Economic Implications of Taliban Rule in Afghanistan

 For the first time in 20 years, the Taliban has won an unexpected and complete victory over the now-defunct Islamic Republic of Afghanistan in August 2021. It comes as yet another shock to the long-suffering Afghan people, whose economy is on the verge of collapsing as it was already plagued by insecurity, COVID-19, corruption, government mismanagement and drought.

The Afghan economy will face a slew of new challenges as a result of the Taliban's takeover and the international community's clampdown on aid and assistance. The coffers are empty because of the disruption in Afghan government revenue and aid, and so the Finance Ministry will have difficulty meeting basic expenses and providing social services.

Gettty Images: Taliban fighters pictured in Laghman Province. They began a lightning offensive earlier this year.

The previous Afghan government and its core institutions are in shambles, and the country is experiencing a severe “brain drain” of qualified technical and professional staff, many of whom have fled or are attempting to flee the country. Despite the Taliban's generally pro-private sector stance, the uncertainty associated with their takeover will further depress already low private investment and, at the very least, stall major projects.

If the Taliban decides to impose abrupt, harsh changes in urban areas, where people have lived in a very different way for the past 20 years, it will exacerbate panic. Taliban actions like stopping women from working could harm livelihoods and increase poverty.

The international community's response could greatly aggravate or moderately ameliorate the current economic and humanitarian crises as a new Afghan government takes shape. The Western powers and the US are willing to engage in conditional engagement, which means that the Taliban must behave in order for the international community to unfreeze Afghanistan's foreign reserves and allow the Taliban access to the assets of Afghanistan's central bank.

An ominous future can be foreseen for the people due to the competing and complex motives of those who will fill the void left in Afghanistan. In terms of the economy, it is in the Taliban's self-interest to provide goods and services to the Afghan people in order to demonstrate that they are now in control, that they are a functioning government, and that they mean what they say when they say they have changed. But whether that is enough to persuade them to compromise on their politics and ideologies remains to be seen.