‘Brink of Collapse’: How Frozen Assets & Halted Foreign Aid Are Impacting the Afghan People

Even before the Taliban took over Afghanistan in mid-August, the country was facing a drought, the ravages of the COVID pandemic, and mass displacement driven by the conflict between the Taliban and the Afghan army, with civilian casualties reaching record levels.

Under the now-collapsed, Western-backed government led by President Ashraf Ghani, 43% of Afghanistan’s GDP came from foreign aid, according to the World Bank. About 75% of public spending was funded by foreign aid grants. Ninety percent of Afghans lived on an income of less than $2 a day, and an estimated 18.4 million people — nearly half the country’s population — were in need of humanitarian aid.

And then came the freezing of assets and international aid, a move intended to halt the flow of money to the Taliban that risks making collateral victims of the country’s people — and one that reportedly came up at talks between the United States and the Taliban last weekend in Doha, Qatar.

Neither party has announced any agreements stemming from those talks.

With the people of Afghanistan facing an uncertain future, as reported by correspondent Najibullah Quraishi in the upcoming FRONTLINE documentary Taliban Takeover, aid workers and experts say humanitarian measures taken so far by the U.S. and the international community are not sufficient to offset what could amount to a total breakdown of public services.
‘Make or Break Moment’

Directly after the Taliban took power on Aug. 15, the U.S. blocked access to billions of dollars in Afghan central bank reserves held in the U.S. On Aug. 17, the European Union suspended development funding — long-term aid that supported projects ranging from healthcare to agriculture and law enforcement — to Afghanistan but said it would maintain humanitarian aid and observe what kind of government the Taliban formed. Germany and Finland announced a halt to development aid the same day.

On Aug. 18, the International Monetary Fund paused the release of more than $400 million in funds, citing “a lack of clarity within the international community regarding recognition of a government in Afghanistan.” On Aug. 24, the World Bank also stopped disbursing aid money earmarked for the country.

The asset and aid freezes were meant to keep money out of the Taliban’s hands until more was known about how the group would govern and how it would treat Afghan citizens.

But the effects have been felt far beyond Taliban leadership.

“The freezing of the national reserves and the drying up of all types of aid to the country has sent financial shockwaves in the country, and the economy is on the brink of collapse,” said Ibraheem Bahiss, a consultant on Afghanistan with the International Crisis Group, a nonprofit that focuses on preventing and resolving armed conflicts.

On Monday, United Nations Secretary General Antonio Guterres warned that this was a “make or break moment” for Afghanistan, saying, “Right now, with assets frozen and with development aid paused, the economy is breaking down.” He called on the world to inject liquidity into the Afghan economy to prevent its collapse, while avoiding channeling cash through the Taliban. Urging the Taliban to uphold their promises to protect the rights of all Afghans, especially women and girls, Guterres said, “the main responsibility for finding a way back from the abyss lies with those who are now in charge in Afghanistan.”

Over the weekend, the U.S. and Taliban held their first face-to-face talks since the August takeover. U.S. officials said the meeting was a “pragmatic” engagement and “not about granting recognition or conferring legitimacy” to the Taliban. Topics discussed included the delivery of U.S. humanitarian aid directly to the Afghan people, and according to Al Jazeera, the Taliban delegation sought financial assistance and the unfreezing of assets.

While neither side has said whether any agreements were reached, Ned Price, a spokesperson for the U.S. State Department, said the discussions were “candid and professional with the U.S. delegation reiterating that the Taliban will be judged on its actions, not only its words.”
‘Huge Ramifications for Everyday Afghans’

Even for Afghans who have money, the freeze on Afghan central bank reserves has made accessing cash difficult. According to the former acting governor of the central bank, around $7 billion of the bank’s $9 billion in foreign reserves are held by the Federal Reserve Bank of New York. The former banking official said in August that the Taliban likely had access to 0.1% to 0.2% of the country’s international reserves.

The economic situation has had “huge ramifications for everyday Afghans, for normal Afghans who are not political in any sense, in trying to go about their lives,” Bahiss said. “They are struggling. They’re trying to sell household commodities to find any type of money to put food on the table.”

According to the U.N.’s World Food Program, as of August, 14 million people in Afghanistan did not have enough to eat. Also in August, UNICEF’s executive director said an estimated 1 million Afghan children were projected to suffer from severe acute malnutrition in 2021 and could die without treatment. Last month, the World Food Program conducted surveys showing that only 5% of Afghan families have adequate food every day and that, for the first time, people living in urban areas are experiencing food insecurity on par with rural areas.

“The situation is also dire among the middle classes, who used to be able to feed their families every day,” WFP staff wrote.

The cash shortage has also impacted the work of humanitarian aid organizations, such as the International Rescue Committee, which remains on the ground in Afghanistan.

Vicki Aken, the Kabul-based country director for the IRC in Afghanistan, said it took about a month from when the U.S. froze Afghan reserves for the IRC to figure out how to get cash to pay its employees. “Our own staff were struggling to buy food. And these are people that have decent jobs,” Aken said. “So, you can only imagine, for the 90% of the population that was living on less than $2 a day, how they were getting any money at all to buy food.”

Karsten Noko, field coordinator in Kunduz, Afghanistan, for the medical aid group Doctors Without Borders (also known as Médecins Sans Frontières, or MSF) said the liquidity crisis has made running hospitals “extremely challenging,” from buying fuel needed for generators to providing food for patients and paying staff. “At the end of the month, we need to pay our colleagues who are working,” Noko said. “They need their salaries to survive.”
‘Stopgap Measures’

When the Taliban seized power in August, decades-old sanctions applied to the group and its leadership by the United States and the United Nations complicated any financial transactions with the new de facto government.

The Taliban were aware of the ramifications but still named sanctioned individuals to government posts, said Rina Amiri, who directs the Afghanistan and Regional Policy Initiative at New York University’s Center on International Cooperation.

“By doing that, they effectively sanctioned the Afghan economy and the population as a whole,” Amiri said, betting that “the international community will be under pressure and will ultimately have to back down because of broad concern about the Afghan population.”

On Sept. 24, the U.S. Treasury issued general licenses that would allow aid groups, including the U.N. and NGOs, to deliver humanitarian aid — food, medicine and services that provide “basic human needs” — to people in Afghanistan, even while the U.S. maintains sanctions on the Taliban.

Also in September, the U.S. pledged $64 million in new humanitarian assistance to Afghanistan. Secretary of State Antony Blinken said the aid, which would be routed through NGOs and U.N. agencies providing relief, would “respond to the needs generated by recent conflict and compounded by the severe drought and other natural disasters, and the ongoing COVID-19 pandemic.”

And on Tuesday, ahead of a Group of 20 summit focused on Afghanistan, the European Union pledged $1.16 billion in humanitarian aid and “targeted support for other basic needs” for Afghanistan and neighboring countries. European Commission President Ursula von der Leyen said the Taliban would need to meet certain benchmarks before halted development aid could resume.

In Amiri’s view, “Humanitarian aid will not be sufficient to prevent the collapse of the Afghan economy” and the public service system that was built over the course of 20 years.

Aken agreed: “Longer term, humanitarians can provide stopgap measures, but we’re never going to be a replacement for long-term healthcare or for the government’s education system.”

Foreign aid previously funded much of Afghanistan’s public sector — including half of the country’s 2020 spending on education, according to a recent report by UNESCO, and large portions of its healthcare system, which relied on $600 million from the World Bank and others.

Only 17% of the health facilities previously supported by the World Bank system were fully functional as of Sept. 22, according to the World Health Organization, and the breakdown was having a ripple effect on essential healthcare and vaccination efforts. A quarter of the hospitals dealing with COVID-19 had closed, and “all aspects of the COVID-19 response have dropped,” per the WHO.

MSF’s Noko said that what organizations like his do is try to plug holes in healthcare infrastructure. “But at the moment, we find there’s not a hole that exists, because there’s nothing left.” No single organization would be able to replace a country’s healthcare system, he said: “We neither have the capacity nor the knowledge to do something like that.”

As for potential costs, if “the entire system is allowed to collapse, it means that many people will die unnecessarily,” he said.

On Oct. 6, the U.N. Development Program said it would take over managing the previously World Bank-supported healthcare system for the month of October with $15 million from the Global Fund, a partnership of public and private donors around the world. According to The Washington Post, the UNDP’s Asia-Pacific director said this was only a “temporary lifeline.”
‘Very Hard Choices’

While trying to help Afghans where they can, international aid groups like MSF and IRC must negotiate with the Taliban to access communities in need, just as they did in Taliban-held areas before the group took over the country.

“We’ve been able to meet with several ministries, and they have been welcoming of international aid agencies and have been asking for direct services,” Aken said. She urged the international community to exempt NGOs from sanctions and keep up diplomatic engagement with the Taliban, so aid groups aren’t left to negotiate on their own.

Both Aken and Noko stressed the uncertainty of the current moment and the future. Among the questions yet to be answered is whether Aken and Noko’s Afghan colleagues, especially women, will be able to continue to work. The U.S. State Department said it raised the issue of Afghan women and girls participating in all aspects of society during last weekend’s talks with the Taliban.

Aken said it’s important for aid agencies in Afghanistan to be able to employ female staff who can reach women and girls who are in need of aid in “a culturally appropriate way.”

Amiri also sees another opportunity to include women and minorities who were marginalized by the Taliban as it formed a government. She suggests naming women, including Afghan women, to positions of power in any organizations charged with administering aid to the country, which would “empower those that have been shut out by the Taliban and make [the Taliban] contend with these very hard choices.”

Countries and institutions that previously supported the Afghan government with funding also have decisions to make. It is unclear if and when the U.S. will unfreeze Afghan central bank assets. As of Sept. 3, a spokesperson for the Treasury Department told Reuters, “As we maintain our commitment to the Afghan people, we have not reduced sanctions pressure on Taliban leaders or the significant restrictions on their access to the international financial system.”

Likewise, the World Bank, IMF and others haven’t indicated if or when they will resume halted development aid. Acknowledging on Oct. 3 that “the economic situation is dire, which risks worsening the unfolding humanitarian crisis,” the EU’s foreign policy chief wrote that the EU had increased humanitarian aid but also noted that assistance in areas like health and education would depend “on the behavior of the new Afghan regime.” Amiri said political considerations in donor countries and the Taliban’s ongoing treatment of women hamper such a restart.

But Amiri noted, “No one gains the moral high ground from inflicting more suffering on the Afghan population.”