Over-compliance and misconceptions about the scope of international sanctions have led to severe obstacles for the Afghan business community, including for businesses that import and export food and other essential goods, a new report commissioned by the Norwegian Refugee Council (NRC) has found.
The report, based on in-depth interviews with Afghan businesspeople and other private sector stakeholders, calls on the international community to improve awareness about sanctions and reduce over-compliance. It argues that concrete steps must be taken to address the crippled Afghan economy and ongoing unprecedented humanitarian crisis.
“Humanitarian aid alone cannot meet the needs of the millions of Afghans who have lost their jobs and been forced to take on huge debts and sell their possessions just to be able to buy food needed for survival,” said Neil Turner, NRC’s country director in Afghanistan.
“We must reverse this devastating economic disaster. A stable economy, thriving private sector, and the reintroduction of development programmes are important to complement the work of humanitarian organizations,” he said.
Since the Taliban returned to power in 2021, international actors have pursued political and economic isolation policies towards Afghanistan, in reaction to the Taliban’s increasingly restrictive governance, that have contributed to the current economic crisis and the population’s reliance on humanitarian assistance. More than 28 million people are now on the edge of survival.
There are comprehensive exemptions to the sanctions that should enable the transfer of money in and out of Afghanistan for activities designed to address the basic needs of the population, but banks continue to restrict businesses’ access to financial services despite the exemptions in place. Afghan businesses highlighted that payment instructions for any international bank transaction that mention Afghanistan get blocked, even for transactions for food shipments via the United Nations.
“We need to educate overseas companies and banks that Afghanistan itself is not under sanctions. There is a real lack of understanding about this – particularly among key sectors in our main export and import markets,” said an executive of a large agricultural firm in Afghanistan.
The Taliban’s stance towards women has also led to the loss of many women from the Afghan workforce. These restrictions pose substantial challenges to the Afghan people and the economic prospects of the country as well as serious practical and ethical dilemmas for international donors and aid agencies.
To address the complex political, economic, and social changes since the return to power of the Taliban, NRC calls on major governments, financial institutions, UN agencies and relevant regional actors to urgently convene to establish measures to stabilize and support Afghanistan’s economy for the benefit of all the Afghan people.
“Concrete steps must be agreed to address the barriers faced by critical private sector actors in Afghanistan, including challenges in accessing financial services. On top of this, it’s vital that mechanisms are stepped-up to provide technical assistance to the Afghanistan Central Bank to support its resumption of core functions that are critical to support the Afghan economy, private sector actors, and ultimately the Afghan people who have already endured so much,” added Turner.
Facts and Figures:
• 28 million people, two thirds of Afghanistan’s population will need urgent humanitarian assistance in 2023 to survive. This makes Afghanistan one of the world’s worst humanitarian crises (OCHA).
• The main driver of humanitarian need is the extremely high levels of food insecurity, with nearly 20 million people in Afghanistan acutely food-insecure (IPC 3+), including more than 6 million people on the brink of famine-like conditions in IPC Phase 4 (Emergency). Four million people are acutely malnourished, including 3.2 million children under the age of five (WFP).
• According to the United Nations Development Programme (UNDP), Afghanistan’s real GDP contracted by 20 percent between 2021 to 2022, equating to a loss of $5 billion, which had taken almost ten years to generate. As a consequence, per capita income declined by 14–28 percent and an estimated 700,000 jobs were lost during the same period.
• Banking sector de-risking and overcompliance to sanctions continues to create challenges for private businesses and international banks. In the linked report, one European Bank reportedly needed 40-50 staff members to facilitate one financial transaction to Afghanistan.
• Despite the broad exemptions to sanctions, humanitarian actors continue to face challenges accessing domestic and international banking services for Afghanistan (NRC), and remain mostly reliant on UN cash shipments (UNAMA).
• A recent report by ACAPs demonstrates the Afghani has maintained its stability through foreign currency inflows that are part of humanitarian aid. These inflows have been vital to help stabilize the price volatility of essential food and non-food items, but if jeopardized it will have a serious impact on the stability of the economy and banking sector.