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Analysis

Afghanistan Foreign Trade under Taliban

Wednesday 30 November 2022
Afghanistan Foreign Trade under Taliban

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Alwaght- With the assumption of power by the Taliban in Afghanistan, the country went through an economic misery represented by unbridled inflation in food prices, slump in the national currency, negative growth rates, and tangible drop in the foreign currency inflows. 

A mix of sanctions, end of international aids, and migration of hundreds of thousands of citizens led to economy shrinking by 30 percent since Taliban takeover in August 2021. The UN Development Program estimates that since last year, Afghanistan's economy lost around $5 billion. Also, due to large-scale unemployment, about 50 percent of the population suffers from foot insecurity crisis. 

In addition to cutting off their economic aid, the Western countries do not allow the Taliban to access foreign currency of the country abroad. Half of Afghanistan's assets have been frozen since Taliban takeover by a US court order filed by 9/11 victims and their families. Washington recently transferred the other half to the Swiss Bank for International Settlements to stabilize the Afghanistan's economy while avoiding any interaction with the Taliban. Experts say the mechanism of these aids remains unclear and will probably be far from the reach of the Afghan people. 

On the other hand, banks in Afghanistan are unable to make international transfers to facilitate national trade as the country is disconnected from the global financial system. Every day, customers line up at 5 a.m. to withdraw $400 a week, a limit imposed by the Taliban. All banks have sharply reduced their activities and only a few major cities of Afghanistan have active branches left. 

Still, the Taliban government is hopeful to reactivate its foreign trade and ease the raging crisis represented by inflation, unemployment, downturn in per capita income and GDP by bolstering trade with such powers as China and India and by using Afghanistan's geostrategic position as a gate to Eurasia. 

Taliban's Deputy Minister of Industry and Trade Qudratullah Jamal said that the Islamic Emirate, and especially the Ministry of Industry and Trade, “stands shoulder to shoulder” with businessmen and will solve any problem with the consultation of businesspeople. 

Data provided by Ministry of Finance show that Afghanistan has exported more than 1$ billion of goods in the last seven months. According to the information of the Ministry of Industry and Trade, in the first quarter of this year, Afghanistan exported goods worth more than $330 million to other countries, which is expected to be $1.3 billion in full year. 

Most of Afghanistan's exports are coal and fresh fruit. Recently, a large shipment of these products went to Europe. 

Sanaullah Navid, Taliban's customs director general, on November 26 said that 120 tons of saffron and dried fruits were headed to Europe. Worth of $2 million, this shipment goes to Germany, the Netherlands, Belgium, and Austria. 

“While Afghanistan is suffering from economic challenges, unemployment, and poverty, and its economy is dependent on foreign aid, this is good news," he said. 

Also, last month, 20 tons of pine nuts ( which are also called pignoli or pinon) were exported to China, 12 tons worth $400,000 to Germany, and about more 75 tons of were exported to China through the air corridor. Afghanistan's annual pine seed exports is estimated at $2 million. 

The statistics of the Ministry of Industry and Trade show that a large part of the commercial goods of the country have been exported to Pakistan. 

According to the latest report of the Special Inspector General for Afghanistan Reconstruction (SIGAR) in November, Afghanistan recorded a trade surplus of $79 million with Pakistan from July 2021 to June 2022. During this period, total exports to Pakistan were worth &$796.4 million, while Pakistan's exports to Afghanistan were $717 million. 

According to the SIGAR report, most of Afghanistan's exports to Pakistan are minerals like coal and oil. Other export items of Afghanistan are textile products and foodstuffs such as fruits and vegetables. The main imports are food products, followed by pharmaceutical products and wood. In this report, quoting the Ministry of Mines of the Taliban, it is stated that Afghanistan exports about 10,000 tons of coal to Pakistan daily. Coal is transported to Pakistan by hundreds of trucks daily through three dedicated border crossings, and both sides are reportedly planning to allow more hours for customs operations instead of the current 12, the SIGAR report said. 

The Taliban announced that they are looking to diversify the business partners of this country. On September 27, the Taliban announced that it had signed an interim agreement with Russia for the annual import of one million tons of gasoline, one million tons of diesel, 500,000 tons of LNG, and two million tons of wheat. The agreement will run for an unspecified trial period, after which a contract is expected to be signed if the parties agree, an official said. 

Earlier this month, a Taliban delegation traveled to Russia to discuss a deal to exchange Russian crude oil products with Afghan products. Minister of Industry and Trade of the Taliban Nuruddin Aziz told Russian state media in August that "since Russia is a friendly country, we have reached an agreement with it to produce oil. 

Significance of reopening air corridors 

Part of Afghanistan's foreign trade was done by the air corridor under government of Ashraf Ghani, but when the Taliban assumed to power, the export of goods by air was stopped. Analysts believe that by reopening of air routes, the government can better take advantage of existing economic opportunities and establish new economic relations with other countries. 

The Ministry of Trade and Industry in later October talked about plans to reopen air corridors to boost trade with India. Afghanistan-India trade has been almost on hold since 2021, and reopening the air route was an important step forwards. The air route was launched three years ago. Afghanistan air route to China was also opened in 2018 under Ghani government. 

Khan Jan Alokozay, the member of Afghanistan Chamber of Trade and Investment governing board, holds that reopening the Afghanistan-India air route positively influences Afghanistan. A major part of Afghanistan exports to India include nuts, saffron, fig, and medical plans. He added that their trade volume is now between $600 million to $800 million. 

The Taliban have high hopes of expanding trade with neighboring countries, especially India and China as two emerging powers, so that they can settle economic problems. But in the absence of international recognition and lack of foreign investment, Afghanistan's foreign trade machine will advance slower than what the government expects. 

 

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Afghanistan Taliban Crisis Economy Sanctions Trade

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