Taliban takes advantage of Pakistan economic crisis to boost Afghanistan's coffers

Kabul: Even as neighbouring Pakistan struggles with an economic crisis, Afghanistan seems to be doing relatively well on the economy front despite being embroiled in a humanitarian crisis.

With the Taliban collecting tax from businesses across Afghanistan and trucks carrying goods across the Durand Line – the de facto border with Pakistan – the current Afghan regime in Kabul is doing well as far as revenue is concerned.

According to media reports, around 60 percent of the revenue being collected by the Taliban regime in Kabul is from trucks carrying goods across the border between Afghanistan and Pakistan.

Even as Afghanistan remains frozen deep in a second winter of humanitarian turmoil since the Taliban seized Kabul in August 2021, cash is changing hands at a surprising pace.

The Taliban rulers of Afghanistan have proved to be adept at collecting tax and – if reports are to be believed – apparently without the corruption associated with the previous administration in Kabul.

Last month, the World Bank had reported that the Taliban had collected revenue amounting to 136 billion Afghani ($1.5 billion) from across Afghanistan during the first nine months of 2022. This is almost equal to tax collection during the final full year of the US-backed regime in Kabul.

“It has been reported quite consistently that they’re doing quite well on revenue, and that too is happening when economic activity is quite subdued,” an official with a foreign organisation in Afghanistan was quoted as saying by news agency AFP.

“It was a shock.”

However, with the United Nations (UN) warning that half the population of Afghanistan facing severe hunger, the figures related to tax collection by the Taliban have raised many questions.

Taliban taking advantage of Pakistan economic crisis

According to the World Bank, around 60 per cent of the Taliban revenue is funded by custom duty from trucks plying between Afghanistan and Pakistan. This revenue is raised at dusty, tumbledown checkpoints such as Torkham in the eastern province of Nangarhar, where truckers pay cash for rubber-stamped official paperwork.

Freight coming to Afghanistan is mostly food — oranges, potatoes and World Food Programme (WFP) flour — but the trucks going into Pakistan are loaded with chromite and coal.

Pakistan has been badly hit by the global energy crisis caused by the war between Russia and Ukraine at a time when a severe economic crisis has decimated the country’s foreign exchange reserves. The Taliban have been quick to take advantage of Pakistan’s economic woes.

According to a 2022 report by research group XCEPT, with Pakistan brokering a deal to pay for Afghan coal in rupees — cutting out usual suppliers in South Africa and Indonesia – Afghanistan’s coal exports to Pakistan have likely doubled under the Taliban government. This has earned the Taliban rulers of Afghanistan $160 million in tax which is thrice what the previous administration in Kabul was capable of.

But the mining industry relies heavily on child labour, with punishingly low pay and the barest safety measures.

“This has been their strategy from day one — to increase revenue no matter what,” former deputy commerce and industry minister Sulaiman Bin Shah told AFP.

The Taliban’s lodestar has always been law and order — albeit on their ultra-conservative terms — and there are signs Kabul’s coffers have benefitted from a crackdown on corruption which leeched the US-backed government for 20 years.

Afghanistan climbed 24 places up Transparency International’s corruption perception ranking last year, a rare case of a metric improving for the country.

“Afghanistan has that capacity, which now we are collecting,” said finance ministry spokesman Ahmad Wali Haqmal. “The main problem was the corruption.”

But analyst Torek Farhadi sees it another way.

“They are more effective because people are scared of them,” he said. “The Taliban have an iron grip on the administration. They have the guns, and nobody can steal any money.”

Taliban transforming from insurgents to bureaucrats

The Taliban’s transition from insurgents to bureaucrats is not entirely surprising.

During their 20-year guerilla war, they established a shadow government in many areas they controlled, including courts, regional governors and a tax system to fill their war chest.

Afghanistan’s customs director Abdul Matin Saeed once ran shadow toll booths for the insurgency in Farah province, bordering Iran, and Balkh, bordering Uzbekistan, roving the territory on raspy motorbikes to evade capture.

“We didn’t have complete control over the roads … but still we were meeting our ends,” he told AFP.

This experience was “very handy” when the republic fell and he took office in Kabul, he says.

The government’s ability to raise revenue has far-reaching implications.

The international community has pressured the regime over restrictions on women’s rights with financial sanctions, but their ability to raise domestic revenue grants them greater independence.

It also presents a dilemma for donors — does providing humanitarian support free up the Taliban administration to pursue discretionary aims such as quashing dissent?

But perhaps the most glaring issue is the lack of clarity over how all this cash is spent.

Last year, the Taliban government issued an annual budget outlining 231 billion Afghanis of spending, but scant further detail.

“This money goes to the functioning of the government of the Taliban,” said analyst Farhadi. “I want to see how they spent it. Where did it go? “

(With AFP inputs)

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