Friday, March 31, 2023

Afghan GDP may drop 20% after Taliban takeover

According to Fitch Solutions, Afghanistan’s GDP might drop by up to 20% this year, and the country’s currency could fall much more than it has already since the Taliban’s takeover.

Last weekend, the Taliban overthrew a US-backed administration, sending many fleeing and perhaps ushering in a return to the insurgents’ austere and authoritarian rule of two decades ago.

“The economy is expected to decline substantially this year,” said Anwita Basu, head of Asia Country Risk at Fitch Solutions, the analytical and research arm of Fitch Group.

“Countries experiencing comparable situations, such as Myanmar and Syria, have seen GDPs fall by 10-20%, which cannot be ruled out for Afghanistan.” According to Basu, international grants and aid, which are a major source of money for Afghanistan, may dry up considerably this year, if not sooner.

“Already, some UN (United Nations) statistics show that aid would have decreased by at least 20% from 2020 levels in 2021 following the US exit, but that did not factor for the Taliban’s quick takeover,” she wrote in an email.

According to Basu, Afghanistan’s currency, the afghani, which has already lost more than 7% of its value versus the US dollar this month, might fall much more because most of the state’s foreign-held assets have been blocked to prevent the Taliban from getting access. She went on to say that hyperinflation cannot be ruled out.

Decades of conflict have harmed Afghanistan’s frail healthcare system. The country’s chances of acquiring Covid-19 vaccinations have always been dismal, according to Basu, but the situation has now turned “bleak.”

The Taliban’s takeover was creating anxiety not only about Afghanistan’s future but also about the impact on the economics of other nations in the area.

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