A friend drew my attention to some factlets which a tweet had attributed to the Economist. I thought I should respond with some comments on Taliban economic performance. Yes, the Taliban are best known as an armed, militant Islamist movement. But, since they insisted on grabbing a monopoly of power in a country with a forty or so million population, they should now expect to be assessed on economic performance rather than just military prowess or effectiveness of jihadi communications.

To my mind, the most significant economic statistic coming out of Afghanistan is that the annual revenue controlled by the Afghan Taliban Movement is now $2.1bn by my calculation (and $2.3bn by the “Economist’s” calculation). Surely this fact alone renders pretty much all terrorist financing control around the world irrelevant. Terrorist facilitators are routinely jailed for passing on one or two thousand dollars to a listed terrorist organisation. The Taliban remain under sanctions. But their General Directorate of Intelligence pays monthly stipends to the members of the Tajikistani, Uzbekistani and Uygur jihadist movements hosted in Afghanistan and can now do this “on budget”. Is anybody going to be prosecuted for the carelessness which handed a sanctioned entity a revenue stream worth billions?

In the light of the way the Taliban conducted themselves during their first stint in power in the 1990s and during the insurgency, it is not hard to explain what they are doing now that they are back in control of the Afghan state. Here are my responses to the factlets attributed to the Economist.

 

Currency

Quote: “The collapsed currency is back to USD/AFN 1:87, only 7% lower than before Kabul fell.”

My response: Currency stability has been achieved by tight monetary policy – no expansion of M1 as strictly limited issuing of paper currency (employees complain the notes they get are all damaged!) and almost no credit in the country. And, based on US Treasury special exemption UN agencies transferred 1.8bn USD cash to Kabul and deposited it in one of the Afghan private banks during 2022. This was the same rate of transfer as during the Republic and effectively balanced the supply of dollars with demand. And, of course, the main hard currency earners of humanitarian assistance ($3bn in 2022) and narcotics (massive stocks being sold on despite cultivation reduction) were buoyant enough to support the $4bn trade deficit.

 

State revenues

Quote: “State revenues are $2.3bn, up 10% on the year”.

My response: Afghanistan now has an authoritarian government which treats economic statistics as state secrets. They now do not publish the budget or full revenue figures, so anything you see is selective. WB monitoring of the first 10 months of FY 22/23 had 75% performance against a target of Afs.1.98 bn, or $2.1bn. I am doubtful of the $2.3bn claim and shall continue to use $2.1bn as my upper end estimate of actual revenue. The key point on how they have achieved it is by more than doubling customs take, upping the import & export tariffs. 48% of revenue coming from customs is deeply problematic – the measure is regressive & makes margins on trade dangerously narrow, jeopardising the $400m Afghanistan has recently been earning from selling coal to Pakistan. Anyway, the $2.1-$2.3bn figure is around 16% of Afghanistan’s GDP, which is in line with typical 15-20% of GDP as government revenue in low and middle-income economies. Perhaps people should get used to looking at Afghanistan as a low-income economy with an authoritarian government and thus not in a category of its own.

 

Bribery and corruption

Quote: “The proportion of businesses that bribe customs officials is down from 62% to 8%”.

My response: The bribery figure is survey-based evidence. I am doubtful of this one. The reporting I receive from Afghanistan suggests that bribe-taking and extortion are endemic. But the Taliban are good at suppressing news critical of their Emirate. Perhaps a figure collected during the Republic when there was no penalty for speaking your mind (62%) is not comparable with a figure derived when Afghans fear being detained for speaking or posting criticism of the authorities (8%). I was amused recently to see the Taliban authorities discussing letting Transparency International operate, given that, almost by definition, the Taliban are non-transparent.

 

Civil service salaries

Quote: “All 800,000 government employees are paid on time despite the loss of 75% of the state budget (formerly provided by foreign donors)”.

My response: This one is a half-truth. Performance on payment during 2022/23 was pretty good and salaries were getting regular. Payment has been irregular again since March because they have still not approved the budget, although this week saw the start of Q2, 1402. But you should not be surprised at them paying salaries. This is almost the whole point of the Emirate. A systematic purge (called “tasfia”) is underway to replace those Afghans appointed under the Republic with members of the Taliban movement. Civil service pay is their reward for jihad. And the 75% figure is wrong. The Republic’s budget for 1398 was Afs 396 bn of which 48% came from foreign grants/budget support. But that budget included both operational and development heads. The Emirate budget dropped development spending to 12%, which I suspect they have not been able to fund, so the real figure is lower. Basically, Taliban have slashed development spending and tweaked domestic revenue raising and now spend almost all the budget on salaries.

And for the future, one might ask what the Taliban will do when no one is prepared to give Afghanistan $3bn humanitarian assistance, equivalent to 25% of GDP because their Amir is posturing as being anti-west.

 

For more, listen to my podcast, Taliban Turbans and Smart Phones, available here and on other platforms. Series 2 Episode 8 focuses on Taliban economic policy.

Professor Michael Semple is a Professorial Research Fellow at the Senator George J. Mitchell Institute for Global Peace, Security and Justice and the School of History, Anthropology, Philosophy and Politics at Queen’s University Belfast. 

He works on innovative approaches to peace-making and engagement with militant Islamic movements in Afghanistan and South Asia.

The featured image has been used courtesy of a Creative Commons license.