Afghans Adapting to Economic Decline, Social Restrictions

A Continuing Perfect Storm of Pervasive Poverty and Food Insecurity

One-third of all households surveyed have insufficient income to buy the food they need, another nearly one-third enough for food but not other basic necessities. This represents a very small decline from the first-round AWMS covering October to November 2021, but the latest survey covers the post-harvest period — when food and income tend to be more plentiful — so there is nothing positive in the current situation and trends.

Loss of income due to the economic collapse following the Taliban takeover in August 2021 has been the main culprit in worsening food insecurity, exacerbated by a succession of drought-induced poor harvests. Wheat production in the 2021-22 season is expected to be 5 percent less than last year’s drought-affected output, and about 15 percent less than the previous five-year average.

As in the first-round AWMS, households’ coping mechanisms include buying cheaper, lower-quality food; borrowing to buy food; and rationing by reducing portion size, reducing adult food intake in favor of children and reducing the number of meals per day. All these coping mechanisms, except the last one, are reported to be resorted to by a majority of the households surveyed. Though not in the AWMS, there are reports of even more extreme, harmful coping mechanisms in certain cases, such as some families being forced to marry off daughters in order to obtain a bride-price to make ends meet.

Perceptions of Better Security, and a Precarious Low-Level Economic Equilibrium

Perceptions that security has markedly improved comprise probably the only significant “peace dividend” from the Taliban takeover and the end of major fighting throughout the country. More than two-thirds of those surveyed feel much safer or at least somewhat safer than in the months before the Taliban takeover, compared to less than a quarter who feel less safe.

The perceived improvement in security is greatest in regions which saw the most fighting last year, less marked though nevertheless significant in the central region and urban areas. The west-central region (which includes much of the country’s Hazara minority) and the central region (dominated by Kabul) had the lowest proportions of households feeling safer — 46 percent and 56 percent, respectively.

Partly as a result of better security, the Afghan economy is no longer in free fall and appears to be in a precarious low-level equilibrium. Recent modest positive trends include lower inflation (though still in double digits), exchange rate stability (at around 87 to 89 Afghanis per U.S. dollar), some recovery of imports, a more than doubling of exports, stability or small increases in the demand for labor and wages and Taliban revenue collection exceeding levels in the past two years. However, this degree of economic stability is critically dependent on continuing humanitarian aid flows, including cash shipments by the United Nations totaling $1.8 billion over the past year, stoppage of which would precipitate a human catastrophe. Even with this aid, most Afghans remain poor and hungry — in other words, a “famine equilibrium.”

Moreover, better security does not translate into economic optimism. Sixty-five percent of those interviewed believe the economic state of their household will be a lot worse in 12 months, nearly three times the number who think there will be any improvement. These numbers mark a sharp deterioration since before the Taliban takeover last year and are slightly worse than in the immediate aftermath of the Taliban victory.

Adapting to Adversity: Education and Labor Force Participation

In the realms of education and work, the numbers tell a story of human tragedy and adaptation in the face of draconian social restrictions and economic collapse. Afghan households, facing severe economic hardships and the ban on girls’ secondary education, are responding by increasing youth as well as adult participation in the labor force, almost entirely in self-employment and home-based activities.

The underlying strong Afghan societal interest in education nevertheless is striking: In the sample, primary school attendance by both boys and girls has increased since 2020 (more in rural areas than in urban areas), reflecting recovery from the COVID-19 pandemic and perhaps better security. And in rural areas, despite the economic imperatives facing families as well as Taliban restrictions, girls’ enrollment in secondary schools remained unchanged on a seasonally adjusted basis, albeit at a low level of around 15 percent — now very slightly higher than the corresponding number in urban areas. The proportion of households not sending any girls to school — though high at 46 percent — is lower since the Taliban takeover as a result of more primary school attendance in rural areas, perhaps also reflecting perceptions of improved local security.

Unfortunately, the wishes of the Afghan people to educate their children are denied by the closure of girls’ secondary schools, other social restrictions and economic problems that are drastically reducing secondary school attendance, especially for girls in urban areas.

There has been a large increase in overall participation in the Afghan labor force, especially among women and girls — predominantly in home-based and informal activities — probably reflecting a combination of economic necessity and diminished schooling opportunities. Female participation in the labor force jumped from 16 percent in 2019-20 to 45 percent. There was also an increase in female unemployment (i.e., women and girls reported to be seeking but not finding work), but this was equivalent to only one-third of the increase in labor force participation (which includes salaried employment, self-employment and home-based gainful economic activity, as well as people who are seeking but not finding work).

Panel data show great “churn” and what must be traumatic whiplash for Afghan women. Almost half of women who were employed in 2019-20 lost their jobs and became unemployed or left the labor force, though two-thirds of female teachers kept their jobs. On the other hand, more than half of women who were inactive in 2020 entered the labor force, the bulk engaged in home-based activities (agriculture, livestock, textiles, handicrafts, etc.).

The increase in female labor force participation appears to be driven mainly by the dire economic situation faced by households. The collapse of girls’ secondary school attendance in urban areas and the shift in the composition of women’s engagement in economic activities away from salaried and outside employment in favor of home-based activities will be very damaging to Afghanistan’s longer-term economic development if these trends continue much longer, as will be the decline in the number of boys going to secondary school (especially in urban areas). More boys are leaving secondary school to seek work, and more are also working while in school.

Among men, increasing participation in the labor force (from 75 percent in 2019-20 to 83 percent) is associated with a commensurate increase in unemployment (from 6 to 14 percent). More men are looking for work but not finding it, so there has been no net increase in the proportion of men who are gainfully employed.

Key Implications

Afghans appear to be adapting as best they can to the dire situation, but this will not mitigate pervasive poverty, hunger and deprivation. Some of their coping mechanisms will make things worse over the longer term: Reducing the quantity and quality of household food consumption will have adverse health and nutrition consequences. Higher youth labor force participation will make things worse over the longer term by reducing education levels.

In the long run, there is no alternative to sustained economic recovery and growth, led by the private sector and including public investments in infrastructure and other public goods. But in the short run, Afghanistan requires continuing humanitarian help to get through the coming winter and subsequent lean season, and humanitarian aid needs are unlikely to drop sharply after that. This underlines the urgency of not only maintaining humanitarian aid but improving its effectiveness and cost-efficiency.

Increasing use of cash transfers to deliver aid (potentially including digital currency) is a promising approach, because (1) such transfers will be used for food and basic needs as shown in the household survey, (2) they minimize overhead costs of aid, (3) the pervasiveness of poverty and food insecurity in Afghanistan means precise targeting of cash transfers is unnecessary, and (4) they inject liquidity and encourage private sector business activity and trade. These advantages more than offset any risk of leakages from small cash transfers to households.

Given that so much employment, especially for females, is in home-based agricultural and other informal work, aid programs need to support and nurture such activities, especially in the short run.

While the emphasis on aid for basic public health is understandable, Afghans, who suffer from serious health problems (88 percent of households surveyed had at least one member requiring medical services in the preceding month), heavily rely on privately provided health services — around 57 percent of surveyed households did so. Public hospitals in urban areas and basic health facilities in rural areas remain essential, but a broader perspective encompassing privately provided health services is needed.

Outward labor migration and inward financial remittances, which provided an essential “safety valve” for the Afghan people during the past more than 40 years of conflict, drought and economic weakness, must not be shut off by neighboring countries. This topic is not covered in the AWMS, but earlier studies underline the critical importance of labor migration and remittances. Neighboring countries should be encouraged to not prohibit inflows of Afghans facing desperate conditions during the coming winter and lean season, and flows of remittances into Afghanistan must be facilitated, both through the banking system and informal channels.

Finally, looking to the future of the AWMS, continuing reliance on the 2019-20 and 2021 household survey frame and telephone numbers, though useful for analyzing trends for the household panel itself, may become increasingly unrepresentative of Afghan reality on the ground over time. The World Bank should start exploring other options, including possible restoration of an in-person national household survey.