Afghanistan's Economy In A Turmoil As Can Shrink By 20%

Afghanistan's economy is going through a difficult situation, as the Taliban seized power over the country, and economists are expecting it will slide down soon. To overcome this, Afghanistan will receive around half a billion dollars from the International Monetary Fund (IMF) from Monday, next week.

Measurable grant by the IMF

IMF has fixed their largest-ever allocation of - Special Drawing Rights (SDRs) with an estimated $460m SDRs for Afghanistan. Till now the state has been receiving over $52.5m SDR, but, likely Taliban will not be able to access any of the SDR. Afghanistan will have to join Myanmar and Venezuela who will receive IMF fund but cannot access it for their domestic purposes. Taliban terrorists additionally will not be able to access the country's reserve.

Even before the Taliban seizure, the country's economic condition was highly troubled. According to the World Bank, the country's economy is "shaped by fragility and aid dependence." To note, Afghanistan receives a huge amount of foreign funds annually and 75% of public spending is funded by grants. Hence, the changed circumstances will only worsen the situation there.

The economy might shrink by 20%

Fitch Solutions, a top sovereign rating agency has shared its views on the country. Their report found that Afghanistan's economy might shrink by 20% in 2021, due to the Taliban attack and their currency may slide further.

Afghanistan had a $19.8 billion GDP in 2020 which will head further south. Last year, aid flows represented 42.9% of their GDP with Afghanistan's currency is down 90%. Anwita Basu, Head of Asia Country Risk at Fitch Solutions commented, "Countries facing similar circumstances like Myanmar and Syria have seen their GDPs collapse by around 10%-20%, which can't be ruled out for Afghanistan too." The pandemic has already contributed enough to pull down the state, and these terrorist activities will only accelerate the de-growth.

Lesser manpower in the economy

Afghans in large numbers are leaving the country now, they are rallying over airports. Migrant workers from other countries including India are also leaving the state and this will leave an immediate impact on the manufacturing and service sectors in Afghanistan. The war-torn country is additionally experiencing its second severe drought in three years to hit the economy.

UNDP on the other hand, calls for millions of Afghans and others around the world for peace, respect for human rights, and access to development assistance for all in Afghanistan, irrespective of their gender, religion, ethnic background, professional affiliation, or political beliefs. Economists from across the globe are calling to aid Afghanistan's economy to overcome this turmoil.