Out of Texas, a Cowboy Solution to an Afghan Crisis
(Bloomberg Opinion) -- The idea began with urgent phone calls between United Nations agencies and an anonymous business executive in Texas. It’s resulted in a steady stream of much-needed currency into Afghanistan.
Acting as an intermediary for one of Afghanistan’s richest men, the Texas-based businessman has helped arrange for warehouses of afghanis, the local currency, to be swapped with U.S. dollars held in the accounts of international humanitarian groups. The two sides have mirror needs. Afghan businesses are stockpiling immense amounts of paper currency because they don’t trust the banks, which are currently frozen; meanwhile, humanitarian agencies desperately need money to pay their staff and give cash handouts to a starving population. The U.S. dollars are needed to import essential items in the face of the almost total economic collapse since the Taliban took power on Aug. 15.
“It is a cowboy way of running liquidity in the country but it is what we have got. I have never seen anything like this,” says Graeme Smith, a senior consultant with International Crisis Group, the quarter-century old organization focused on preventing conflict. Smith, who has worked in Afghanistan since 2005, is writing a report for the group on solutions to the economic crisis in Afghanistan, and is in contact with the Texas executive, who has sought to remain anonymous while talks are underway.
Afghanistan needs dollars. After 20 years of U.S. military occupation and billions invested in state building, the country’s economy is heavily dependent on the greenback. U.S. troops may have left months ago, but the administration in Washington still holds most of the financial cards. As much as $9.4 billion in Afghan reserves are in the Federal Reserve in New York, while America maintains significant sway over the international agencies, including the International Monetary Fund and the World Bank, which have suspended payments into the country — ostensibly in order to prevent them from reaching the Taliban.
To suddenly cut off access to U.S. dollars meant Afghanistan’s three main imports — fuel, food and equipment — were stopped in their tracks, just as temperatures plunged below zero and food supplies ran dangerously low. That means someone will have to keep serving as a matchmaker for afghani-to-dollar trades between large business and humanitarian groups until there is either sanctions relief or international agencies decide to release those funds to Afghanistan.
The informal currency swap will prop up a small part of the economy but certainly won’t be enough to prevent Afghanistan slipping into full-blown famine this winter.
The World Bank is expected to decide this week whether to release around $500 million to help those facing imminent starvation. Early reports suggest this will be earmarked only for the health sector. So clinics will receive some funding, but they will be swamped with the needs of a starving population. Whatever happens, it is clear no aid drops or community-level food distribution can meet the needs of a country where all but 3% of households are expected to fall below the poverty line in the coming months. Just days ago, Afghanistan’s Acting Prime Minister Mullah Mohammad Hassan called on the global community to help prevent the crisis from deepening. There was no immediate relief following meetings of Taliban officials with separate delegations of U.S. and European officials in Doha over the past week.
Development economist William Byrd, a senior Afghanistan expert at the U.S. Institute of Peace, recommends a series of measures to provide for the import of food and other essential goods, as well as trade credit and banking transactions for certain items — many of which are already backed by existing sanctions relief provisions. He also suggests facilitating the transfer of funds to reputable Afghan private banks; enabling commercial imports exempted from sanctions; providing cash for distributing and spending assistance funds; and releasing small amounts of foreign exchange reserves to Da Afghanistan Bank to be provided to domestic banks.
But this is not as simple as implementing a technical work-around to ensure money isn’t siphoned off to the Taliban. The U.S. needs to “swallow the bitter pill of the Taliban victory,” Smith says. “It is not a technical challenge. It is an emotional challenge. Most of these officials spent their careers fighting the Taliban. They last thing they want to do is to be seen propping up this government.”
Civil society leaders like Shaharzad Akbar, who was the chair of the Afghanistan Independent Human Rights Commission and is now living in exile, have been warning for many months of the imminent collapse of the economy and the burgeoning humanitarian crisis. “The dire economic situation in Afghanistan is not due to a lack of solutions. Bringing relief does not require legitimizing Taliban. The current misery is due to lack of political will, courage and empathy both among U.S. decision-makers and the Taliban,” Akbar said.
As she points out, the Taliban also have agency. They know what they need to do to get the money flowing — they are just unwilling to do it and are prepared to let people starve rather than open girls’ schools and stop appointing people on U.S. and United Nations’ sanctions lists to key government roles.
Let’s hope there are some U.S. officials with long memories still walking the halls of power — long enough to recall what happened in Somalia in 2010 and 2011 when it was in the grip of a drought and an insurgency from the al-Qaeda-aligned militant Islamist group al-Shabab. Back then, aid groups warned that without urgent action, including the lifting of U.S. sanctions, there would be a famine. The sanctions stayed in place and the country slipped into famine. The Obama administration lifted the restrictions soon after but by then, many thousands had already died and ultimately, nearly 260,000 perished.
Unfortunately, the U.S.-Afghanistan relationship is so dysfunctional that, for now, ad hoc solutions like the one out of Texas may end up being more successful than the official ones. And that is not sustainable for a country on the brink.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Ruth Pollard is a columnist and editor with Bloomberg Opinion. Previously she was South and Southeast Asia Government team leader at Bloomberg News. She has reported from India and across the Middle East and focuses on foreign policy, defense and security.
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