World Bank Freeze Leaves Afghanistan Bracing for Economic Impact

The World Bank has suspended more than half a billion dollars in aid projects for Afghanistan after the Taliban suddenly reversed their decision to allow all girls to return to school, a move that could further complicate one of the world’s largest humanitarian and economic disasters.

The multilateral financial institution will withhold money for four projects totalling $600 million that would support Afghan education, health, and agriculture, stating that the work was meant to help promote gender parity for access to schooling. The U.S. State Department also decided to cut off meetings with the Taliban at the satellite U.S. mission in the Qatari capital of Doha last week in response to the move.

“The World Bank is deeply concerned about the decision by the interim Taliban administration not to allow Afghan girls to return to secondary school,” a World Bank spokesperson said. The four projects will not be relaunched until there is an agreement between the World Bank and international partners that the goals of the projects can be met amid the current climate in the country.

Most of the 10 former Afghan officials, U.S. lawmakers, aid workers, and experts who spoke to Foreign Policy about the World Bank’s move are worried about the potential economic blowback from the decision in the Taliban-ruled country, where most of the population is in deep poverty and suffering from acute starvation. 

The bank’s decision also speaks to the tricky line that the international community has had to walk since the fall of Kabul last August. U.S. and European nations—none of which formally recognize the Taliban—are having to temper their economic punishments for the Taliban’s increasingly flagrant human rights abuses to prevent the country from tipping closer to complete collapse. And a milder response risks limiting damage to the Taliban, former Afghan officials said. 

“These decisions [on] Afghanistan are like a two-sided sword,” said Aref Dostyar, who was Afghanistan’s consul general in Los Angeles until last month in defiance of Taliban rule. “Each way will hurt unfortunately. In the case of the World Bank, I am not so sure if the Taliban will feel the impact.” 

In fact, the Taliban could be springing a diplomatic trap for the West, Dostyar and other former Afghan officials said, using the decision to suspend women and girls’ education to leverage more concessions out of the United States and Europe. “We still haven’t established if the Taliban banned girls because they are truly implementing their beliefs or if it is some kind of a strategy to argue that they would moderate their policies in return for asks like recognition and flow of aid,” he added. 

Other former Afghan officials went so far as to welcome the World Bank’s decision, which comes on top of the international lender’s move to freeze $1.2 billion in Afghan assets after the Taliban takeover of Kabul last August. “The Taliban should be punished because of what they are doing,” said Zelgai Sajad, the former Afghan consul general in New York. “If they receive money from international organizations and countries unconditionally, [the Taliban] will put more restrictions on the people of Afghanistan.” 

Afghanistan has long been deeply reliant on international assistance. At one point during the two-decade U.S.-led war in the country, nearly 80 percent of Afghanistan’s government budget was funded by foreign donors, far more than the fledgling Western-style bureaucracy could absorb. 

The shock of switching off the flow of U.S. and European aid after more than two decades has left the war-torn country in near-total economic isolation.

The shock of switching off the flow of U.S. and European aid after more than two decades—including international freezes of Afghanistan’s central bank funds—has left the war-torn country in near-total economic isolation, some experts believe. And after the World Bank agreed last month to release trust funds used to provide for health, education, salaries for civil servants, and food security—helping to inject liquidity into the beleaguered Afghan economy—some aid groups who pushed for that move are worried that the new freeze will deepen the economic freefall. 

There is also fear that the World Bank’s decision could further hurt women and girls impacted by the Taliban’s decision to cut off education. Some families have even reportedly resorted to marrying off or selling young girls into child labor to pay the bills since the militant group took power. 

“The economic crisis will continue to deteriorate without international intervention with severe impacts on Afghans, including and especially women and girls,” said Amanda Catanzano, a senior director at the International Rescue Committee. “Ordinary Afghans, including women and girls, should not be denied access to essential health services due to positions taken by the Taliban.” 

But since the Taliban’s sweep of the capital, international donors have said that they will not work with the government out of fear of emboldening the militant group’s brutal Islamist rule, opting instead to work directly with nongovernmental organizations based in the country to deliver lifesaving aid. The Wall Street Journal reported on Thursday that the Taliban have begun jeopardizing aid deliveries by NGOs, trying to force assistance toward specific recipients, and even going as far as to detain aid workers who do not comply with their demands. 

And the Afghan government’s inability to absorb foreign aid and the threats of waste and corruption that were endemic to the U.S.-backed Afghan presidencies of Hamid Karzai and Ashraf Ghani haven’t gone away with the Taliban now in control. Indeed, one former Ghani official, speaking on the condition of anonymity, noted that in previous years, there was persistent corruption in the distribution of international aid across several districts of the country, in which no differentiation was made between parts of the country that were challenged by a lack of aid and those that were in urgent need. At times, the official claimed, aid was not given to those most in need at all. 

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“What I see the donors doing is dressing up old government programs in new clothes,” said Jennifer Brick Murtazashvili, a nonresident scholar at the Carnegie Endowment for International Peace. “Our focus shouldn’t be on our projects. It shouldn’t be on the NGOs. It shouldn’t be on the Taliban. It should be on the people and how this aid is harming or hurting [economic] resilience.”

But there are also smaller-scale projects that could give Afghanistan a better shot at building a self-reliant economy in the long run. The U.N. Development Program (UNDP) and the NGO Islamic Relief have announced a $22 million partnership to provide 158,000 families with cash to purchase basic necessities, support female entrepreneurs to stimulate local markets, and fund local laborers to rehabilitate the country’s irrigation system—part of a larger UNDP humanitarian program to invigorate the local economy with community-level projects.

“In parts of Afghanistan that had peace over the past 20 years, you didn’t need as much aid going to them,” Murtazashvili said. “Afghans are very, very entrepreneurial and can solve so many problems and are so creative. I just worry about the incentives that have been built into aid and how it’s crowding out a lot of those things.” 

One former senior Afghan official, speaking on the condition of anonymity for fear of retribution, said the Taliban had not been transparent about health and education spending and allocated some of that money to pay for militants. The Taliban could also be using foreign money flowing into Afghanistan to cultivate illegal revenue streams, such as in arms, human trafficking, minerals, and drug production, some experts fear. 

“We’re starting to see a larger transnational network of criminal organizations that facilitate Afghan illicit products to the greater Middle East and then, of course, potentially to Central Asia as well,” said Caroline Rose, who is a senior analyst and leads the Power Vacuums program in the Human Security Unit at the New Lines Institute. “Even on the civilian level, individuals are turning to these illicit economies just to get by, just to get through the day, and I think that this represents a very concerning level of lack of governance and rule of law.”

In Washington and European capitals, there is mounting pressure from lawmakers and humanitarian actors to loosen strict sanctions. But even as the United Nations has appealed for $5 billion in international help—a number that experts and officials expect could rise even more next year—the world body is nowhere close to meeting the goal. At a U.N. conference on Thursday, donor countries reportedly pledged $2.4 billion in emergency cash, medical, and basic aid toward Afghanistan, well short of the annual goal. 

U.S. lawmakers worried about an imminent economic collapse in Afghanistan have urged the Biden administration and European allies to make large aid commitments now, despite concerns about the Taliban’s deteriorating human rights record. 

“[W]e must distinguish between punishing this untrustworthy government and helping innocent civilians who are suffering immensely,” Sen. Jeff Merkley, a member of the Senate Foreign Relations Committee, said in a statement. “The best way to do that is to ensure aid goes directly to the people, which is what these U.N. programs do.” 

But former Afghan officials who resisted Taliban rule from abroad aren’t willing to give the militant group a pass for cracking down on the country’s hard-won freedoms over the past two decades, even if that causes more economic suffering. 

“The people of Afghanistan [are] paying the cost of the international community’s trust in the Taliban,” said Sajad, the former Afghan diplomat. “When there is no school for millions of students in Afghanistan, why should the World Bank continue sending money there?”

Update, April 1, 2022: This article has been updated to include comment by the World Bank.