United States Institute of Peace
Wednesday, January 25, 2023
United Nations humanitarian cash shipments of U.S. dollars into Afghanistan average about $40 million a week — a total of $1.8 billion since they began in December 2021. These inflows, similar to or slightly more than the Afghan central bank’s pre-2021 imports of cash dollars, have replaced the latter in stabilizing the country’s economy.
Unlike before the Taliban takeover, this money no longer goes directly to the central bank (Da Afghanistan Bank, or DAB), now under Taliban control. Instead, deposits are made in a private commercial bank. U.N. agencies and implementing partners then withdraw the money in U.S. currency or after the bank has converted funds into afghanis to pay local costs.
The U.N. cash shipments provide critically needed liquidity in the economy. They are used to pay for imports directly or to purchase domestic goods and services (including salary payments). Either way, they support Afghanistan’s balance of payments, which is characterized by a gap between imports and exports of roughly $4 billion per year, by providing much-needed foreign-sourced funding.
The U.N. cash imports are a major reason why the exchange rate for the afghani has been reasonably stable and the falling inflation rate mainly reflects international price inflation rather than the domestically driven hyperinflation of the 1990s.
No One Should Want a Repeat of Afghanistan’s Economic Free-Fall in 2021
So, Afghanistan’s extraordinarily high aid dependency has continued, now on the shoulders of humanitarian support. Moreover, given the much more precarious situation faced by most Afghans — living near, at, or below the subsistence level — people’s dependence on external aid arguably is just as great as or even greater than pre-2021.
But by supporting a low-level economic equilibrium — albeit precarious and subject to downside risks — current humanitarian assistance creates similar issues regarding dependence and sustainability that arose with past aid. Recent Afghan history provides a striking demonstration of the problems that can occur. The August 2021 Taliban takeover and the resulting immediate cut-off of international aid plunged the country into a period of economic free-fall and precipitated the largest humanitarian crisis and U.N. humanitarian appeal in the world until the Ukraine war. No one should want a repeat of this disaster.
Humanitarian aid is not supposed to be conditioned on a government’s policies. That would be contrary to internationally accepted humanitarian principles, namely:
- Humanity — human suffering must be addressed wherever found, with particular attention to the most vulnerable
- Neutrality — humanitarian aid must not favor any side in an armed conflict or other dispute
- Impartiality — assistance must be provided solely on the basis of need, without discrimination
- Independence — provision of aid must remain autonomous from political, economic, military or any other objectives
However, the sheer size and economic importance of humanitarian aid for Afghanistan means it has important macroeconomic impacts. Moreover, by helping stabilize the macro-economy and shoring up incomes, it inevitably benefits the Taliban regime at least indirectly. The government generally benefits from a more stable economy where people are not starving, but this aid also means the Taliban can freely use their sizable resources from taxation — perhaps around $2 billion a year — for other purposes. As is true of all aid, resources are fungible in the bigger picture.
This issue is common to large humanitarian interventions in any conflict-affected country. But when the Taliban administration takes deliberate actions that harm large segments of the country’s population, we have arrived at the crux of a humanitarian dilemma.
Taliban Actions Against Women and Girls Complicate the Delivery of Humanitarian Aid
Recent Taliban actions have jeopardized the delivery of aid to Afghanistan — both in general and specifically aid for Afghan women and girls.
Comprising 30-40 percent of NGO employees, women include nutrition experts, team leaders, community health workers, vaccinators, nurses, doctors and heads of organizations. Moreover, aid that goes directly to women and girls — such as health and nutrition services, food and other aid to female-headed households or those whose males are away from home — must be delivered by Afghan women. It would be socially unacceptable in most of the country for men to bring humanitarian relief and services to Afghan women and girls. And asking female NGO employees to work at aid delivery points but never report to the office on work-related matters, which the Taliban might see as an acceptable compromise, would be unrealistic and unviable.
Over the medium term, the education bans will reduce the numbers of trained and professional women able to provide health and other humanitarian-related services, further constraining humanitarian aid.
Finally, Taliban actions against females in education and NGOs most likely mean that little if any development aid will be forthcoming in the near-term future. Hence humanitarian assistance will continue to comprise the lion’s share of international public financial flows into Afghanistan. The macroeconomic and financial implications of this aid need to be kept front-and-center and guide decision-making, in addition to responding to humanitarian needs.
Conditionality for Humanitarian Assistance?
Making humanitarian aid contingent on the Taliban reversing the recent restrictions they placed on women and girls may go against the humanitarian principle of nonconditionality. Moreover, if experience is any guide, imposing explicit conditions on aid is unlikely to work. It would provide the Taliban with a further excuse to misleadingly blame economic problems and human suffering on the international community’s actions.
Nevertheless, according to the British government, nearly half of NGOs in Afghanistan have paused their assistance following the Taliban ban on Afghan women working for NGOs. Inability to effectively deliver essential humanitarian aid without women is the prominent reason for these suspensions. Humanitarian principles require aid to be delivered in a non-discriminatory manner, and if that becomes impossible due to Taliban restrictions, questions arise over whether and to what extent the aid should continue. On the other hand, U.N. imports of cash dollars have resumed at high levels following a month’s gap during the winter holiday period, with no sign that they will decline in the immediate future. International aid donors are still developing their responses to the Taliban bans.
Even in the absence of explicit conditionality, the Taliban’s recent actions will dampen donors’ enthusiasm for continuing to fund humanitarian aid at current levels. Moreover, the distinction between humanitarian and basic development activities is somewhat fuzzy, so there could be a narrowing of the scope of humanitarian assistance to focus on the most life-saving activities (such as food aid and emergency health services). This would leave other important programs that are currently being carried out under the humanitarian umbrella vulnerable to cuts.
Donors’ aid fatigue over Taliban actions will further worsen the already deteriorating outlook for aid to Afghanistan in the face of competition from the massive humanitarian needs generated by the Ukraine war as well as other humanitarian crises. These trends also mean that the amount of cash dollars imported by the U.N. will at some point start to decline.
There needs to be clear and explicit international messaging about the effects of the Taliban’s bans on humanitarian aid, so the implications are abundantly clear both to them and to the Afghan people.
Proactive Strategizing and Planning Are Needed — Not Reactive, Disorganized Responses
Afghanistan’s humanitarian crisis is not like, say, a discrete natural disaster, affecting hundreds of thousands or perhaps 1-2 million people for a limited time. Most of Afghanistan’s more than 40 million people are facing severe hunger and deep poverty. This is an economic crisis for the entire country, one likely to extend for at least several years. The situation cries out for incorporating a macroeconomic, stabilization and sustainability perspective on humanitarian aid — not just reacting short-term to Taliban actions.
When humanitarian aid is as large and prolonged as in Afghanistan, effectiveness issues and cost-efficiency come to the fore. This will be particularly true when resource constraints tighten and funding declines, as almost surely will happen for Afghanistan in coming years.
For example, there is widespread recognition that cash assistance is more cost-effective than in-kind aid in meeting most humanitarian needs, and no more risky. Aid organizations globally are beginning to shift the composition of their assistance from in-kind to cash. So, one way to improve the cost-effectiveness of humanitarian aid in Afghanistan is to provide more of it in cash rather than in-kind.
Reducing Dependence on U.N. Cash Shipments
In the likely scenario that humanitarian aid declines over time, a smooth transition away from U.N. cash shipments must be planned to avoid a repeat of the August 2021 shock when aid abruptly stopped.
U.N. cash shipments need to be put on a planned trajectory and not allowed to haphazardly reflect aid agencies’ fluctuating needs for funds in-country and the availability of money from donors. It would make sense to pre-program a gradual, predictable decline in the U.N. cash shipments over time, to give the Afghan economy and people time to adjust, rather than injecting volatility through ups and downs, let alone precipitating another major economic shock if there is an abrupt drop.
Use of new technologies involving mobile phones and digital money transfers is increasing around the world, driven in part by the pandemic. A highly effective aid delivery mechanism which is already being piloted in Afghanistan, mobile phone-based digital cash transfers could progressively replace part of U.N. cash shipments, supporting Afghan women’s and their households’ humanitarian needs directly, as demonstrated by a successful recent pilot program.
The proposed Humanitarian Exchange Facility (HEF), preferably with streamlining and simplification of design to ensure that it is cost-effective and curbs excessive overhead, could be revived and partly substitute for U.N. cash shipments. Aid donors can incentivize the shift away from U.N. cash shipments in favor of mechanisms such as the HEF by requiring increased use of such channels.
Such options would require more cohesive, coordinated planning and deployment of humanitarian aid among U.N. agencies and on the part of donors. This is not how humanitarian business is normally conducted, but the nationwide crisis, the sheer amount of aid and the risks of future disaster in Afghanistan require such a holistic approach.