IPRI – Islamabad Policy Research Institute

PRESS RELEASE Islamabad September 8, 2021

Event Organized by Islamabad Policy Research Institute
IPRI Webinar Series Afghanistan’s Economy in Crisis: Possible Scenarios 

The Webinar focussed on the future of Afghan economy, in the wake of foreign forces exit, and what policy aspects of the new government will impact it in the long run. Three distinguished speakers namely, Dr Aqdas Afzal, Program Director & Assistant Professor of Economics, Habib University; Dr Samina Khalil, Director AERC, University of Karachi, and Dr Zahid Shahab Ahmed, Research Fellow Alfred Deakin Institute, enlightened on the prevailing scenario, and were unanimous in pointing out that the war-torn country is need of being supported by the international community in order to avoid an imminent economic meltdown.

Dr Samina said that western money did wonders in Afghanistan during the two decades of occupation, which is likely to come down to one per cent with the exit of United States. She also said that while the country is rich in mineral base, it lacks the necessary infrastructure to tap its indigenous resources. This is acting as an impediment in development and prosperity.

Dr Aqdas said that peace is inevitably linked with the inclusivity of the new government. He also said an economic meltdown is on the cards, if not pumped in with money. The reason is that 42 to 60% of Afghan GDP was dependent on foreign aid. This is why the threat of mass exodus looms large. “Even if two per cent of Afghans cross over into Pakistan, it will be catastrophic,” he remarked.

The policymakers were advised to settle any influx of refugees on the western side of Durand Line, and not to let them cross over into Pakistan. He said that Taliban have two challenges in the form of setting up a broad-based government and stabilising the economy.

One of the key recommendation was that Pakistan should set up a swap line of $2 billion to help Afghan importers stay afloat. Similarly, it was noted that reputed technocrats should run the Afghan Central Bank, and Pakistan should play a role in it.

Dr Zahid pointed out that brain drain taking place in Afghanistan with the fleeing of educated class, especially. Twenty percent of economy used to depend on remittances, and now this will be an uphill task to retain. He also raised concerns as to why regional states despite pledges have not been able to explore untapped minerals in the war-weary country.

A couple of positive indicators, however, at the moment are Afghanistan’s two top trading partners, Iran and Pakistan, are on board helping it overcome a crisis-like situation. Speakers estimated that the new government will be needing around $5 billion budget, as compared to skyrocketing expenses of its predecessors.

Ambassador Asif Durrani raised a pertinent point by observing that Taliban are likely to produce and trade in Opium, which they do not consider as ‘Haram’ in raw form.

Acting President IPRI Brig (retd) Raashid Wali Janjua, in his concluding remarks, said that the suggestions of $2bn swap line and placing of technocrats in Afghan central bank is worth considering.


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