Afghanistan’s economy could shrink by up to 30% following Taliban’s takeover: IMF

Afghanistan’s gross domestic product could see a decline of up to 30% after the Taliban took power, the IMF said in its latest regional economic report.

Jihad Azur, director of the IMF’s branch in the Middle East and Central Asia, said the country’s situation worsened even before Kabul fell.

“They faced more than one shock-drought, Covid,” he told CNBC’s Hadley Gamble. “Therefore, what we predict and fear is a sharp contraction.”

The report also noted that non-humanitarian aid has been halted, foreign assets mostly frozen, and Afghan banks have been crippled by cash shortages after the Taliban returned to power.

“These shocks could cause a 20-30 percent decline in production with declining imports, depressing Afghan and accelerating inflation,” the report said. “The resulting decline in living standards threatens to push millions into poverty and could lead to a humanitarian crisis.”

TOPSHOT – A man carries bushes on a wheelbarrow in the Injil district of Herat province, Afghanistan on October 18, 2021.

Hoshang Hashimi HASHIMI | AFP | Getty Images

In addition, “the unrest is provoking an increase in Afghan refugees”, which could strain the public resources of the refugee host countries, put pressure on the labor market and create social tensions, the IMF said, highlighting the need for assistance from the international community.

The G-20 promised last week to help tackle the crisis in Afghanistan.

Azur said the IMF welcomed the upscale humanitarian aid of the international community and said there should be a focus on education and health services.

Economic views

The International Monetary Fund also gradually raised its outlook for the Middle East and the North Africa region.

It expects real GDP to grow by 4.1% in 2021 and 2022, an increase of 0.1 percentage points and 0.4 percentage points respectively compared to the April projection.

In the Caucasus and Central Asia, real GDP is expected to grow by 4.3% in 2021 and 4.1% in 2022.

But the recoveries remain “divergent” and will be shaped by several factors, including Covid-19 vaccination rates and high oil prices, the IMF predicts.

“Not all countries are growing at the same rate, and problems are still looming on the horizon,” Azur said.

Wealthy countries in the region have been able to quickly vaccinate their populations against Covid, while lower-income countries have faced “delayed and uneven” deliveries of vaccines.

Those with higher vaccination rates will be more resistant to the emergence of new variants, the report said.

“We will not see a good level of vaccination until mid-2022, which will also hurt regional growth completely,” Azur said.

He also said that oil prices will benefit exporters but increase inflation, which will hurt low incomes.

Futures on US crude oil rose 0.7% to $ 83.02 per share. barrel, while futures on Brent oil rose 0.56% to trade at $ 84.80 per barrel. barrel Tuesday afternoon in Asia.


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