(THE CONVERSATION) Now that the Taliban would have taken total control from Afghanistan and started form a government, an imminent challenge awaits them: how will they keep their country and their economy afloat financially?
Over the past 20 years, the U.S. government and other countries financed the vast majority the Afghan government’s non-military budget – and every penny of fighting strength this melted down to the Taliban so fast in August 2021. Now, with US aid probably out of the question and the central bank’s billions in foreign reserves frozen, the Taliban will have to find other ways to pay wages and support citizens and infrastructure.
i studied finance Taliban and US-backed government for many years as an economic policy analyst at the Center for Afghanistan Studies. Understanding how the Taliban will pay for their government begins with the last time they were in power over 20 years ago.
Afghanistan has changed a lot
In the 1990s, Afghanistan was a very different country.
The population was less than 20 million and relied on international aid groups for whatever services they could provide. In 1997, for example, the The Taliban government had a budget of just $ 100,000, which barely met the salaries of civil servants, let alone the administrative and development needs of the whole country.
Today Afghanistan has changed a lot. The population has grown significantly and its citizens increasingly expect services such as health care, education and basic public services. In 2020, for example, Afghanistan had a non-military budget of $ 5.6 billion.
Most of the development and infrastructure spending that has taken place since 2001 has come from other countries. The The United States and other international donors have covered about 75% of government non-military spending during these years. In addition, the United States spent $ 5.8 billion since 2001 on economic development and infrastructure.
Always, Public revenue began cover a growing share domestic spending in recent years. Sources included tariffs, taxes, revenue from fees on services such as passports, telecommunications and roads, as well as revenue from its vast but mostly untapped mineral wealth.
Revenues would have been much higher without the endemic corruption of the government, which some experts and officials cite like a main reason for his fall. A May 2021 report suggested that 8 million dollars have been embezzled of the country every day, which would amount to about $ 3 billion per year.
Where the Taliban get their money
Meanwhile, the Taliban had their own large income streams to fund their insurgency as they took control of the country.
In the 2019-2020 fiscal year alone, the Taliban raised $ 1.6 billion from a wide variety of sources. Most notably, the Taliban made $ 416 million that year selling opium, more than $ 400 million in extraction of minerals such as iron ore, marble and gold, and $ 240 million in donations from private donors and groups.
With these resources, the Taliban were able to buy a lot of weapons and swell their military ranks by taking advantage of the US withdrawal and conquering Afghanistan. in a few weeks.
The challenges of Afghanistan
But winning the war may be easier than running the county, which faces many challenges.
Afghanistan is currently experiencing a severe drought that threatens more than 12 million people – one third of the population – with “crisis” or “emergency” levels of food insecurity. Food prices and other essentials have skyrocketed, while most banks started to reopen with limited liquidity availability.
The Taliban are also facing major financial challenges. About $ 9.4 billion in Afghan international reserves were frozen immediately after the Taliban took Kabul. The International Monetary Fund suspended over $ 400 million in emergency reserves, and the European Union stopped dispersal plans $ 1.4 billion in aid to Afghanistan through 2025.
5 potential sources of funding for the new government
Yet as they finish forming their government and charting a future course, the Taliban have a few sources they could tap into to generate enough money to run their reclaimed country: