News Digest

As Nato war ends, Afghanistan faces economic time bomb

The Taliban insurgency may still be raging but the poor state of the economy could pose a bigger threat to Afghanistan’s long-term viability, and huge mineral reserves are unlikely to offer a quick fix. After a decade of near double-digit growth, the Afghan economy has stalled in the last two years, hit by a disputed presidential election and the end of NATO’s combat mission, which formally closed on Sunday. Now the tricky political and security transitions are joined by an equally tough economic hurdle. A recent survey of more than 9,000 Afghans by the Asia Foundation, a U.S. NGO, found unemployment and a weak economy were the biggest concerns, beating insecurity and corruption. The fact is not lost on the moneychangers who deal in “hawala” transactions, an informal system of transferring funds internationally seen as a barometer of economic confidence.

As the withdrawal got nearer, investors in Afghanistan moved their money abroad - they transferred it to Dubai, China, Pakistan, India, Turkey.

Omiad Khan, an Afghan moneychanger

The Kabul government is expecting income this year of around $1.8 billion dollars — less than the value of Afghanistan’s opium crop, which feeds the coffers of the Taliban. Without the $8 billion a year in international aid currently guaranteed until at least 2016, the Afghan government is unable to pay the salaries of the 350,000 soldiers and police on the front line of battling the Taliban. However, Afghanistan’s NATO decade has brought huge economic growth - GDP has risen from $2.5 billion in 2001 to more than $20 billion, according to the World Bank, boosted by transport, construction, telecoms and media. One sector which has caught investors’ eyes more than any other is mining. The US Geological Survey has estimated the value of Afghanistan’s mineral deposits, including gold, iron and copper, at between one and three trillion dollars. This could in theory free the Afghan government of its reliance on foreign aid, but there is a dizzying list of obstacles to exploiting this potential.