The World Bank announced on Wednesday that it is suspending aid to Afghanistan following the Taliban’s takeover of Afghanistan earlier this month.
The World Bank has given more than $5.3 billion to Afghan development projects. The Afghanistan Reconstruction Trust Fund, which is administered by a bank, has also raised more than $12.9 billion for the country.
“We are deeply concerned about the situation in Afghanistan and its implications for the country’s development prospects, particularly for women,” said a World Bank spokesperson in a statement.
The International Monetary Fund (IMF), a member of the World Bank Group, barred the Taliban from accessing financial resources last week. The IMF’s action followed the Biden administration’s decision to freeze approximately $9.5 billion of the Afghan government’s reserves in US banks.
Republican Congressman Andy Barr, the ranking member of the House Financial Services subcommittee on national security, introduced legislation on Wednesday to prevent the Taliban from accessing the IMF.
The World Bank Group, based in Washington, is waiting for clarity on Kabul’s future government before resuming its lending.
“In accordance with our internal policies and procedures, we have paused disbursements in our operations in Afghanistan and are closely monitoring and assessing the situation. We will continue to consult closely with the international community and development partners as we do so,” the World Bank said on Wednesday.
“Together with our partners, we are exploring ways to remain engaged in order to preserve hard-won development gains and continue to support the Afghan people.”
The World Bank’s announcement is yet another setback for the Afghan economy, which is heavily dependent on foreign aid and faces rising food prices. “Afghanistan’s most pressing economic challenge is identifying sustainable sources of growth,” the bank stated in a blog post on its website. “Afghanistan’s economy is characterized by instability and reliance on foreign aid.” Even before the Taliban took power, Afghanistan’s economy suffered from “insecurity, political instability, poor institutions, inadequate infrastructure, pervasive corruption, and a challenging business climate,” according to the World Bank.
In the 2020 Doing Business Survey, Afghanistan was rated 173rd out of 190 countries. According to the World Bank, grants continue to support around 75% of government spending. Security expenditures are substantial, accounting for around 28 percent of GDP in 2019, compared to the low-income nation average of approximately three percent of GDP.
In announcing its decision to deny Afghanistan access to its resources, the IMF stated that its decisions were “guided by the opinions of the international community” and that there was “a lack of clarity among the international community regarding recognition of an Afghan government.” As a result, the IMF was forced to refuse the country “access to its Special Drawing Rights or other IMF resources.”
