Hyperinflation storms Kabul as Afghanistan pays the price for Taliban incompetence

That ended on August 15, when Ashraf Ghani’s government – the Islamic Republic of Afghanistan – fled and his donors balked at funding the Taliban replacements. Aid was turned off at a stroke and the country’s $9bn of foreign reserves were frozen. 

Since then, the government’s hefty payroll has gone unpaid, resulting in an economic apocalypse for many. 

Liquidity has dried up as dollars stopped being shipped in and afghani notes also ran short. It has led to banks limiting withdrawals, and scenes of customers queuing for hours to get money. 

The fear of sanctions is further stifling activity with many members of the new Taliban regime listed for UN penalties. As foreign banks cut their links to Afghan lenders in fear of punishment for dealing with the new regime, overseas transactions needed for trade and commerce have halted. Exporters, too, do not know if they will be sanctioned for paying export taxes.

It has prompted informal transfers, smuggling and the black market to take up some of the slack – solutions that have been insufficient in preventing soaring inflation and looming starvation for swaths of the population. After price increases of around 30 per cent in recent months, the cost of petrol and bread have doubled this week.

As the population struggles, the Taliban government of clerics and fighters are ill-equipped to handle the crisis. Many of the previous government’s most able civil servants have fled.

Gul Agha Ishakzai, the Taliban’s interim government’s finance chief, is one of the many under international sanctions. Also known as Mullah Hedayatullah Badri, he was a senior figure in the insurgents’ financial commission and oversaw the collection of Islamic tax, according to his sanctions designation. 

“He has also collected money for suicide attacks in Kandahar, Afghanistan, and has been involved in the disbursement of funds to Taliban fighters and their families,” his European Union listing alleges.

Another member of the Taliban’s financial commission, Haji Muhammad Idris, has been made interim governor of the central bank.

While the pair may be among the most financially literate of the regime’s leadership, there is a vast difference between collecting tax and smuggling levies to finance an insurgency – and an entire nation.

“They’ve got no idea what they are doing,” complains one international official. “It sometimes feels like they’d prefer to go back to a barter economy if they could.”

Faced with economic collapse, the Taliban has turned to pleading with America to lift sanctions and unfreeze the country’s foreign reserves.

“You are a great and big nation,” the foreign minister said earlier this week. “You must have enough patience and have a big heart to dare to make policies on Afghanistan based on international rules and regulations, and to end the differences and make the distance between us shorter and choose good relations with Afghanistan.”

Such entreaties are unlikely to persuade Washington, according to international officials in Kabul, however, with influential hawks in Joe Biden’s government wanting to punish the Taliban for America’s humiliation. 

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