UN launches cash plan to support Afghan economy

The United Nations on Wednesday launched a funding programme aimed at preventing the Afghan economy from collapsing during the winter by getting cash flowing through the local economy again.

The UN Development Programme has set up a trust fund through which governments can channel finance via the UN to specific programmes on the ground, rather than sending money government-to-government, with Afghanistan now controlled by the Taliban.

“What we are witnessing is not only a nation and a country in the midst of political turmoil; what we are also witnessing is an economic implosion,” UNDP chief Achim Steiner told a news conference in Geneva.

Since the Taliban takeover in August, banks are running out of cash and civil servants are going unpaid.

Afghanistan’s economy is in a parlous state with most aid cut off, food prices rising and unemployment spiking.

The UNDP fears that on the current trajectory, 97 percent of Afghan households could be below the poverty line by early- to mid-2022.

The money will be channelled through three different routes: cash for public works programmes; small grants to keep small businesses running and get start-ups off the ground; and temporary basic income for the elderly and vulnerable.

The plan is to try to bridge the gap between the current situation and 12 months’ time, when there should be a clearer perspective on Afghanistan’s longer-term future.

Steiner said the planned programmes had been discussed with the Taliban.

– ‘Desperation, destitution, displacement’ –

It is hoped that by keeping the local economy afloat, Afghans can keep living and working in their local areas rather than falling into “desperation, destitution and displacement” and ultimately leaving for somewhere else, said Steiner.

The UN agency gave the example of small-scale interventions to keep markets functioning, by funding micro-enterprises such as raising chickens to sell eggs, rather than people queueing to receive food handouts.

The activities that the UNDP wants to cover have been costed at around $667 million for the first 12 months, reaching about 4.5 million people, with an aim then to double the project if it can double the side of the fund.

The scheme has little seed funding but Germany it set to be among the first contributors, putting in 50 million euros ($58 million).

The support would be provided in Afghan currency rather than dollarising the economy.

Steiner said the greatest challenge was an economy with virtually no domestic currency in circulation.

“Our intent is to find ways very quickly in which we can convert international support into local currency,” he said.

“This is how you keep an economy alive and stop people becoming dependent on donations.”