(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

 

MUMBAI - A fresh disaster can be averted in Afghanistan, but the international community needs to act fast. The chaotic withdrawal of NATO alliance military forces has been accompanied by abrupt financial disengagement, setting up the country, home to some 38 million people, for failure.

Ordinary Afghans depend on a severely distorted economy for their livelihoods. Few countries are as reliant on international funding; about half of the roughly $6 billion budget for 2021 was expected to be financed by grants and borrowings led by foreign agencies, per the World Bank. Now that has halted, and the United States has effectively put most of the country’s $10 billion of central bank foreign exchange reserve out of reach, creating a huge shock.

Western officials might not like the radical Islamists in the Taliban, but at the moment someone needs to run the country. Economic upheaval could leave Afghanistan near ungovernable, engendering food shortages, mass unemployment, and hyperinflation, which would in turn fan extremism and exacerbate the refugee crisis.

Take deposits. A lot of accounts are held in U.S. dollars, so as Haji Mohammad Idris, the new acting head of the central bank, reopens lenders, he will need to impose strict withdrawal limits on greenbacks. Civil servants can be paid from the stock of local currency, but its plummeting value means it probably won’t buy much. The mess puts development gains made on the back of $145 billion of U.S. reconstruction spending at risk, and could further fuel the illicit drug trade.

Multilateral institutions can find ways to prop up basic services while minimising the risk that funds flow to the Taliban. Afghanistan has functioning health and education systems, for example: secondary school enrolment rose from 12% in 2001 to 55% in 2018, per the World Bank, and maternal mortality has fallen.

To lead a response, the International Monetary Fund and others need top backers to give them a green light. The Group of Seven rich nations want to use funding as leverage with the militant group on multiple points starting with evacuations, but letting the Afghan economy dissolve will worsen the problems that led to the war in the first place.

 

CONTEXT NEWS

- British Prime Minister Boris Johnson said on Aug. 24 that the Group of Seven rich nations had agreed a plan to deal with the Taliban, with the first condition being that militants must allow safe passage to Afghans wanting to leave the country even after an Aug. 31 deadline. Johnson said the "huge leverage" the G7 could wield over the group after they seized control of the country just over a week ago included withholding substantial funds.

- “We reaffirm that the Taliban will be held accountable for their actions on preventing terrorism, on human rights in particular those of women, girls and minorities and on pursuing an inclusive political settlement in Afghanistan”, the G7 leaders said in a statement.

- The Taliban on Aug. 23 appointed Haji Mohammad Idris as acting head of Afghanistan's central bank to help ease growing economic turmoil. He is expected to help organise institutions and address the economic issues facing the population, according to a statement by Taliban spokesman Zabihullah Mujahid.

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

(Editing by Pete Sweeney and Katrina Hamlin) ((For previous columns by the author, Reuters customers can click on GALANI/ SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS http://bit.ly/BVsubscribe | una.galani@thomsonreuters.com; Reuters Messaging: una.galani.thomsonreuters.com@reuters.net))