After nearly two decades, the Afghanistan War ended in August 2021, when United States forces evacuated the country. For the nearly 40.9 million Afghans left behind, the rippling impacts of the war have created a devastating crisis. Afghanistan’s humanitarian crisis has made nearly every aspect of life take a turn for the worst under the rule of the Taliban. Crucially, this includes economic struggles, which then affect access to food and healthcare.
Part of the reason for the harsh and sudden economic downturn for Afghanistan came as a result of the Taliban’s takeover in August 2021. Since then, most foreign aid has been revoked, including from sources such as:
- The United States
- The World Bank
- The International Monetary Fund
- The Asian Development Bank
As a result, nearly $2 billion in aid has been stopped, causing the economy to collapse, as prior to this, Afghanistan was nearly dependent on foreign aid.
Humanitarian Crisis
The economic collapse was the result of multiple failures or setbacks Afghanistan faced in recent years. Drought, the COVID-19 pandemic and conflicts all came to a head with the Taliban takeover. Food insecurity has been at the forefront of the humanitarian crisis plaguing the Middle Eastern country.
According to the World Food Programme, 95% of Afghans are food insecure as of January 2022. Drought and rising food prices in the last year have increased the severity of food insecurity, which is now up 14 points from 81% the year before.
Food insecurity isn’t due to a lack of food in the country and is rather due to a lack of economic security. As of 2020, 85% of Afghans did not have a bank account. In the current crisis, humanitarian aid is not enough. Afghans need access to secure finances to lift themselves out of poverty and to allow them to purchase food and other necessities.
However, Afghanistan’s Central Bank’s credentials are not recognized internationally, which essentially renders it useless as a financial institution. This is a security measure, as there are fears that the Taliban could use any money for their own purposes. However, the group Human Rights Watch writes of a way to legitimize the Central Bank without giving funds indirectly to the Taliban, in a practice called “ringfencing.”
A Human Rights Watch article stated the ways to protect money going into Afghanistan. By “(ensuring that bank leaders have sole and independent authorities and credentials), put in place independent auditors to monitor the bank’s transactions internationally and domestically and ensure that assets made available are being used for legitimate central banking functions and humanitarian and commercial purposes.”
Measures to ease the burden of the economic crisis will go a long way to aid Afghanistan’s humanitarian crisis.
Digital Payments
One creative attempt to relieve the financial woes felt by Afghans is the use of digital payments. The Center for Global Development released a brief in May 2022 on the potential impact of digital payments on Afghanistan’s humanitarian crisis.
Digital payments do not include cryptocurrency, though it doesn’t exclude the possibility. They work similar to apps like Venmo or CashApp, where money goes directly to consumers and then to the places they do business. The rise of technology like QR codes has made digital payments even more accessible.
In a country similar to Afghanistan, digital payments are seen as a way to alleviate economic hardship without inadvertently giving money to the Taliban, or paying the Taliban to regulate financial institutions. Instead, security measures including biometric data on smartphones or customer due diligence protocols. The protocols are already in place for digital payments used by non-governmental organizations (NGOs), which often utilize digital payments for salaries in the countries they operate in.
The benefit of digital payments is the traceability, unlike bank notes. However, one potential disadvantage is that many Afghan women do not have access to smartphones or are illiterate, which would be a greater barrier to the effective use of digital payments.
There are various digital payment platforms that have already shown success. Fintech for International Development partnered with several NGOs to launch “Lotus20”, which had a successful pilot program in Kenya. In Afghanistan, the platform seeing success is “HesabPay”, which has partnered with more than 4,000 Afghan merchants to accept digital payments.
A Look Ahead
Afghanistan’s humanitarian crisis is rapidly growing and will continue to get worse. There are a plethora of other issues contributing to the total devastation and yet so many can be traced back to economic pitfalls. Digital payments have the potential to help Afghans regain control of their finances and lives in a time of near constant crisis.
–Emma Rushworth
Photo: Wikimedia Commons