As Afghanistan grapples with a banking system on the verge of collapse and significant erosion of women’s rights, Economic recovery hinges on international support for boosting productivity and reinstating women’s rights, states UN Development Programme (UNDP).
AFGHANISTAN; BLEAK SOCIO-ECONOMIC LANDSCAPE SINCE THE TALIBAN’S RETURN
Since the Taliban’s resurgence in August 2021, socio-economic conditions in Afghanistan have taken a downturn. In its report titled “Two Years in Review: Changes in Afghan Economy, Households and Cross Cutting Sectors”, the UNDP highlights the alarming 27% shrinkage in the economy since 2020, with particular concern over the collapsing banking system and restrictions on trade, commerce, and foreign investment.
AFGHANISTAN; STABILIZING AT A LOW LEVEL: CHALLENGES AND OBSTACLES
Afghanistan’s economy, after the cumulative shrinkage, seems to be stabilizing at a remarkably low level of activity. The report attributes this to restrictions on the banking sector, disruptions in trade, weakened public institutions, and the absence of foreign investment and donor support, especially in crucial sectors like agriculture and manufacturing.
AFGHANISTAN; WOMEN’S RIGHTS: A MAJOR AREA OF CONCERN
One of the most distressing aspects highlighted in the report is the erosion of women’s rights since the Taliban’s return to power. The restrictions have not only affected women’s access to public spaces but have also led to decreased food consumption, greater income inequality, and a significant drop in women’s participation across all sectors.
SUBSISTENCE-INSECURITY INDEX (SII): MEASURING DEPRIVATION
Introduced in the report, the Subsistence-Insecurity Index (SII) reveals that nearly 70% of Afghans are unable to meet their basic needs for food, healthcare, employment, and other daily requirements. This index provides a comprehensive view of deprivation using 17 non-monetary indicators across three dimensions.
DECLINE IN FOREIGN AID: A LOOMING CHALLENGE
International assistance has been crucial in preventing starvation, supporting livelihoods, and averting economic collapse. However, the report notes a decline in aid flows at a time when the majority of the population remains highly vulnerable. Stephen Rodriques, UNDP Resident Representative, stresses the need for complementary investments to stimulate economic recovery.
“International assistance has helped save millions of Afghans from starvation, sustained delivery of essential social services, and ensured the continuation of hundreds of thousands of livelihoods,” said Stephen Rodriques, UNDP Resident Representative in Afghanistan. “However, humanitarian assistance is declining at a time when an overwhelming majority of the Afghan population remain highly vulnerable, and subsistence-insecurities remain very high. The assistance and efforts require complementary investment to stimulate the recovery of the private sector, financial system, and overall production capacity of the economy.”
WOMEN’S ECONOMIC PARTICIPATION: A PRIORITY
To address the challenges in the banking system, the UNDP emphasizes the importance of supporting the microfinance sector, crucial for women-led micro and small enterprises. The report underscores the need to prioritize women’s economic participation, advocating for policies that empower women and contribute to sustainable economic growth.
FOCUS ON LASTING RECOVERY AND VULNERABLE POPULATIONS
The UNDP calls for a comprehensive approach that integrates local economic development, builds resilience against shocks, and fosters robust private sector-led growth. Emphasis is placed on lasting recovery and prioritizing the needs of all vulnerable Afghans, with a specific focus on women and girls.
KEY FINDINGS
- International assistance since the regime change in August 2021 has saved millions of people from starvation and helped prevent a total economic collapse. This assistance must increasingly be complemented by investments in robust, private-sector led economic growth that supports livelihoods, creates jobs, and raises household incomes. This is the only path to sustainable recovery, poverty reduction, and community resilience.
- Although total public employment has not declined significantly, the de facto public institutions, particularly those in the economic sector, continue losing vital technical expertise they need to formulate policy and regulation, create an enabling Environment for growth, and deliver essential services and support to key sectors such as agriculture, industry, finance and commerce.
- The microfinance sector — a major source of financing for start-ups and micro, small, and medium enterprises including women-led businesses — remains crisis-hit, with no immediate signs of recovery. This sector, which is heavily reliant on donor grants, has contracted by over 60 percent in terms of its loan portfolio. The number of branches and share of female clients have also declined significantly. The sector is likely to further atrophy unless swift remedial steps are taken.
- Two years following the change in regime, seven out of ten Afghans are subsistence insecure—that is, they don’t have access to the most basic items such as utilities, cooking items, winter clothing, basic healthcare and coping strategies needed for mere Subsistence. In addition to this, for two successive years, four out of five households were impacted by drought and/or economic shocks.
- The proportion of the population without access to basic necessities needed for subsistence-level living conditions reduced from 85 percent in 2022 to 69 percent in 2023, based on the Subsistence Insecurity Index (SII) which is introduced by this report.
- Women are disproportionately affected by the socio-economic crises, in that their share of employment has nearly halved, decreasing from 11 percent in 2022 to 6 percent this year. On the opposite side, men’s share of employment increased 11 percent, suggesting a gender-based labour substitution. Compared to male-headed households, female-headed households consume a lower quantity of food and put in extra work for income similar to that earned by male-headed households.
- Overall, household living conditions have slightly improved in 2023, due largely to international assistance, as they report accessing better shelter, heating devices, and increased access to electricity provided by the national grid, mainly produced by hydropower. Despite a 76 percent increase in household monthly average real income compared to 2022, more than half of households still have subsistence needs greater than their income.
- The proportion of households that received humanitarian assistance nearly halved in 2023, although more than nine out of ten Afghans identified their highest priorities as food, livelihoods or healthcare. In the face of stagnating or declining humanitarian aid, economic recovery is even more vital to address the priority needs of the Afghan population.
- Despite stability in economic activity at low levels and some improvements in humanitarian conditions in 2023, strong international aid will remain crucial in maintaining stability and achieving sustainable improvements in economic revitalization and people’s living situations. The assistance and efforts require complementary investment to stimulate the recovery of the private sector, financial system, and overall production capacity of the economy.