Stock Groups

Aid funding for Afghanistan at risk of Taliban misuse, corruption


Taliban forces block the roads around the airport in Kabul, Afghanistan August 27, 2021.

Stringer | Reuters

One month after the fall of its U.S.-supported government to the Taliban, Afghanistan faces crises of astronomical levels: millions facing starvation, a nationwide liquidity crunch, suspension of aid and freezing of assets by international donors and fears of brutal human rights abuses.  

Policymakers in the West are grappling with whether to engage with Afghanistan’s new government of hardline Islamist extremists — which includes wanted terrorists — as the country approaches economic collapse.  

Prior to the Taliban’s takeover, the U.S. funded 80% of Afghanistan’s government budget. 40 percent of Afghanistan’s GDP was derived from international assistance. Half of Afghanistan’s population was below the poverty line.

Of the 40 million Afghans, fourteen million are in serious food insecurity. U.N. World Food Programme estimates that $200 million is required to continue operations in Afghanistan through the year. 

Already, the Taliban leadership has outlined their policies for aid agencies entering Afghanistan. The Commission for the Arrangement and Control of Companies and Organisations would oversee this process. This authority deals both with aid organisations and business.

Amer Alhusein is a Middle East financial advisor for Plant for Peace. He stated that this commission would oversee all the aid agency registrations and enforce the Taliban code for behavior for those organizations. These include taxation and political neutrality (ensuring aid workers do not spy) and respect for Afghan culture.

‘Important to engage with the Taliban’

Earlier this week, international donors at a U.N. conference in Geneva including the U.S. and European states pledged more than $1 billion in aid to war-ravaged Afghanistan. U.N. Secretary-General Antonio Guterres said that “the people of Afghanistan are facing the collapse of an entire country — all at once.”

The U.N. Secretary-General Antonio Guterres warned the nation that the food supply could dry up by September and stressed the need for engagement with the Taliban government.

Reuters interviewed Antonio Guterres at the United Nations Headquarters, Manhattan, New York on September 15, 2021.

Reuters “It is impossible to provide humanitarian assistance inside Afghanistan without engaging with the de facto authorities,” Guterres told the press.| Reuters

“It is impossible to provide humanitarian assistance inside Afghanistan without engaging with the de facto authorities,” Guterres told the press. 

This creates a problem for donors as it raises concerns about the Taliban’s brutal interpretation of Islamic law and new possibilities for corruption.

That potential for corruption is “a huge risk,” said Alex Zerden, an adjunct senior fellow at the Center for a New American Security and former Treasury Department financial attaché at the U.S. embassy in Kabul. 

The families from Afghanistan who fled to Pakistan are seen in makeshift tents near Chaman, Pakistan’s railway station on September 1, 2021.

Reuters The Taliban control taxes and customs.| Reuters

“The Taliban control customs, they control taxation. He spoke to CNBC by phone Wednesday, saying that although they were involved in the extortion trade a month back, he doesn’t believe their plans will change. The Taliban control all the money moving around the country, and 25% of its banks and central bank are owned by the state. Anybody doing business with such banks is also at risk from U.S. sanctions. 

Zerden explained that while aid agencies may prefer to transfer funds to independent institutions, they “mayn’t have the absorptive capability to responsibly transfer and use large amounts of funds.”

What is the new form of corruption? 

It isn’t new corruption exists in Afghanistan. Over the past two decades, billions of dollars have been poured into Afghanistan, especially by the U.S. This has fueled an elite class of Afghan millionaires contractors, politicians, and warlords, whose corruption has crippled the country, and forced many to join the Taliban who pledge to end such behaviour. 

The Taliban have funded their activities through opium, extortion and illegal mining in Afghanistan. The group’s yearly revenues reached into the hundreds of million, which funded their insurgency over the years — but it falls far short of the more than $5 billion required annually to fund the Afghan government.  

At a demonstration held in Kabul on August 19, 2021, people carried the Afghan national flag.

Stringer | Reuters

Instead of being eradicated, corruption may just take on a different flavor, Alhusain said. 

“Given the lack of resources combined with the Taliban’s urgent need to stabilize the country and win over the loyalty of local tribal leaders, I believe that a new form of corruption — similar in nature to the one that the country suffered from over the past 20 years, but different in terms of recipients and distribution — is bound to emerge,” he said.  

However, donors have mechanisms to prevent funds being misused. The first is to deliver food, medicine, and other essential goods, rather than money. This is exactly what countries like Qatar, Iran, China and Pakistan have pledged or done so far. 

Zerden indicated that another option is to work through the U.N., rather than the Afghan central bank. Or, to use private banks instead of state-owned banks for capital deployment.  

U.S. continuing aid, but not through Taliban

The U.S. will continue to deliver aid to Afghans, but not through the Taliban and despite its own sanctions on the group, Secretary of State Antony Blinken said last week.

He stated that the U.S. Treasury Department had issued licenses to permit U.S. government contractors and grant recipients to continue providing critical and life-saving humanitarian aid for the Afghan people, in spite of sanctions against the Taliban. This aid will not be flowing through the government as it is prohibited by our sanctions. It will instead flow through non-governmental organizations.

CNBC also received a statement from the World Food Programme stating that they have “robust monitoring systems” and are following global standards. They conduct routine monitoring activities in order to monitor accountability and ensure quality.  

The World Food Programme claims it’s “100% focused” on local communities and works with a wide range of partners. 

Andreas Krieg from King’s College London, an associate professor, warned that aid money will not be monitored and “foreign or humanitarian aid” donated to countries may end up in the wrong hands. “Under the [previous Ashraf] Ghani government much of these funds were expropriated to fund a kleptocratic regime.” 

Funds are often misused in the developing world. Krieg stated that the Taliban were just one of these regimes. He added, “The solution is not no foreign assistance’ as it will weaken any efforts to control and moderate the Taliban.”