If politics go wrong in Afghanistan, what happens to the economy?
- Published on Monday, 04 August 2014 12:01
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Afghanistan is going through a fragile moment. It has already been more than 15 weeks since the first round of the presidential elections and it is likely that it will take another five or six weeks to declare the next president of Afghanistan. The Afghans' excitement about the election has dissipated and in its place is nationwide chaos and a volatile situation following the second round of voting.
How important is the financial support warning from the US?
Afghanistan has become economically dependent because of poverty and the disintegration of political cohesion following the US-led invasion of 2001. The economic situation is partly the result of insecurity and instability in the country. The economic and security problems of this war-ravaged country have grown into a “cause and effect” relationship especially in the last five years.
Both the economy and the security situation of Afghanistan have slightly improved. One of the most important factors in Afghanistan's economic recovery is the ever-increasing inflow of international aid. The international community pledged more than $67 billion between 2003 and 2010. The growth of the service and agricultural sectors has also had a positive impact on the economy. However, the living conditions of the Afghan people remain among the worst in the world.
The unemployment rate increased sharply from 9 percent in 2009 to 15 percent in 2011 according to Gallup records. Yet the most recent poll from the CIA World Factbook shows that the unemployment rate in Afghanistan was 35 percent in 2008.
The Afghan economy is much stronger today than it was in 2009. Afghanistan's purchasing power parity (PPP) for 2013 was estimated to be $45.3 billion by the CIA. According to the Asian Development Bank, real gross domestic product (GDP) growth increased from 7.2 percent in 2011 to 11.9 percent in 2012. With the population increasing and many Afghans returning to their country, the total workforce has increased from 10 to 15 million people over the past decade.
Despite the fact that the Afghan economy has developed at a remarkable rate since the collapse of the Taliban in 2001, the growth is largely due to the inflow of international aid and donor-led development projects. In fact, Afghanistan is still exceedingly depraved and the Afghan economy is at a crucial point where any decrease in aid could jeopardize the achievements of the last 10 years.
Under today's conditions, Afghanistan may need more than $12 billion, since the salaries of Afghan police and soldiers alone will cost more than $6 billion after 2014. Despite the billions of dollars of aid over the last decade the Afghan government cannot offer a minimum standard of living to its people. In order to achieve the most important goal, which is to render the Afghan state and the economy self-sufficient by the end of the Transformation Decade in 2024, the international community, the Afghan government and the Afghan people have a lot to do. There is no doubt that international aid will remain central for all the stakeholders to succeed in Afghanistan.
This is why the US brought out the “financial support card” when it saw the potential for democracy to deteriorate with the presidential elections. The level of international aid pledged for Afghanistan is critical and its influence on the quality of an ordinary Afghan's daily life is so vital that no one, especially the next leader of Afghan politics, would dare risk it.