Monitoring the ‘Real’ Afghan Economy Under Taliban Rule
As the Taliban pushed toward victory last summer, L4P published a groundbreaking report on the economy of Nimroz province. In this blog, co-author Graeme Smith revisits the paper. He argues that the experimental methodology that was used to map resource flows and revenues could also help answer some crucial questions about the emerging political economy of the Taliban regime.
Published: 14 March 2022
As the Taliban pushed toward victory in August 2021, I co-authored a report for ODI’s Lessons for Peace: Afghanistan (L4P) project about the economy of Nimroz, a border province in Afghanistan. Published in the midst of the chaos that engulfed the capital shortly afterwards, major media outlets were generous to give us a little space to discuss ways the research might become relevant to the era of Taliban rule.
Half a year later, the pace of events has slowed down. Air strikes have stopped. Bombings attributed to the local Islamic State group still terrorize civilians, but major battles are over. Internal displacement as a result of conflict has tapered off.
However, the world is now preparing for a new struggle in Afghanistan, this time against large-scale famine and mass migration. The humanitarian response in Afghanistan could become the largest in history, which should inspire new thinking about how to monitor events on the ground. As the economic and humanitarian crisis unfolds, the Nimroz case study could provide a useful reference for understanding the Taliban’s chances of survival in government; the scale of Afghanistan’s need for aid; and the best ways of mitigating risks associated with the fast-growing aid operation.
The Nimroz study was ambitious and novel. We put together a full picture of the economy in a single province, including licit and illicit revenues for both sides of the war, using an experimental methodology that built on decades of work correlating first-hand qualitative data gathering with overhead observations. In practical terms, this meant sending researchers to checkpoints to talk with truckers, and counting trucks using satellite images. We used similar methods for other types of economic activity, filling some gaps with educated guesswork. The results suggested that the volume of trade passing through the province was twice as large as official statistics claimed, because much of the economy thrived in the shadows.
The Nimroz study hinted at large sources of wealth for the Taliban movement. We could not draw conclusions about how the Taliban distributed its revenues internally—i.e., whether the cash stayed with Taliban commanders or moved into Taliban operating budgets. Still, the findings suggested that in the event of a Taliban takeover, reactions from the outside world such as sanctions, aid cut-offs, or asset freezes, might have limited influence on the group’s hold on power, while hurting the people of Afghanistan.
That is precisely what happened in the early months of Taliban rule. With tens of millions of Afghans on the brink of starvation, top UN officials and other leaders are calling for the world’s largest relief operation and economic assistance that would include salary support for public sector workers. The UN has proposed spending $8 billion in the coming year on Afghans’ humanitarian and basic needs, the most expensive such plan in UN history. Donors have only committed smaller amounts, so far, but Britain will host a donors’ conference in March with the aim of raising the $4.4 billion requested for the most urgent humanitarian needs.
Some observers have claimed that the Taliban authorities are “tottering”, and cannot withstand the economic pressure for long. Yet questions of state solvency and potential state collapse are often discussed within the international community without reference to robust empirical data.
What indicators should we watch? Academic definitions of ‘state collapse’ depend in part on a regime failing to collect taxes. The Taliban have avoided that fate, so far; Western officials, citing contacts in the Ministry of Finance, say that the Taliban government’s tax and non-tax revenues might amount to $1.5 billion to $2 billion on an annualised basis. In recent months, customs revenues climbed back to the levels recorded before the Taliban takeover. Still, that information comes from a Taliban-controlled bureaucracy and donors should insist on better measurements. A good start would be re-deploying the World Bank and International Monetary Fund, still absent from Kabul, and re-establishing the Risk Management Unit within the UN mission in Afghanistan to help with accountability.
Such institutions should be delving into the political economy. Key questions include whether and how the war economy, and the access to cross-border revenues that secured the Taliban’s power base at local levels, can now be mobilised by the group as the central public authority. Understanding the details of revenue collection would give donors insight into the viability of the new government: for example, a way of evaluating claims about Taliban factions splintering off. If the customs office in Helmand is sending its revenues back to the central treasury in Kabul, it’s fair to assume that the Taliban’s purported internal spats with Helmandi factions are not having a serious impact.
Gaining better visibility on the Taliban government’s revenues would also help donors gauge how much assistance is needed: if the Taliban say that funds are lacking for girls’ schools, is that correct? Who will pay for Afghanistan’s electricity imports? If donors start to support these and other essential state services, as some UN officials are proposing, they need to know more about the inflows and outflows from state coffers. American officials have expressed concern that helping the Taliban-controlled government might free up resources for Taliban spending on discretionary items, but it’s hard to know whether that’s a major concern without a clearer sense of the Afghan government budget. Will the Taliban have a parallel ‘political’ budget in addition to the Afghan state budget? A lesson from other fragile contexts, such as Yemen, is that working to mitigate risks should start early, before multi-billion-dollar relief operations find themselves in trouble over allegations of misused aid.
That is why it makes sense to look again at the ‘War Gains’ report: both for its methodology, and because the research offers new ways of keeping a close eye on Afghanistan’s political economy. The methods used in Nimroz could be applied to the country as a whole, providing at least some minimum revenue figures for the Taliban government. However, it might not be possible to account for all kinds of government income, in a region where intelligence services have made a habit of supplying covert assistance.
Afghanistan is nominally no longer in a state of full-scale armed conflict. Still, understanding the flows of money in conflict and post-conflict settings remains important, particularly as the methods now available for measuring them are getting more sophisticated. As donors prepare to invest heavily in averting humanitarian disaster in Afghanistan, they should build on lessons from the past and invest in better understanding the country’s political economy in order guide their efforts.
 The number of violent incidents declined by 91 per cent between 19 August and 31 December 2021, as compared with the same period a year earlier. “The situation in Afghanistan and its implications for international peace and security”, UN Secretary-General, 28 January 2022, p. 5. https://unama.unmissions.org/s...
 After reaching a peak of more than 255,000 people displaced by conflict in a single month in July 2021, internal displacement as a result of war declined sharply after August according to figures compiled by the United Nations Office for the Coordination of Humanitarian Affairs (OCHA). https://www.humanitarianrespon...
 “Beyond Emergency Relief: Averting Afghanistan’s Humanitarian Catastrophe”, International Crisis Group, 6 December 2021.
 Some aspects of Western economic pressure on the new Taliban regime have eased in recent months, especially with the 25 February 2022 publication by the U.S. Department of the Treasury of General License 20, authorizing transactions involving Afghan businesses and governing institutions. https://home.treasury.gov/syst...
 A test of statehood is “making and enforcing binding rules, monopolising the means of violence and collecting taxes”. Daniel Lambach, Eva Johais and Markus Bayer, “Conceptualising State Collapse: An Institutionalist Approach”, in Rachel M. Gisselquist (ed.), Fragility, Aid and State-building: Understanding Diverse Trajectories (New York, 2017), p. 31.
 International Crisis Group, op. cit., p. 11.
 The World Bank took steps in this direction on 1 March 2022, unlocking $1 billion from a multi-donor trust fund and permitting Bank staff to p ublish analytical work on Afghanistan. https://www.worldbank.org/en/n...