IMF forecasts 30% contraction in Afghan economy after Taliban takeover

Jihad Azour, director of the IMF’s Middle East and Central Asia department, said the country’s situation was deteriorating, even before Kabul fell.

“They were facing more than one shock — drought, Covid,” he told CNBC’s Hadley Gamble. “Therefore, what we foresee and fear is a sharp contraction.”

The report also noted that non-humanitarian aid has been halted, foreign assets mostly frozen and Afghan banks have been crippled by cash shortages after the Taliban returned to power.

“These shocks could cause a 20–30 percent output contraction, with falling imports, a depreciating Afghani, and accelerating inflation,” the report said. “The resulting drop in living standards threatens to push millions into poverty and could lead to a humanitarian crisis.”

Additionally, “the turmoil is fueling a surge in Afghan refugees” that could burden public resources in refugee-hosting countries, pressure the labor market and create social tensions, the IMF said, highlighting the need for assistance from the international community.

The G-20 last week pledged to help tackle the crisis in Afghanistan. Azour said the IMF welcomes the international community’s scaled-up humanitarian aid, and said there should be a focus on education and health services.

SOURCE: CNBC