Looming economic crisis overshadows Afghanistan talks at U.N.

Looming economic crisis overshadows Afghanistan talks at U.N.

Talks between U.S. and global leaders this week underscored intensifying concerns about the fallout from the Taliban’s takeover of Afghanistan, but they produced no consensus on how and when to fully resume vital financial assistance to the country as it plunges deeper into economic crisis.

Secretary of State Antony Blinken discussed the international response to the militant group’s stunning August victory in meetings with senior officials from China, France, Pakistan and other countries on the margins of the United Nations General Assembly.

The Biden administration has promised to continue humanitarian aid to Afghans in need while also outlining criteria that will govern additional financial and diplomatic backing the Taliban government may be granted in the future. Those include steps to contain terrorism, protect women’s rights and facilitate departure from Afghanistan for those whom wish to leave.

“The bottom line is this: Again, the Taliban says that it seeks legitimacy, that it seeks support from the international community; the relationship that it has with the international community is going to be defined by the actions it takes,” Blinken told reporters on Thursday. “That’s what we’re looking for.”

But current and former officials say other donor nations and financial bodies such as the World Bank and International Monetary Fund are waiting on determinations by the Biden administration to inform their own decisions on restarting development aid, which includes funding for crucial services like public health and is now mostly halted.

“The U.S. has extremely important influence on what other Western donors do in Afghanistan,” said William Byrd, a former World Bank official who focuses on Afghanistan at the U.S. Institute of Peace. “My concern with all this diplomacy is that it’s happening slower than the actual economic collapse is likely to happen.”

The New York meetings took place as Afghans come to grips with the Taliban’s return to power after a 20-year war with American, NATO and Afghan government forces. Militant leaders, who say they welcome trade and foreign assistance, are seeking permission to send a representative to the United Nations but were not present this week.

Already less than six weeks after militant fighters entered Kabul, signs of acute economic crisis are multiplying. Following the U.S. Treasury’s decision to freeze nearly $10 billion in Afghan reserves held in New York, local banks have restricted withdrawals. Prices of food and basic goods are rising sharply at a time when many government officials have not been paid for months, and the Taliban victory has thrust hundreds of thousands of Afghan soldiers into joblessness.

These conditions compound a slow-building set of challenges for Afghanistan, including entrenched poverty, drought and the effects of the coronavirus pandemic.

To help avoid a catastrophe, the Treasury Department has issued a license allowing American humanitarian aid to continue, creating a way around legal restrictions that carry the threat of penalties on those who do business with the Taliban and could discourage aid. The humanitarian assistance that officials now hope to continue is supposed to be channeled outside the government, keeping it out of Taliban coffers.

Even so, that leaves millions of dollars in other aid — including funding for farming and medical programs — in limbo. Two decades after outside nations began the effort to transform Afghanistan, the country remains heavily dependent on foreign aid, which prior to the government’s collapse accounted for at least half of state spending.

The World Bank, which administers a massive, internationally backed trust fund that underwrites nutrition, sanitation and other core areas through Afghan ministries, has paused its disbursements to Afghanistan. The International Monetary Fund (IMF), citing a lack of global consensus, has likewise suspended Afghanistan’s access to emergency reserves and halted communications with officials in the country.

A World Bank official said the body was assessing the situation. “We are deeply concerned about the situation in Afghanistan and the impact on the country’s development prospects, especially for women,” said the official, who spoke on the condition of anonymity in accordance with rules set by the World Bank.

Experts say that IMF funding for balance of payments purposes is fairly small but that securing the fund’s “seal of approval” would encourage engagement by the World Bank and other donors.

Byrd said donor countries and international financial organizations would probably remain cautious about resuming funding broader development aid to Afghanistan until the United States does so itself or provides a green light to others. The United States is the World Bank’s largest shareholder.

Peter Maurer, who heads the International Committee of the Red Cross and participated in a Group of 20 meeting this week on Afghanistan, said international action in the next few weeks would be crucial in ensuring the continued functioning of Afghanistan’s health and financial systems.

“Humanitarian programs cannot be a Band-Aid for a broken system,” he said.

Some within the U.S. government are urging the Biden administration to embrace greater engagement with the Taliban, which so far has been limited largely to coordinating evacuations. They argue the United States could miss an opportunity to exert greater influence over the Taliban’s future government composition and its policies.

As the United States takes a wait-and-see approach, some European nations, including Germany and Britain are expected to reopen their embassies. There are no signs the United States will do the same. Russian and Chinese diplomats have remained in Kabul.

Blinken said there was broad agreement on the need to hold the Taliban to key conditions as it courts outside aid and legitimacy. “This is not a favor to the international community,” he said. “It’s a basic requirement for a stable and secure Afghanistan.”

According to Scott Worden of the U.S. Institute of Peace, who has worked on Afghanistan issues at the U.S. Agency for International Development and the Special Inspector General for Afghanistan Reconstruction, the administration would face challenges, even if it does decide to broaden assistance to Afghanistan.

Those include navigating legal constraints including the Leahy law, which prohibits the United States from funding foreign security forces that have committed human rights violations.

“Even if you get over your political distaste, there are real legal and administrative obstacles that are going to take many months and if not years to resolve,” he said.

David Lynch contributed to this report.