US sanctions and forced returns deepen Afghanistan’s humanitarian crisis

US sanctions on Afghanistan’s central bank have “dramatically reduced” the ability of humanitarian organisations in the country to receive donations.

According to a recent study by the Costs of War project at Brown University’s Watson Institute, this has gravely hampered their ability to address the “increasingly severe” needs of the Afghan people.

Meanwhile, “forced returns” of Afghan nationals under the current Taliban administration continue, despite the non-return advisory of the UNHCR, the UN refugee agency.

Countries that had hosted Afghan refugees for years now argue that the forced returns are justified, citing the subsiding of active war since the US withdrawal from Kabul in August 2021.

However, continuing US sanctions have “severely limited” Afghanistan’s central bank’s functions, cutting off remittances – a lifeline for many Afghans.

In 2020, the last full year before the Taliban retook power in the war-torn country following a chaotic exit by the US military, Afghanistan received $789 million in remittances.

The amount accounted for nearly 4.1 percent of Afghanistan’s GDP, making it the fifth highest recipient country in Southern Asia in terms of the share of remittances in national GDP.

But inflows dried up immediately after the Taliban takeover mainly because they remain a designated terrorist group subject to US sanctions.

As a result, remittances shrank by 62 percent to roughly $300 million in 2021 as the US made a botched exit from Afghanistan in August. The US then refused to recognise the Taliban as the rightful ruler of Afghanistan and ordered the freezing of more than $7 billion of its foreign exchange reserves.

Taking a cue from the US, its Western allies also froze another $2 billion of foreign exchange reserves that Afghanistan had deposited in their financial institutions.

“Reductions in funding for education, health, basic services and infrastructure in Afghanistan in the wake of the Taliban takeover have contributed to lost incomes and a humanitarian crisis where over 90 percent of Afghans suffer from food insecurity, with many resorting to harmful coping mechanisms to survive, including child labour,” the study says.

The funding crunch has coincided with rising consumer prices in Afghanistan for basic household staples as well as supplies for agriculture, which has contributed to decreases in domestic food supply, it adds.

The Afghan economy has “basically collapsed” amid negligible economic activity in terms of exports or public expenditure, according to the UNDP.

The size of the economy has shrunk by 27 per cent since the Taliban takeover, causing economic stagnation and high levels of poverty and unemployment. Nearly 70 percent of Afghans remain “subsistence insecure”, meaning they do not have enough basic resources.

Forced return to Afghanistan

Millions of Afghans have lived in Pakistan and Iran for the last 40 years as Afghanistan faced continuous war.

Last year, Pakistan ordered about 1.7 million refugees to leave by November 1 after it announced an “Illegal Foreigners’ Repatriation Plan” for Afghan nationals who had stayed in Pakistan for decades in some cases.

Subsequently, about half a million people returned from Pakistan to Afghanistan in the last quarter of 2023 as the Pakistani authorities resorted to forced deportations.

While repatriation efforts have occurred in the past, analysts note that this recent wave of expulsions is on an unprecedented scale. Islamabad justifies the move, underlining that it is necessary to protect public welfare and make Pakistan safer.

In addition to Pakistan, Iran also increased deportations, expelling at least 651,000 Afghans, a 36 percent increase compared to the previous year.

Withheld Afghan funds

The ongoing crisis is further compounded by the freezing of Afghanistan’s foreign exchange reserves. In February 2022, the US government seized $7 billion in Afghan reserves through an executive order.

Half that amount –$3.5 billion – has been earmarked for the families of the victims of the 9/11 terror attacks.

The US has transferred the remaining $3.5 billion to an independent Afghan Fund in Switzerland to help Afghanistan pay back debts to international organisations and fund electricity imports.

It remains a mystery as to how the Afghan Fund operates or handles financial transactions when the country is cut off from the global financial system.

The US had vowed to keep the cash out of the hands of the Taliban. News reports say the Switzerland-based fund has made no payments to Afghanistan so far.

The Human Rights Watch has called the fund a “shadow quasi-central bank” situated outside Afghanistan, which serves only as a workaround, not a comprehensive solution to Afghanistan’s deep economic crisis.

“Due to the lingering effects of a war that neither the Afghan government nor its people chose, Afghanistan requires and deserves international community support,” the study by the Costs of War project says.

The Afghan people are returning home amid instability and lack of planning under the current Taliban administration—a situation that is complicated by the lack of employment opportunities, absence of basic services in most peri-urban areas where they generally settle, and the structural issue of landlessness, it adds.

“These types of recurring crises have placed more pressure on the country’s limited economic, social, and institutional integration capacity, which impacts returnees’ ability to reintegrate successfully.”