Connect with us

Economy

Taliban rely on former technocrats as the economy is on the brink – The Globe and Mail

Published

 on


Afghans wait in front of a bank as they try to withdraw money in Kabul on Sept. 12.

Bernat Armangue/The Associated Press

When the Taliban swept into power, they found Afghanistan’s economy fast approaching the brink and were faced with harrowing predictions of growing poverty and hunger. So they ordered the financial managers of the collapsed former government back to work, with an urgent directive: Do your jobs, because we can’t.

In the 20 years since the Taliban last ruled, Afghanistan evolved from an economy dealing mostly in illicit enterprise to a sophisticated, multi-billion-dollar system fuelled by donor aid and international trade. The Taliban, a movement borne out of the rural clergy, struggled to grasp the extent of the transformation.

Four employees from financial institutions told The Associated Press how the Taliban commanded bureaucrats from the previous government’s Finance Ministry, central bank and other state-owned banks to return to work. Their accounts were confirmed by three Taliban officials.

“They told us, `We are not experts, you know what is better for the country, how we can survive under these challenges’,” recalled one state bank official, who like others spoke on condition of anonymity because he was not authorized to speak on record.

They told him, “Do what you must,” but warned, “God is watching you, and you will be accountable for what you do on Judgment Day’.”

Quietly, these technocrats are advising the Taliban leadership in the running of the crippled financial sector. They tell them what to do and how to do it. But, as seasoned experts, they see no way out of Afghanistan’s economic quagmire: With billions in international funds frozen, the best they can muster in domestic revenues is $500 million to $700 million, not enough to pay public salaries or provide basic goods and services.

The Taliban are buttressing relations with local businessmen to keep them operating, while the leadership makes its case for international recognition in meetings with foreign officials.

The Taliban’s seizure of power in mid-August resulted in an abrupt halt to most donor funds. These disbursements accounted for 45% of GDP and financed 75% of state expenditures, including public sector salaries. In 2019, total government expenditures were nearly $11 billion.

With drought ongoing as well, the United Nations predicts 95% of the population will go hungry and as much as 97% of the country risks sinking below the poverty line.

The United States froze billions in dollar reserves in line with international sanctions against the Taliban, eroding the liquidity of both the central bank and commercial banks and constraining their ability to make international transactions.

This has undermined international trade, a mainstay of the Afghan economy. Intermediary banks abroad are reluctant to engage in transactions given sanctions risks. Informal trade, however, continues. The International Monetary Fund predicts the economy will contract sharply.

In the Finance Ministry and central bank, near daily meetings revolve around procuring basic staples like flour to ward off hunger, centralizing customs collections and finding revenue sources amid critical shortages in household goods. In Afghanistan, all fuel oil, 80% of electricity and up to 40% of wheat is imported.

The technocrats’ frustrations are many.

Never mind dollars, there isn’t enough of the local currency, the afghani, in circulation, they said. They blame this on the previous government for not printing enough prior to Kabul’s fall in August.

Hallways once bustling with employees are quiet. Some ministry workers only show up once or twice a week; no one has been paid a salary. A department responsible for donor relations once had 250 members and dealt with up to 40 countries; now it has 50 employees at best, and one interlocutor: the United Nations.

There are no women.

Many are growing exasperated with the Taliban leadership.

“They don’t understand the magnitude,” said one ministry official. “We had an economy of $9 billion in circulation, now we have less than $1 billion.”

But he was quick to excuse them. “Why would I expect them to understand international monetary policy? They are guerrilla fighters at heart.”

The returning government workers said the Taliban appear genuine in wanting to root out corruption and offer transparency.

They aren’t told everything. A closely guarded secret of the Taliban is how much cash remains in state coffers. Ministry and bank officials estimate this could be just $160 million to $350 million.

“They are very sincere about the country, they want to boost morale and create friendly relations with neighbouring countries,” said another banking official. “But they don’t have expertise in banking or financial issues. That is why they requested we return, and that we do our work honestly.”

Mawlawi Abdul Jabbar, a Taliban government adviser, said the returning experts are “with the government. And they are working on the financial issues to solve these problems.”

The Taliban are strengthening relations with businessmen who trade in basic goods with neighbouring countries.

An active proponent of forging business relations is Taliban adviser Abdul-Hameed Hamasi. He was recently greeted with a warm embrace at the wedding of the son of prominent businessman Baz Mohammed Ghairat.

Ghairat’s factories process everything from cooking oil to wheat. Hamasi said the Taliban were providing him with security, including permission to drive in bulletproof vehicles, so his dealings could continue.

But central bank limits on withdrawals are Ghairat’s chief concern. Without access to deposits, he cannot pay traders, he said.

The economic woes preceded the Taliban’s rise. Corruption and mismanagement were rampant in the former government.

In the first months of 2021, economic growth slowed and inflation accelerated. Drought undermined agricultural production as fuel and food costs spiked.

The Taliban’s capture of border posts and transit hubs ahead of Kabul’s fall exacerbated matters.

Government officials, schoolteachers and civil servants hadn’t received salaries for two to three months before the government collapsed. Many sold household goods or accumulated debts with neighbours and relatives to make ends meet.

Sayed Miraza, an Agriculture Ministry employee, arrived at the bank at 4 a.m. one Saturday morning. People had already lined up to access their weekly withdrawal limit of 20,000 afghanis, or $200.

Miraza’s account is empty. He came to pick up a Western Union transfer from a nephew in the U.S. “We ran out of food, so we had to ask for help,” he said. By 9 a.m. he was still waiting.

In a Kabul flea market, Hematullah Midanwal sells the items of people who have run out of funds.

“They come sometimes with their entire living rooms, everything down to spoons,” he said.

Many hope to leave Afghanistan. Given the chance, the technocrats running the country’s finances would also leave, every single one interviewed by the AP said.

One central bank official said he was waiting on his asylum papers to go to a Western country. “If it comes, I will definitely leave. I would never work with the Taliban again.”

Our Morning Update and Evening Update newsletters are written by Globe editors, giving you a concise summary of the day’s most important headlines. Sign up today.

Adblock test (Why?)



Source link

Continue Reading

Economy

Australia's economy likely contracted in Q3 but recovery expected soon – Financial Post

Published

 on


Article content

BENGALURU — Australia’s economy likely contracted in the third quarter as fresh lockdowns weighed on consumer spending and investments, but the extent of the fall was milder than the historic recession recorded last year, a Reuters poll showed.

Despite Australia’s success last year in containing the COVID-19 virus, fresh flare ups and the stay-at-home rule imposed this year severely dented economic activity leading to job cuts and calls for a ramped-up vaccination drive.

Advertisement

Article content

The Nov. 23-26 poll of 24 economists showed the A$2.07 trillion ($1.5 trillion) economy contracted 2.7% during the July-September quarter. Forecasts ranged from -3.8% to -1.9%.

If economists predictions were realized, it would mark a sharp turnaround in economic activity from the 1.8% and 0.7% expansion rates in the January-March and April-June quarters respectively.

“Extended stay-at-home orders in New South Wales and Victoria will have hit consumption, with services spending set to be particularly impacted,” said Felicity Emmett, senior economist at ANZ.

The year-over-year growth was estimated at 3.0% but that was over a decline of 3.6% in the third quarter last year, revealing no substantial growth.

Advertisement

Article content

Data released by the Australian Bureau of Statistics on Thursday showed capital expenditure https://www.reuters.com/markets/rates-bonds/australia-q3-business-investment-slips-outlook-surprisingly-resilient-2021-11-25 fell a real 2.2% in the third quarter but an upgrade to future spending showed analysts were expecting a rapid recovery to take hold.

Construction activity too declined last quarter but at a much smaller rate than expected, showing a recovery was not far off.

“The fact investment held up pretty well, we expect GDP to surpass its pre-delta level this quarter. Consumption will probably rebound very sharply given lockdowns have now ended,” said Marcel Thieliant, senior Australia & New Zealand economist at Capital Economics.

Advertisement

Article content

Despite the setback to economic growth last quarter, economists do not see that trend turning into a full blown recession.

With about 86% of Australia’s adult population now vaccinated and most restrictions eased, a swift recovery is anticipated on higher consumer spending.

“There is a saying that while history doesn’t repeat, it does rhyme. The pattern for GDP in the second half of 2021 is certainly rhyming with the middle quarters of 2020 – a sharp decline followed by a large bounce,” wrote economists at ANZ. ($1 = 1.3986 Australian dollars)

(Reporting by Shaloo Shrivastava; Polling by Md. Manzer Hussian and Devayani Satyan; Editing by Marguerita Choy)

Advertisement

Comments

Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

Adblock test (Why?)



Source link

Continue Reading

Economy

China's Economy Likely Remained Weak as Factories Slump – Financial Post

Published

 on


Article content

(Bloomberg) — China’s manufacturing activity likely remained subdued in November, with weak domestic demand in the economy outweighing any relief that came from an easing in energy shortages.

The official manufacturing purchasing managers’ index is forecast to improve slightly to 49.7 from 49.2 in October when it’s released Tuesday, according to the median estimate in a Bloomberg survey of economists. That would be the third month it stays below the key 50-mark, indicating a contraction in production. 

Advertisement

Article content

The non-manufacturing gauge, which measures activity in the construction and services sectors, is forecast to fall to 51.5 from 52.4 in the previous month. 

China’s energy shortages, which ravaged factory production in September and October, likely eased this month as coal producers boosted output and inventories rose. However, the housing market crisis shows no signs of ending, and frequent Covid-19 outbreaks continue to curb consumption.

“Supply-side restrictions have improved marginally, so production likely rebounded somewhat,” said Xing Zhaopeng, senior China strategist at Australia & New Zealand Banking Group Ltd. But there’s “not much positive signal on domestic demand,” which continued to weigh on activities, he said.

Advertisement

Article content

Economic growth is forecast to slow to 5.3% next year, according to a Bloomberg survey median, with some economists seeing expansion as low as 4%. Bloomberg Economics forecast growth will come in at 5.7%, as the government will likely target a 5-6% range.

What Bloomberg Economics Says…

“In 2021, policy played a secondary role in setting the growth trajectory. In 2022, it will be pivotal. The extent of the slowdown will hinge largely on what balance China strikes between supporting short-term growth and advancing long-term reforms.

…We see the People’s Bank of China cutting the interest rate on its one-year medium-term lending facility by 20 basis points and the reserve requirement ratio by 100-150 bps by end-2022.”

Advertisement

Article content

— Chang Shu and David Qu

For the rull report, click here

Authorities are trying to moderate the sharp downturn in the property market, while providing targeted support to areas such as small businesses and green technology. Officials will reveal more clues on how much policy easing they plan to provide during two key political meetings in December by the Politburo and the Central Economic Work Conference.

China will adopt a more proactive macroeconomic policy next year to respond to the challenges from an uneven recovery of the global economy and instability in containing the pandemic, the Securities Times, run by the People’s Daily, said in a front-page commentary Monday. 

Authorities have exercised restraint in using monetary and fiscal tools amid an economic slowdown this year, thus creating sufficient space for policy maneuvering next year, according to the commentary.

The slowdown is being cushioned by strong export demand, which likely remained solid in November, judging by latest shipment figures from South Korea.

Consumption and travel continues to be affected by a resurgence in virus cases and the country’s growing determination to stick to its strict Covid Zero strategy. Subway passenger traffic in six major cities of China declined less than 10% in November from October, though the plunge is smaller than that over the August outbreak, according to Xing. 

©2021 Bloomberg L.P.

Bloomberg.com

Advertisement

Comments

Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

Adblock test (Why?)



Source link

Continue Reading

Economy

China's Economy Likely Remained Weak as Factories Slump – Bloomberg

Published

 on


China’s manufacturing activity likely remained subdued in November, with weak domestic demand in the economy outweighing any relief that came from an easing in energy shortages.

The official manufacturing purchasing managers’ index is forecast to improve slightly to 49.7 from 49.2 in October when it’s released Tuesday, according to the median estimate in a Bloomberg survey of economists. That would be the third month it stays below the key 50-mark, indicating a contraction in production. 

Adblock test (Why?)



Source link

Continue Reading

Trending