Afghanistan’s Economy

There are many concerns that come to mind when discussing the current state of Afghanistan’s economy. Twenty years of war has crippled the economy and citizens must find ways to survive day-by-day by scrounging enough food for themselves and family. Citizens do not have the facilities to receive an education or treatment for medical conditions. According to Afghanistan Facts, on average, men die at forty years of age and women at forty-three (“Afghanistan Facts”). There are hundreds of thousands people that are disabled due to war, land mines, or lack of fruit and vegetables in Afghanistan and there is not any help available to them. Afghanistan is the most heavily mined country in the world and according to Kevin Whitelaw; mine-related injuries number up to 300 per month (Whitelaw). Citizens that are willing and able to work are struggling to eat, making it impossible to help others in need. The problems that are evident in Afghanistan’s economy are government issues, trade/foreign relations, and lack of available labor.

Afghanistan is about 252,000 square miles which is slightly smaller than the state of Texas with a population, according to Kevin Whitelaw, of 25,853,797 people (Whitelaw). Most of the land is either mountainous or desert with a dry climate being very cold in the winter and very hot in the summer. The capital, Kabul, is the most populated city in Afghanistan as stated by Kevin Whitelaw, there are 1,780,000 citizens residing within this area (Whitelaw). More than 4 million Afghans live outside the country residing in Pakistan and Iran to avoid violence. The violence in Afghanistan has hurt their economy and they are only averaging an annual growth rate of 14 percent since 2002.

Afghanistan’s economy, with relation to the currency and natural resources, has not been stable throughout its existence. According to Kevin Whitelaw, their GDP is three billion (1991 est.), purchasing parity power (1999 est.) is twenty-one billion, and natural resources include: natural gas, oil, coal, copper, chomite, talc, barites, sulfur, lead, zinc, iron, salt, precious, and semiprecious stones (Whitelaw). Agriculture takes up a majority of Afghanistan’s GDP which produces wheat, corn, barley, rice, cotton, fruit, nuts, karakul pelts, wool, and mutton. Their industry is composed of the production of small scale textiles, soap, furniture, shoes, fertilizer, cement, carpets, natural gas, precious, and semiprecious gemstones. In the 1930’s, the government created banks, introduced paper money, established a university, expanded school systems, and sent students abroad for education. In the 1970’s there was mixed results because of problems with planning processes, funding, and a shortage of skilled managers and technicians.
The currency currently being used is called the Afghani. There are many problems surrounding this currency due to individual printing in different parts of the country. The Afghani has an inflation rate that fluctuates often. According to Kevin Whitelaw, the market rate during much of 2001 for each currency exceeded 50,000 Afghanis=U.S. $1 (Whitelaw). Afghanistan citizens do not take old currency out of circulation, dating all the way back to 1930, like banks do here in America. There are other foreign currencies often used as legal tender including the Rupee from Pakistan. Due to the Soviet invasion and ongoing civil war the GDP has substantially fallen over the past 20 years because of the loss of labor, capital, and disruption of trade and transport. The idea of new currency that is supported by US$220 million in gold from the U.S. Federal Reserve Bank could diminish warlords’ power in Afghanistan. When the money is destroyed citizens will receive a small number of bills at one time. This will devalue Rabbani’s money and counterfeiters will have a difficult time keeping up with the new designs such as silver tabbed notes. In the past warlords’ were able to simply produce their own money which caused anarchy among the country. This may not stop the counterfeiting but it sure will slow the process down. The only problem with this concept is convincing citizens to put their money in the bank. There are banks available in Kabul that reopened recently. Most Afghans initially hide their money or purchase gold and Rupees, and then hide those items. Another improvement to be made to Afghanistan is the introduction of taxes. Taxation has never been a part of Afghanistan government and will be hard to introduce because of the lack of competent civil service.

Afghanistan considers itself as an “Islamic state.” Its government has been full of corruption and violence since its beginning. It wasn’t until 2001 that an agreement was reached to introduce an interim government that will hopefully flourish into a permanent government. Interim Authority only sustained power for six months and in 2002 decided to develop a structure of Transitional Authority which was later named the Transitional Islamic State of Afghanistan (TISA). TISAs authority was very weak outside of the Capital of Kabul and had difficulties when trying to deliver the social services needed within communities. With much support from the Coalition Afghanistan has secured its borders, which has led to internal order rising. Afghanistan has been training a National Army (ANA) and police officers. This can bring much of the needed order to their country.

In the mid 1980s, there was an Afghan resistance movement aided by the United States, Saudi Arabia, Pakistan and many others that exacted a high price from the Soviets. In 1988 the governments of Pakistan and Afghanistan signed an agreement settling the major differences between Afghanistan and the Soviets which took six years. This agreement was the Geneva Accords which included five major documents and called for the United States and Soviet to not interfere with the internal affairs within Afghanistan and Pakistan, the return of refugees without fear of persecution, and total withdraw of the Soviet from Afghanistan. The casualties of this ongoing war were about 14,500 Soviet and about one million Afghans between the time of 1979 and 1989. The mujahidin opposed the Geneva Accords and as a result the civil war continued within the country. This problem increased when Gen. Abdul Rashid Dostam, a mujahidin, took over Kabul and had control over the central government. Without Soviet occupation the inner problems which include ethnic, clan, religious, and personality differences, exploded in Afghanistan. Heavy fighting broke out in Kabul when those who were loyal to President Rabbani opposed those who were loyal to Gulbuddin. When Rabbani stayed in office he appointed Hekmatyar as Prime Minister, which ended up not being very successful. The Jalalabad Accord was implemented which called for militias’ to be disarmed but of course was not strictly enforced. In 1994, Dostam switched sides and caused many casualties within Kabul and Northern provinces. The fighting led to more displaced people and refugees. This in turn caused more anarchy and warlords’ took power over the entire country.
The rise of Taliban is a significant issue in Afghanistan. According to Kevin Whitelaw, the name Talib itself means pupil (Whitelaw). This was a cover for what would turn into one of the biggest terror groups known today. In the beginning this group was designed to remove warlords, provide order, and impose Islam into the country. It was highly supported by Pakistan, who was in hopes of peace in Afghanistan. In 1994 the Taliban was able to overthrow the city of Kandahar from local warlords’ and increased control throughout Afghanistan. According to Whitelaw, by the end of 1998, the Taliban occupied about 90% of the country, limiting the opposition largely to a small largely Tajik corner in the northeast and the Panjshir valley (Whitelaw). The Taliban’s’ initiation of the extreme interpretation of Islam in Afghanistan created more problems on top of all the others. The problems included human rights violations especially against women and girls. Women were not allowed to work outside the home or pursue an education. Women are required to wear a burka and are not allowed to leave their home without a male relative. The Taliban proceeded to destroy anything that represented Afghanistan’s’ pre-Islamic past, even destructing statues of Buddha. The Taliban took it’s turn for the worse when they adopted Osama Bin Laden, who provided a base for terrorist organization, into the group. Bin Laden was powerful in that he provided financial and political support to the group to increase their presence in Afghanistan. Bin Laden and his Al Qaeda group were responsible for numerous bombings including that of the U.S. embassies in Nairobi and Dar Es Salaam and the September 11th attacks on the Twin Towers. The Taliban refused to get rid of Bin Laden and his group which led to the United States and its partners to enact a campaign to target terrorist facilities, the Taliban’s military and political assets. The United States Air Force went forward and bombed terrorist’s camps on 2001. After this occurred the Taliban disintegrated and Kabul fell. Afghans that opposed the Taliban met and agreed on a political process to restore stability and governance. They came up with TISA which has the primary function of writing a constitution and to hold elections.

Afghanistan’s main exports are natural gas and dried out fruit. Their other exports include carpets, fresh fruit, wool, and cotton. Afghanistan imports food, motor vehicles, petroleum products, and textiles. Most of the foreign trade is controlled by the government or government-controlled monopolies. Trade only accounts for a small portion of the Afghanistan’s’ economy. According to “Afghanistan Facts”, the leading purchasers of Afghan products, in addition to the USSR and the former Soviet republics, have been Pakistan, Great Britain, Germany, and India (“Afghanistan Facts”). Afghanistan does not trade with the United States often. In the 1970s the Soviets estimated that, according to Kevin Whitelaw, Afghanistan had as much as five trillion cubic feet of natural gas, 95 million barrels of oil and condensate reserves, and over 400 million tons in coal (Whitelaw). The conflicting issues, rough terrain, and inadequate transportation make the mining of these resources very difficult. Trade in goods that were smuggled into Pakistan was a major source of revenue for Afghan regimes and is very important to the economy. Many of the goods were originated in Pakistan which made goods free of duty. Pakistan, in 2000, tightened the regulations on what would be allowed to be traded with no duty. This ended up providing jobs to Afghans on both sides of the Durand Line .
There a significant problems with transportation in Afghanistan. They do not have any functioning railways which makes it difficult to get around. There is a river however that allows barge traffic along the borders of Turkmenistan, Uzbekistan, and Tajikistan. There are busses and trucks that provide public transportation, but only offer a small space for multiple passengers. There is one major highway that goes along the main cities but is in much need for reconstruction. According to Kevin Whitelaw, the poor state of the Afghan transportation and communication networks has further fragmented and hobbles the struggling economy (Whitelaw). There are only 48 airports in Afghanistan in which only half have paved runways. Camels and other pack animals are used frequently for delivering goods. The energy used in Afghanistan mostly comes from firewood and the rest comes from gas, oil, and hydroelectricity. There dams stationed in four cities that are also used to store water for irrigation. The Afghanistan economy is very much centered around agriculture, even though only 12% of its total land is arable and less than 6% is currently is cultivated. The agricultural production process is often hindered by erratic winter snows and spring rains for water. The agriculture production took a significant hit when there was a three year drought, as well as the continued fighting inside of the country. According to Kevin Whitelaw, recent studies indicate that agricultural production and livestock numbers are only sufficient to feed about half of Afghanistan’s population (Whitelaw). Shortages are heavily due to transportation, lack of government, and war. Opium is prevalent in Afghanistan, and the Taliban earned about forty million dollars a year for exporting. Afghanistan was the world’s largest producer of raw opium which is easy to cultivate and transport. Opium is refined into heroin and distributed to addicts all over. TISA wants to eliminate the narcotics economy that is flourishing.
The labor force is another issue causing difficulties in Afghanistan. Over the centuries, citizens have been able to adapt to these conditions by farming or herding. Citizens are struggling to feed their families and these trades are limited in respect to ecological, economic, and political factors. According to William Byrd and John Wall, in 1993 the total labor force was estimated to be about 6.6 million (Byrd and Wall). Widespread unemployment and a lack of skilled workers and administrators are the most important problems facing Afghanistan’s economy.

There have been numerous attempts to reform Afghanistan into a stable country but it seems that it will take more time. To bring in more foreign currency the government would like to ensure enough stability for tourism business. The roads are full of potholes, boulders, and bandits that make it scary for people to want to travel there. The government is also putting money into restoring ancient Muslim religious shrines to attract tourists. This is a small step into recovering Afghanistan’s economy and much more is needed. To avoid going back into warfare Afghanistan will need about US$20 billion in aid for the next five years. According to William Byrd and John Wall, the economic recovery was concentrated in areas of the country taken over relatively early by the Taliban (who now control about 90% of the country); they removed barriers to trade and restored a certain degree of order (Byrd and Wall).

With so many problems occurring in Afghanistan it is almost impossible to get them on the right track. The attempts to structure a functional government date all the way back to the 1930s. People thought that the problem was with the Soviet presence in Afghanistan, but after they left the country it has been on a downward spiral. The only hope of developing a structured economy in Afghanistan would be to incorporate a government that will last, help the labor force, and construct a developed trade relations agreement. Stopping the conflict in this country has proved to be difficult, but one must continue to try to fix the problem because problems do not fix themselves.

Works Cited:

“Afghanistan Facts.” Afghanistan’s Web Site. 2009. Afghanistan. 5 Nov. 2009
“Afghanistan Government.” Afghanistan Journey to the land of Afghans. 2009. SAARC Tourism. 6 Nov. 2009
Byrd, William and Wall, John. “Brief Overview of Afghanistan’s Economy.” 5 Oct. 2001. Mafhoum. 6 Nov. 2009
“Burka” 2009. 6 Nov. 2009
Hubbard, Glenn and O’Brien Anthony. Macroeconomics. New York: Prentice Hall, 2009.
“The Texas Almanac.” Texas’ Natural Environment. 2009. The Texas State Historical Association. 6 Nov. 2009
Whitelaw, Kevin “A Mixed Report in Afghanistan.” U.S. News & World Report 142.18 (2007): 30. Academic Search Complete. EBSCO. Web. 15 Nov. 2009.