The Darkness under the Lamp (Part 1 of 2)

Last week in Kabul, a young airport security officer began speaking in broken Urdu, sensing that my wife didn‘t speak English. She sheepishly smiled and revealed that she was born in Pakistan but couldn‘t speak Urdu fluently. “What if Pakistan had the same immigration policy as the US or Canada?” I thought to myself, “This girl would have been a Pakistani national.” One thought led to another.

Before I dozed off on my flight to Islamabad, I remembered providing life coaching to Shakeeb Saheb, a 44-year-old graduate of a Madrassa in Karachi. He was slim and slightly built. His polite and thoughtful demeanor stood out. We had sessions until he unexpectedly disappeared, leaving me puzzled as he was very regular.

This was around the time when the Taliban had taken over Kabul on August 15, 2021. The new government faced severe international financial sanctions, the departure of most international humanitarian agencies supporting a population that had faced 42 years of war, the refusal of recognition by the countries of the world, and the freezing of $9.5 billion in assets by the US belonging to the Afghan Central Bank, a significant portion being the deposits of ordinary citizens.

The PBS broadcast network published a report on October 12, 2021, titled *Brink of Collapse: How Frozen Assets & Halted Foreign Aid Are Impacting the Afghan People.* PBS stated that even before the Taliban‘s takeover, Afghanistan was facing a drought, COVID-19, and conflict-driven displacement, causing record civilian casualties. Under the previous government, foreign aid contributed to 43% of GDP and funded 75% of public spending, but many still lived in poverty. The Taliban‘s rise led to The freezing of Afghan Central Bank reserves and suspension of aid pushed the economy to the brink of collapse. It further stated that with millions of Afghans struggling to find enough food, a million Afghan children were facing severe malnutrition.

The urban areas are now experiencing food insecurity, similar to rural regions. UN 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.

Two years later, the Taliban Government has surprised the world. I have traveled thousands of kilometers in urban and remote rural areas for the past year and a half, and by the grace of Allah (SWT), I have witnessed no shortage of food. Yes, there is poverty, but the government‘s hard work to contain inflation has paid off. On August 31, 2023, the World Bank issued a report stating, “The latest official statistics show that year-on-year headline inflation hit -9.1 percent in July 2023, driven by -12.6 percent inflation in food and -5.0 percent in non-food segments.” Pakistan‘s inflation in July 2023 was 28.3 percent. While we suffer in Pakistan, it is good to know that at least 40 million Muslim brothers and sisters across the border are doing much better.

Let us look at inflation in Afghanistan and compare it with Pakistan:

It is a blessing of Allah (SWT) and the new government‘s effectiveness that despite the crippling international financial sanctions listed above, they have brought down inflation to negative, called deflation. Afghanistan has reduced fuel prices by cutting taxes and sourcing oil from Iran. Currently, it is 65 Afghani per liter, down from its highest of 100.15 on August 23, 2021.

Today, petrol is 305.36 Rs./liter in Pakistan and was 144.63 Rs./liter on August 23, 2021. While our fuel prices have increased by 111.13%, Afghanistan has reduced its fuel price by 35% in the same period. You can imagine how this would impact the economic landscape of both countries. Pakistan, dependent on US loans, IMF, and the World Bank, cannot risk taking fuel from Iran, which faces US sanctions. (Please keep in mind that multiple member countries own the IMF and World Bank, but the largest share of votes in the governance of these institutions lies with the US.) Alhamdulillah, Afghanistan doesn‘t have this dependency.

Now let us look at the exchange rate of a dollar to Afghani versus a dollar to Pak Rupee from May 1, 2021, to September 1, 2023, between Afghanistan and Pakistan.

Again, we see the result of an effective monetary policy and its implications. The Government has managed to bring down the currency from 103.73 Afghani (the highest in this period) to 81.12 Afghani currently. Sadly, the comparison of the Rupee speaks volumes about our financial management.

The Afghan Railway Authority (ARA) has agreed with Uzbekistan and Pakistan to build a 573 km Trans-Afghan Railroad to connect the three countries and boost trade. ARA is in charge of road and rail tariffs and constructing a link between Mazar Sharif and Herat. ARA earned Afghani 3.1 billion (PKR 12.9 billion) in the fiscal year ending 2023, while Pakistan Railways lost PKR 24.727 billion in the same time.

The Afghan Government is aggressively pursuing multiple mega projects like the Qosh Tappa Canal. This will use 25% of the Amu Darya (Oxus River), which forms part of Afghanistan’s northern border with Tajikistan, Uzbekistan, and Turkmenistan.

The 285 km canal, when completed, will irrigate 1.35 million acres and create sufficiency in wheat. Worth USD 700 million, it is financed with local sources interest-free, and not a single dollar is borrowed from international lending agencies like the World Bank or the IMF.

A couple of weeks after the Taliban takeover of Kabul, I got a surprise. The new Afghan Government named Mullah Sardar Mohammed Shakeeb as the Ambassador to Pakistan. The mystery of his disappearance had been resolved: he had to leave for Kabul in a hurry to play his part in putting the new Government together. (To be continued)