.

RUWITCH: A big portion of it went to pay the salaries of government workers like Ahmad, as well as the police and military. When the Taliban seized power, it ground to a halt. In addition, the U.S. froze Afghanistan's foreign exchange reserves, worth about $9 billion. And to make matters even worse, in the months before the Taliban took power, the country's central bank tried to prop up the value of the local currency. It did so by shrinking the supply of afghanis and selling dollars.

RAHIMI: And that meant, like, towards the end, Afghanistan's banking sector had a huge liquidity problem.

RUWITCH: The central bank tried to import new bills, which are printed in Europe. It also tried to fly in hundreds of millions of dollars from the U.S., but they couldn't pull it off before the Taliban rolled into Kabul.

RAHIMI: So it kind of worsened an already horrible situation.

RUWITCH: That means banks don't have cash on hand and have been forced to restrict individuals to withdrawals of just $200 a week. People sometimes line up through the night to try to get cash. It's hurting trade, too, because companies also face withdrawal limits.

MANZOOR ELAHI: So they are only allowed to withdraw 25,000 U.S. dollars per week, which is not enough for them to do a big trading, you know?

RUWITCH: That's Manzoor Elahi. He's a businessman in the Pakistani city of Peshawar, a trade hub that lies roughly 30 miles from the Afghan border. He cites cement as an example, with huge quantities normally flowing from Peshawar to Afghanistan.

ELAHI: Two hundred, 300, 500 trucks daily of 37 tons each - daily. But now it's only 50, 60 trucks.

RUWITCH: To get by, those who can are turning to the informal currency market, like this one in Kabul.

UNIDENTIFIED PERSON #2: (Non-English language spoken).

UNIDENTIFIED PERSON #3: (Non-English language spoken).

UNIDENTIFIED PERSON #2: (Non-English language spoken).

UNIDENTIFIED PERSON #4: (Non-English language spoken).

RUWITCH: Traders here facilitate underground money transfers so people abroad can send funds to family and friends in Afghanistan. It's called hawala. Abdul Rab is a currency trader in Kabul.

ABDUL RAB: (Non-English language spoken).

RUWITCH: He says, "The money transfer business is doing well now because it's basically the only way people can send money in."

Not everybody has a connection abroad, and the hardship is getting worse. Alex Zerden led the Treasury Department's office at the U.S. Embassy in Kabul in 2018 and '19. He says the events of the past few weeks have created really tough policy challenges, but withholding aid and freezing Afghanistan's forex reserves are appropriate steps in the face of the Taliban takeover.

ALEX ZERDEN: They haven't changed their behavior. They haven't changed their positions, but they want all the benefits of international recognition, international support that was provided to the former government.

RUWITCH: And that's unrealistic, he says.

ZERDEN: They walked away from peaceful negotiations. They negotiated in bad faith, and they knew this money was on the table. Or if they didn't know the money was on the table, then that is their failure to not know that - how economics works.

RUWITCH: The Biden administration last week said it would grant sanction waivers for humanitarian aid to Afghanistan, including food and medical supplies. Economists say that's a positive step that may help stave off a humanitarian crisis for a few months. But economic conditions will remain tough. For Ahmad from Herat and others like him, life is grim. He thinks maybe he'll sell the TV next for some cash or his bed. And he's moving into a cheaper place.

AHMAD: (Through interpreter) With the current situation, unfortunately, nobody can have a plan. For now, the plan is to sell whatever you have and eat from that.

RUWITCH: The future is dark, he says, and only God knows what will happen next.

John Ruwitch, NPR News, Islamabad.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.