‘The humanitarian crisis unfolding in Afghanistan is likely to be amplified by dire economic circumstances,’ expert says

EVANSTON, Ill. – Northwestern University professors in the fields of political science and international relations are available to provide analysis and commentary on Afghanistan’s economy with the U.S. freezing its financial reserves, residents unable to get their money out of the banks and uncertainty surrounding billions of dollars in international funding.  

Karen J. Alter is the Norman Dwight Harris Professor of International Relations at Northwestern University and co-director of the Global Capitalism and Law Research Group. Her research focuses on the backlash against international institutions, America’s international leadership, and ethics in international affairs. She is the author of six books including the “The New Terrain of International Law: Courts, Politics, Rights.” She can be reached at kalter@northwestern.edu or by contacting Stephanie Kulke in media relations at stephanie.kulke@northwestern.edu.

Quote from Professor Alter
“International institutional banks, such as the International Bank for Reconstruction and Development, are the actors that should be helping in Afghanistan. The question is whether regional banks will step into the void. The first regional bank came from the Marshall Plan, which existed to help European countries stabilize and rebuild from WWII. The Marshall Plan strategy was eventually repurposed into the European Bank for Reconstruction and Development, and this multilateral regional bank helped a lot in the transition of Central Europe after the end of communism. The benefit of a regional bank is that the terms for repayment are either non-existent or more generous.

“This will be an interesting moment to see if China steps up to use the Asian Development Bank to help Afghanistan. China championed this Asian alternative because it wanted an international bank where China would have greater influence over where money went, and so that China could demonstrate its willingness to work with others and to lead in a multilateral way. The Asian bank is a case study in what we call ‘contested multilateralism’ where states create parallel institutions to rival the power or to circumvent obstacles in existing international institutions.

“Yet China seems to prefer to work bi-laterally through its Belt Road initiative. Will China step into the void? And if so, how will it help? China's Belt Road policies are criticized for generating dependence in the form of monies owed. It is also criticized because China tends to require that Chinese companies conduct the work, thereby limiting the extent to which infrastructure projects contribute to local development. The Asian development bank strategy would not encumber Afghanistan as greatly, so we have a moment to assess if and how China will lead in its near neighborhood.”

Stephen Nelson is an associate professor of political science at Northwestern focusing on comparative politics, international relations and international law. His research includes the politics that shape the International Monetary Fund’s (IMF) lending policies, the political dynamics of developing and emerging market countries’ decisions to open their economies to international capital flows, and the international organization of sovereign debt markets. He can be reached at stephen-nelson@northwestern.edu or by contacting Stephanie Kulke in media relations at stephanie.kulke@northwestern.edu.

Quote from Professor Nelson
“The humanitarian crisis unfolding in Afghanistan is likely to be amplified by dire economic circumstances. Since Ghani fled and the Taliban took over the country has lost access to critical funding sources that enable people in the country to consume imported goods. The flow of foreign aid has been cut off, and since the Taliban government is not yet (and may never be) recognized as the legitimate governing authority of Afghanistan by other members of the International Monetary Fund, the IMF cannot negotiate a lending program or release the international institution's currency unit, called Special Drawing Rights, to help Afghanis obtain hard currency to buy the foreign goods upon which they depend. And it gets worse. Since the invasion and occupation the country's meager foreign exchange reserves (less than $10bn) are held abroad, inaccessible to Taliban officials and unusable to the former regime's ousted and exiled leaders. The deprivation that results when crucial goods become scarcer, and the country's currency loses value will likely induce more protest and escape by Afghanis with the means to flee the country. The Taliban is likely to meet resistance with harsher repression. In this situation the economic and political crises are mutually reinforcing.”