It is the duty of any group or party in power, whether elected or forcibly self-installed, to ensure that citizens have access to sustainable income and resources necessary for a decent standard of living. Fostering economic growth and facilitating the provision of essential resources for livelihoods are fundamental responsibilities of a governing body, regardless of its political legitimacy or the means through which it gained power.
In Afghanistan, the Interim Taliban Administration (ITA) has emphasized enhancements in government revenue collection and a strengthened afghani currency as its achievements, along with achieving full security nationwide. While these accomplishments may seem significant, their actual impact on the daily lives of ordinary citizens remains uncertain.
Public Revenues and Expenditure
The ITA has taken effective administrative measures to boost government revenues, including tightening control over revenue streams, imposing additional fees, taxes, and duties, increasing royalties from natural resource exports, reducing corruption, and enforcing stricter regulations. As a result, total revenues for fiscal year 2022 were 193.9 billion afghanis (US$ 2.2 billion), and 210.7 billion afghanis in fiscal year 2023. These levels are comparable to those of the former republic, indicating a significant revenue increase for Afghanistan.
Despite the aid received by the former republic, the Taliban’s revenue collection efforts have been successful. However, before assuming control, they illegally collected funds beyond the former republic’s jurisdiction. These funds are now part of the overall government revenues overseen by the ITA.
To support small businesses and economic development, the ITA has introduced new initiatives such as tax exemptions for small businesses and reduced tax rates for industries. However, they also impose burdensome taxes on individuals residing below the poverty line.
While reducing taxes can help the private sector and economic growth, it should be accompanied by supportive fiscal and monetary policies, a conducive business environment, and effective governance. Merely implementing tax cuts may lead to a decline in government revenues. Likewise, a reported rise in GDP by 2.7 percent is attributed to the agricultural sector following favorable rainfall.
The ITA does not disclose revenue or public expenditure details, raising concerns about how these funds are utilized. A significant portion appears to be allocated to civil servant and security forces salaries, government operations, and select large development projects, rather than programs benefiting ordinary Afghans.
Effective revenue collection is crucial, but efficient allocation is equally important. Citizens have the right to know how their financial resources are being utilized by the government.
Questions About the Mining Sector
The ITA has disclosed over 200 mining agreements since taking power in 2021, with contracts valued at over $6.5 billion. Despite increased revenues compared to the former republic, the lack of transparency in these agreements raises concerns about mismanagement. The absence of authentic international recognition has limited the involvement of reputable mining companies in Afghanistan, hindering valuable foreign investments.
Afghanistan’s Currency
Afghanistan’s currency, the afghani, has shown appreciation following the Taliban’s takeover, attributed to measures taken by the ITA to curb illegal outflows and enforce transactions in afghanis. This has led to sustained deflation, impacting the economy negatively.
Furthermore, a strong afghani has discouraged domestic production and amplified the country’s dependence on imports, contributing to economic stagnation.
The stability of the exchange rate is vital for business confidence and economic growth. Ceasing dollar shipments by the United Nations could result in a rapid depreciation of the afghani and negative effects on market liquidity.
Banking Sector
The banking sector in Afghanistan has suffered due to international sanctions and ITA restrictions on withdrawals, leading to decreased confidence in banks and a return to informal financial systems.
Efforts to convert the banking system to Islamic banking have further eroded trust in the sector, impacting financial and business transactions negatively.
Transactions through informal channels contribute minimally to the formal economy and raise concerns about illicit dealings and money laundering.
Conclusion
The economic challenges faced by Afghan citizens remain significant, despite the ITA’s administrative successes. A growing poverty rate could lead to heightened conflicts and insecurity in the long run.
An upcoming part will discuss the prospects of establishing a self-sufficient economy in Afghanistan.