Speaker 1: Hello, and welcome to another episode of the Odd Thoughts Podcast.
Speaker 1: I'm Tracy Allaway and I'm Joe Wasn't you know, Joe.
Speaker 1: It's obviously the start of a new year, and I'm
Speaker 1: just thinking back to and there were so many things
Speaker 1: that happened. It's kind of crazy when you think back.
Speaker 1: I mean, just think back this time last year. Game
Speaker 1: Stop hadn't even really begun to take off, and then
Speaker 1: it suddenly became such a big thing. But it feels
Speaker 1: like that happened, I mean absolutely ages ago. Yeah, it
Speaker 1: really does. I feel like there were some really big
Speaker 1: themes obviously we don't need to go over them that happened,
Speaker 1: but there were also just a bunch of smaller, remarkable stories. Yeah,
Speaker 1: and you mentioned remarkable stories. So one of the very
Speaker 1: big thing things that happened last year was the fall
Speaker 1: of Afghanistan, and we had those dramatic scenes out of
Speaker 1: Cappel as people scrambled at the airport to try to
Speaker 1: get out of the country. And it's one of those things,
Speaker 1: you know, at the time, people were talking about how
Speaker 1: those pictures were going to go down in history. It
Speaker 1: was all over the news. The news cycle focused on
Speaker 1: it a lot and we did an odd Lots episode
Speaker 1: on it at the time, but it's sort of fallen
Speaker 1: off the front pages since then, and in the meantime,
Speaker 1: Afghanistan has really been struggling under Taliban rule. You see
Speaker 1: these news reports now again they're not on the front page,
Speaker 1: but somewhere in the back of the newspaper talking about
Speaker 1: mass starvation, inflation, absolute economic collapse. And I think it's
Speaker 1: important that we do a follow up on what is
Speaker 1: actually going on in the Afghanistan economy right now. Right, So,
Speaker 1: Afghanistan was in the news for about two weeks near
Speaker 1: the end of I think it was around the end
Speaker 1: of summer. And obviously one aspect of it was just
Speaker 1: the withdrawal after you know, basically two decades of the U.
Speaker 1: S Forces being there. But then the other aspect was
Speaker 1: simply the dramatic pictures at the airport and around the
Speaker 1: airport and people there was an evacuation, and then of
Speaker 1: course the cameras left, and you don't see much Afghanistan
Speaker 1: in the news. But to your point, everyone anticipated that
Speaker 1: there would be extreme economic fragility and likely inflation due
Speaker 1: to the balance of payments issues and the loss of
Speaker 1: aid that would come along with a rule by the Taliban,
Speaker 1: and now we seemed to be seeing exactly that that
Speaker 1: an economy that was already in bad shape is an
Speaker 1: extremely bad shape right now, Yeah, exactly right. And there's
Speaker 1: clearly an informational challenge here, right, which is that there
Speaker 1: aren't a lot of journalists operating in Afghanistan at the
Speaker 1: moment for obvious reasons. There isn't a lot of clear
Speaker 1: financial data necessarily coming out of the country, and so
Speaker 1: that can be difficult um or make it difficult to
Speaker 1: actually report on the situation there. We are going to
Speaker 1: try our best. In this episode, we are going to
Speaker 1: be speaking once more with Ashmal Ahmadi. He's the former
Speaker 1: governor of Afghanistan Central Bank, now a senior fellow at
Speaker 1: Harvard University. So Ashmal, thank you so much for coming
Speaker 1: back on the show. Thank you very much for had
Speaker 1: It's a pleasure to be here. So maybe just to begin,
Speaker 1: could you give us your impression of the situation on
Speaker 1: the ground in Afghanistan since we last spoke to you
Speaker 1: back in August. You know, I mentioned some of the
Speaker 1: things that we've seen, reports of starvation, double digit inflation,
Speaker 1: currency volatility. I think there was one day in December
Speaker 1: where apparently the Afghani fell something like in one day,
Speaker 1: and that's obviously been challenging for people on the ground.
Speaker 1: But what are you hearing from your contacts in the country.
Speaker 1: I think it's it's in line with what you're hearing
Speaker 1: as well. The economic situation continue to deteriorate. The situation
Speaker 1: is getting worse. So, you know, back in August when
Speaker 1: when we first spoke, I've mentioned a few things. One
Speaker 1: that you likely see a large GDP contraction, which is
Speaker 1: what we're seeing now. You're likely to see an effects
Speaker 1: depreciation which will pass on through to inflation, which we're
Speaker 1: also seeing. And we're likely to see an increase in
Speaker 1: refugee flows. UM. So I think all of that is
Speaker 1: in line. And so the people I speak with, um,
Speaker 1: you know, are are seeing the same things. Unfortunately. So
Speaker 1: when we last talked, we talked about I mean, you
Speaker 1: you basically anticipated this, you know, we talked about the
Speaker 1: difficulty that Afghanistan would have important dollars. We talked about
Speaker 1: the current account and what would happen with the loss
Speaker 1: of aid, but you know, just sort of sort of
Speaker 1: talked about what's changed from a sort of like external
Speaker 1: perspective where we're where was the Afghanistan getting its money
Speaker 1: prior to the change in rule, how is it financing itself?
Speaker 1: And what do sort of domestic operations look like now.
Speaker 1: So originally, let's say the current account deficit or the
Speaker 1: trade deficit, I'm sorry, it was approximately seven billion dollars
Speaker 1: which was being financed by international aid flows. And so
Speaker 1: obviously the eight flows have have stopped, the assets have
Speaker 1: been frozen, and so you know, what you're seeing is
Speaker 1: a contraction of the imports that are flowing into the
Speaker 1: country because they can no longer be paid for. No
Speaker 1: official numbers have come out, but I would expect that
Speaker 1: current account more trade deficit to significantly contract over the
Speaker 1: course of two you know, to be honest, Actually the
Speaker 1: currency depreciation hasn't been as significant as I would expect,
Speaker 1: so it's it's appreciated. Um, it's gone to about I
Speaker 1: think the latest figures roughly and ten. It went higher
Speaker 1: than that came back, um, But that's depreciation. Given the
Speaker 1: economic shock and stoppage of aid flo as, I was
Speaker 1: expecting even a larger um depreciation. But I think what
Speaker 1: you have is the transmission mechanism being instead of the
Speaker 1: currency being g d P, so you've had a larger
Speaker 1: GDP contraction than I would have expected. So, something that
Speaker 1: we talked about a lot back in August, UM, and
Speaker 1: you just mentioned it then, was the fate of this
Speaker 1: nine billion in dollar reserves that Afghanistan actually owned but
Speaker 1: was held by the US. So my understanding is the
Speaker 1: US still doesn't want to hand it over because they
Speaker 1: don't want to give money directly to the Taliban. But
Speaker 1: can you maybe walk us through the situation around those
Speaker 1: deposits right now and what the likelihood is that Afghan
Speaker 1: Afghanistan actually gets them at some point. Yeah, So the
Speaker 1: currency reserves are still frozen, UM, and the situation has
Speaker 1: become even more complicated since the last time we spoke.
Speaker 1: So the New York Times has reported on this a
Speaker 1: few times. On September, there was a rid of execution
Speaker 1: that was provided to to the legal department of the
Speaker 1: Court system saying essentially that the plaintiffs of the September
Speaker 1: eleventh attacks would like to have access or gain access
Speaker 1: to the reserves. If you recall, you know, perhaps twenty
Speaker 1: years ago, UM, there was a court case against al
Speaker 1: Qaeda and Taliban, and a court found that defendants in
Speaker 1: this case, Al Qaida and Taliban liable by default more
Speaker 1: than paid damages of seven billion. Now that core case was,
Speaker 1: you know, on paper, there's no way to actually collect
Speaker 1: on that. So what happened is these victims, approximately a
Speaker 1: hundred fifty of them, gathered together and on September provided
Speaker 1: this brid of execution. What what happens now is is
Speaker 1: a little bit unclear. My understanding is the court system
Speaker 1: seeks to have the opinion of the U. S Government
Speaker 1: in such cases, and originally the US government and the
Speaker 1: Biden administration were to provide their opinion back in December,
Speaker 1: but now that's been delayed until the end of August.
Speaker 1: So all this to say is that you have these reserves.
Speaker 1: Of course, the Taliban would like access to them. At
Speaker 1: the same time, it's being held up through the U S.
Speaker 1: Court system, where the defendants or the victims of surrender
Speaker 1: eleventh would like access to them. And it's my understanding
Speaker 1: that as sometime this year, in perhaps January February, there
Speaker 1: will be a decision made as to the status of
Speaker 1: those within that. You know, The Times pointed out that
Speaker 1: perhaps a portion of it could be used to pay
Speaker 1: the victims of September eleven, and a portion could be
Speaker 1: read up to provide humanitarian assistance for the people of Afghanistan.
Speaker 1: So that's the current situation as I understand. So just
Speaker 1: to be clear, who would make that choice, it would
Speaker 1: have to be a court ruling, and would that be
Speaker 1: a final ruling or if there or a court ruling,
Speaker 1: would that just go to potentially another appeal. It's a
Speaker 1: good question. I guess I'm not clear if it would
Speaker 1: be a final ruling, but it's my understanding that the
Speaker 1: court system would have to um decide on this case,
Speaker 1: and there might be negotiations between the Justice Department and
Speaker 1: the plaintiffts to see what the final outcome would be.
Speaker 1: But I'm unsure if whether it be able to go
Speaker 1: to um An Appeals Corton, But just thinking out loud,
Speaker 1: probably wouldn't because in this case, the Taliban or al
Speaker 1: Qaeda is not going to represent themselves in court, so
Speaker 1: I don't know who would actually appeal to that judgment.
Speaker 1: The other thing that's happened since we last spoke is
Speaker 1: I guess you've got a replacement at the Central Bank.
Speaker 1: Um Mohammed address is the new Afghanistan Central Bank Governor
Speaker 1: as far as I know, there aren't a lot of
Speaker 1: details available about his previous experience in economics or monetary policy.
Speaker 1: But what do you know about him, and what's your
Speaker 1: impression of how he's been running the central Bank or
Speaker 1: how the central Bank has been running in general so far?
Speaker 1: So he is um the new central Bank governor. He
Speaker 1: was previously on the Taliban Economic Commission, and my understanding
Speaker 1: is that he doesn't have a strong background in economics
Speaker 1: or finance issues, and as such he's dependent on senior
Speaker 1: staff that remained there to run the operations day to
Speaker 1: day and run the policies. I think he's kept some
Speaker 1: members of the staff that were there when when I
Speaker 1: was governor, and some others have been fired or relieved
Speaker 1: from from working at the Central Bank. The policies that
Speaker 1: he's implementing are roughly in line with what I would
Speaker 1: have expected. So I mentioned in our previous call that
Speaker 1: one of my last actions was to limit the withdrawals
Speaker 1: that people could take out given the shortage of dollars,
Speaker 1: and so I think that's continued, and so they've placed
Speaker 1: a limit which has slowly increased over time. So I
Speaker 1: think people can UM. I think it was two hundred originally,
Speaker 1: and I think it might have increased to three hundred
Speaker 1: or four hundred over time, so I think that that's
Speaker 1: the right approach. I've also read that the Taliban are
Speaker 1: collecting approximately three million per day in revenues, so roughly
Speaker 1: a billion dollars per year in revenue, so that's given
Speaker 1: them some flexibility, I think, to provide currency to the
Speaker 1: business community and the financial sector, um. So overall, you know,
Speaker 1: I think, again it's a tough situation. He probably doesn't
Speaker 1: have the background or experience, but again, anyone even with
Speaker 1: experience in this situation would find it tough to run
Speaker 1: central bank understanctions. So I remember, one of the things
Speaker 1: that really struck me about your description of your time
Speaker 1: on the job was obviously sort of like monetary policy
Speaker 1: as it's understood, with part of it, but also real
Speaker 1: nuts and bolts stuff like how do you get cash
Speaker 1: out to provinces that are further away from the capital,
Speaker 1: how do you get cash to places where it's safe
Speaker 1: and unlikely to be stolen or unlikely to be under
Speaker 1: the control of the Taliban obviously the whole countries under
Speaker 1: the control of the Taliban to some extent. What's your
Speaker 1: impression of that aspect of how the central bank is
Speaker 1: working in terms of like just the just the mechanics
Speaker 1: of cash distribution. It's a good question. I don't have
Speaker 1: that much insight or into how they've changed their operations.
Speaker 1: You know, I would expect it to be along the
Speaker 1: same lines of what we manage, just with much fewer dollars.
Speaker 1: So we had, um, you know, anx auction system where
Speaker 1: banks and currency traders came in and bid electronically for
Speaker 1: dollars to be auctioned off. And you know, on average,
Speaker 1: you know, we have a certain amount that we would
Speaker 1: auction off three times a week. So I would imagine
Speaker 1: they have the same system going, but at a much
Speaker 1: lower dollar auction rate. The one thing that has changed
Speaker 1: is I believe the u N now is providing some
Speaker 1: dollars to the central Bank. I believe, not for them
Speaker 1: to auction themselves, but they are now providing it to
Speaker 1: a private bank, a i B bank, which is larger
Speaker 1: bank in Afghanistan, so that they could provide dollars to
Speaker 1: the market. And this this, you know, brings in a
Speaker 1: larger question of how to provide dollars in this economy
Speaker 1: because the central bank is as such, a sanctioned entities
Speaker 1: of dollars can't be bit brought in and provided to them.
Speaker 1: But some people are proposing that instead of providing to
Speaker 1: the central bank, it's provided to a private bank who
Speaker 1: then conducts the functions of the central bank. Yeah, this
Speaker 1: is something that I wanted to ask you about. So there,
Speaker 1: I mean, we can get into the sanctions issue um
Speaker 1: in a little bit. But one of the ideas floating
Speaker 1: around is that you could maybe give money directly two
Speaker 1: people or to certain groups and bypass the Taliban completely.
Speaker 1: But I imagine in order to do that you need
Speaker 1: to have a functioning banking system. And as we discussed
Speaker 1: the last time you were on, so much of the
Speaker 1: Afghanistan financial sector is informal. There are these informal money
Speaker 1: lenders called I want to say, Sarafa's is that right?
Speaker 1: And so I guess my question is like, what is
Speaker 1: the current stay of Afghanistan's banking system and would it
Speaker 1: be able to handle those kind of direct payments or
Speaker 1: would you inevitably expect to see more and more financial
Speaker 1: activity taken up by informal money lenders or the black market. Again,
Speaker 1: you know, the informal Whoala dealers you know already provide
Speaker 1: financial services to the majority of Afghans. There's only banked market.
Speaker 1: But but again the banking sector, you know, if it's
Speaker 1: even only the banking sector provides the financial services for
Speaker 1: the who walas or provides dollars for the who aalas
Speaker 1: who then provided to the rest of the population. So
Speaker 1: it is difficult to move forward without a functional financial sector.
Speaker 1: And so the broad question I think that um some
Speaker 1: people in in the international community or thinking about, is,
Speaker 1: you know, how do we either deal with the central
Speaker 1: bank as a sacient entity or be how do we
Speaker 1: create a financial sector without the central bank? And so
Speaker 1: under the second option, what some people have proposed is
Speaker 1: simply to say, look, the central bank is sanctioned, we
Speaker 1: can't provide dollars through it, So why don't we have
Speaker 1: a private bank perform the functions of the central bank.
Speaker 1: And so I think that's something people are taking a
Speaker 1: look at and on a trial basis. It's my understanding
Speaker 1: that the UNDP, for example, has provided some money for
Speaker 1: a I B to distribute it um to the business community,
Speaker 1: so that could be potentially one option moving forward. One
Speaker 1: question I have about the tail band's cash management needs
Speaker 1: is who is supporting it right now? And there's the
Speaker 1: US and the sanctions, which we'll talk about shortly, But
Speaker 1: is it getting cash and support and do you have
Speaker 1: any sense of what scale from any allies right now?
Speaker 1: They are not to my knowledge, getting any dollars from
Speaker 1: directly from any donors or many international organizations. There only
Speaker 1: sources funding right now is um for example, through taxes
Speaker 1: and customs. So you know, as I mentioned before, approximately
Speaker 1: three million a day, so approximately a billion a year.
Speaker 1: How long can this situation go on for? Like? What
Speaker 1: is the ultimate end game here? I think broadly speaking,
Speaker 1: you know, one of the goals we had in the
Speaker 1: government was to build state institutions that could take on
Speaker 1: more and more responsibility from the international community. So for example,
Speaker 1: you know, there were some services that the u N
Speaker 1: agencies or NGOs were providing that over time we wanted
Speaker 1: the government to take on. And I think in some
Speaker 1: sense you're seeing a reversal of that. What's happening now
Speaker 1: is there's fewer and fewer functions that will be taken
Speaker 1: up by the government and more and more responsibilities will
Speaker 1: fall on the u N and NGOs to provide. So
Speaker 1: you know, some examples of that is, you know this
Speaker 1: financial services or money transfer system. Instead of going to
Speaker 1: the central bank, may I go, may go to a
Speaker 1: private bank to conduct central bank activities. Another example is
Speaker 1: education and health services will likely be provided through NGOs
Speaker 1: or through the u N. Some of those functions people
Speaker 1: argue should be retained by the state. So, for example,
Speaker 1: the education sector, instead of the u N hiring a
Speaker 1: hundred thousand teachers, we have already in the civil service
Speaker 1: a lot of teachers. Why don't we go ahead and
Speaker 1: just pay them? And under the new carve outs of
Speaker 1: the sanctions regimes, the new exemptions u S Treasury has provided.
Speaker 1: My understanding is that the u N is able to
Speaker 1: pay for teacher salaries. So in some it's you know,
Speaker 1: the flow will be now a donor, whether it's the
Speaker 1: u S or European Union or another country, will provide
Speaker 1: aid to the u N and the u N can
Speaker 1: then pay for teachers directly without paying them through the
Speaker 1: Ministry of Education, which might be a sancition entity. Or
Speaker 1: the donor will give money to an NGO who provide
Speaker 1: health services and therefore won't touch the Taliban government. Um.
Speaker 1: So you have a number of these workarounds, which in
Speaker 1: some ways is hollowing out of the central government, but
Speaker 1: it's it's a way to deal with the situation as
Speaker 1: it stands. What are the dollar amounts we're talking about
Speaker 1: with these alternative arrangement relative to the to the gross
Speaker 1: level of a that was going in previously, uh previously
Speaker 1: through the government. So previously we had what was around
Speaker 1: two and a half billion going to the central government
Speaker 1: and another three billion for the military. So let's call
Speaker 1: it roughly five billion of international aid and two and
Speaker 1: a half billion from domestic revenues, so seven and a
Speaker 1: half total. That's a large figure. You have to take
Speaker 1: into account that now a significant portion of that is
Speaker 1: no longer required. A significant portion of our budget was
Speaker 1: for military salaries and police salaries, and given that now
Speaker 1: the conflict, with the level of conflict has significantly reduced,
Speaker 1: those amounts should be much less and likely you can
Speaker 1: pay or they'll be forced to pay the teacher, the
Speaker 1: police and military, the Taliban military less. So that's one
Speaker 1: way I think you'll see a contraction of what's required.
Speaker 1: The second is the amount that the u N has
Speaker 1: thus far stated they want to collect for if I
Speaker 1: are remembers they said they want to raise approximately four
Speaker 1: billion for humanitarian purposes and another perhaps four billion four
Speaker 1: other programs, and and I think that's probably over optimistic.
Speaker 1: Probably even the original four billion maybe too optimistics, But
Speaker 1: that that gives you an indication roughly, right, So seven
Speaker 1: a half billion total government budget, A lot of that
Speaker 1: can be it can be much less, and so therefore
Speaker 1: you have, you know, perhaps if the un a successful
Speaker 1: four billion being raised and provided for humanitarian purposes as
Speaker 1: well as teacher and teacher salaries and healthcarec delivery. So
Speaker 1: I get that maybe you could work all of that
Speaker 1: out from a budget perspective. But I guess my question is,
Speaker 1: is that a valid way of state building for the Taliban?
Speaker 1: This idea that you know, they only take on very
Speaker 1: limited government functions and basically outsourced things like healthcare and
Speaker 1: education to NGOs or non government entities who have the
Speaker 1: money and are able to do this. I mean, it's
Speaker 1: probably not the best possible outcome, but I think it's
Speaker 1: you know, this is the best possible outcome given the situation. Right, So,
Speaker 1: thus far no country in the world has recognized the Taliban,
Speaker 1: and so therefore no money is going to float to them.
Speaker 1: I think the Biden administration has made it relatively clear
Speaker 1: that they won't be any recognition anytime soon. But on
Speaker 1: the other hand, you have the humanitarian needs of the population,
Speaker 1: so you know, it's it's not the best case where
Speaker 1: you're building up the state capability, but it's a mechanism
Speaker 1: by which humanitarian assistance can be provided without the money
Speaker 1: reaching Taliban hands. I guess what I was trying to
Speaker 1: get it was would the Taliban be satisfied with this
Speaker 1: arrangement or at some point would it be seen as
Speaker 1: as undermining their authority in the country or do they
Speaker 1: not really care about that? No, No, of course they
Speaker 1: care very much about it. On November seventeen, the acting
Speaker 1: Taliban Foreign Affairs Minister released the public letter to the
Speaker 1: United States Congress, you know, stating that the funds must
Speaker 1: be released. There have been many comments and some demonstrations,
Speaker 1: I think just a few days ago in Cobble, demanding
Speaker 1: the release of the funds and demanding additional aid and
Speaker 1: for the aid to be directed through the government. UM
Speaker 1: but I think at this stage the international community just
Speaker 1: is not listening. And to that point, after that Taliban
Speaker 1: statement was released on November the U s Special Representative
Speaker 1: for Afghanistan tweeted that the US, you know, has already
Speaker 1: provided five million, and US officials made it clear the
Speaker 1: Taliban that if they pursued a military takeover rather than
Speaker 1: a negotiated settlement, that they would not be recognized. So
Speaker 1: you do have a situation where the Taliban are unhappy
Speaker 1: with the situation, but it doesn't look like the international
Speaker 1: community thus far as budget. I want to go back
Speaker 1: to something you talked about a little bit in the beginning,
Speaker 1: and you talked about the central bankers reliant to some
Speaker 1: extent on existing staff and some of the staff who
Speaker 1: probably worked close with you at the Central Bank. One
Speaker 1: of the big questions that people wondered about what would
Speaker 1: happen to the sort of like civil servants who had
Speaker 1: worked in government under a certain expectation of how the
Speaker 1: government would be run and then rapid change. How many
Speaker 1: staffords have they kept in place, and what has changed
Speaker 1: for the people who are essentially doing the work of
Speaker 1: running the government. And I guess based on the people
Speaker 1: you speak to and um your sense of the professionals
Speaker 1: basically running things, well, I think the first thing that
Speaker 1: comes to mind is female staff have been told to
Speaker 1: stay at home. So you know, I had a few
Speaker 1: directors who are female and Davids and she said stay
Speaker 1: at home and in other words, you know, they're they're
Speaker 1: not working there. Um So I think that's a big
Speaker 1: loss um and continues to be um. You know, we
Speaker 1: can talk about the education and the fact that they're
Speaker 1: not opening up schools as well, but you know, so,
Speaker 1: so that's a very import an aspect that needs to
Speaker 1: be discussed. Secondly, I think that I think they're hiring
Speaker 1: or valuing, you know, people who they know and people
Speaker 1: who they trust. So there's a number of people that
Speaker 1: I brought on professionals that have been released over the
Speaker 1: past year, and I think that's unfortunate for the Central
Speaker 1: Bank and for the country, and so they're forced to
Speaker 1: find other opportunities and the people who remained or in
Speaker 1: some cases people who have been there for thirty years.
Speaker 1: So I think I mentioned last time even we spoke
Speaker 1: that you know, I had one of my directors who
Speaker 1: has worked at the Central Bank since the since the
Speaker 1: Taliban were there previously, and so you know, he's someone
Speaker 1: that they kept on because there's some level of trust,
Speaker 1: I think. Um So, so it's a mix some people
Speaker 1: left or and went into hiding, and because they were
Speaker 1: afraid of that, what the reaction might be some people
Speaker 1: that were able to leave the country, and so it's
Speaker 1: it's it's a mix for for all the people who
Speaker 1: previously there. Can I ask a potentially sensitive question, So
Speaker 1: Ashraf Ghani, the former president, he infamously, I guess at
Speaker 1: this point fled Capal, you know, apparently right when the
Speaker 1: US and the Taliban were negotiating some sort of handover
Speaker 1: and UM. He gave an interview a few days ago
Speaker 1: where he basically defended his decision and said that he
Speaker 1: had done the best thing and that he'd saved Capple
Speaker 1: by leaving UM. And you know, I'm aware that obviously
Speaker 1: you've left UM quite quickly as well. But after the president,
Speaker 1: or after it had become clear that the president had
Speaker 1: already left, what do you think of that? Of like
Speaker 1: Ghani's explanation for why he left, I probably haven't changed
Speaker 1: my view from when we first spoke, which is he
Speaker 1: was placed in a very difficult situation. You know, some
Speaker 1: might say impossible, and so I recognize that. But at
Speaker 1: the same time, the decision on the last day for
Speaker 1: him to depart was his to take and you know,
Speaker 1: there should have been some planning or some recognition. You know,
Speaker 1: people debate whether, you know, if he should have stayed
Speaker 1: or left, but I think the key part is he
Speaker 1: should have known that things were deteriorating to such an
Speaker 1: extent that some planning had to take place. And I think,
Speaker 1: you know, the decision to leave on that last day,
Speaker 1: leaving me, leaving you know a lot of people to
Speaker 1: fend for themselves. Is you know where where I follow him? Ore?
Speaker 1: There's still people evacuations happening, are not formal evacuations, But
Speaker 1: are there still people who are finding their way out
Speaker 1: of the country at this point or to what degree
Speaker 1: has that been has that become impossible? There are still
Speaker 1: some people receiving approvals for SIV status or P one
Speaker 1: or P two status. The issue then becomes they have
Speaker 1: to travel to a third country um in order to
Speaker 1: apply and move the process forward, and that becomes really
Speaker 1: challenging for for some people. So there's still efforts, but
Speaker 1: I think the flow has has significantly declined. So there's
Speaker 1: just one more thing on the economy that I wanted
Speaker 1: to ask you about, and this is the idea of
Speaker 1: somehow retooling the existing Afghanistan economy in order to generate
Speaker 1: more revenue that the Taliban could actually be in charge of.
Speaker 1: And I think there was an official from the Taliban
Speaker 1: administration that talked about maybe boosting exports in order to
Speaker 1: get that money and avert economic collapse. And I guess
Speaker 1: my question is how viable is that given that Afghanistan
Speaker 1: has always been um you know, imports have always heavily,
Speaker 1: heavily outweighed its exports, which you talked about a little
Speaker 1: bit at the beginning of this discussion. Yeah, I think
Speaker 1: it's challenging. Right. So previously, before I was Central incouvernment
Speaker 1: as Minister of Commerce and UM, we tried to push
Speaker 1: exports up to a billion for the first time, but
Speaker 1: our imports for seven billion, right, so you can very
Speaker 1: easily see this the huge gap we have in our
Speaker 1: trade balance. So you know, even if they're successful, let's
Speaker 1: say they push up exports to know one point two billion,
Speaker 1: one point five billion, right, you're still going to have
Speaker 1: this very large trade deficit that you're gonna have to
Speaker 1: finance through some means. So you know, if it's possible,
Speaker 1: if they're able to get some mining projects going and
Speaker 1: increase exports. Um, that would help on the margin, but
Speaker 1: I think the larger question still remains. You know, the
Speaker 1: international community. Without the support of the international community becomes
Speaker 1: a very challenging situation. You know, back in August, there
Speaker 1: are these theories that China would come in or you know,
Speaker 1: a large mining projects potentially could come in and and
Speaker 1: support the Taliban government. And I was skeptical then, and
Speaker 1: I think that's um, you know, played out the way
Speaker 1: that I projected, in the sense that those kind of
Speaker 1: flows might be marginally supported, but um, the fundamental issue
Speaker 1: probably won't be resolved until there's some yes, it's until
Speaker 1: the international community finds out how to support them. And
Speaker 1: so you know, part of the solution is what we
Speaker 1: talked about just a few minutes ago, which is, you know,
Speaker 1: if international community does provide let's say four billion to
Speaker 1: the u N to spend in Afghanistan, and there has
Speaker 1: to be some oversight of the u N, but let's
Speaker 1: say that that gets spent in Afghanistan, Well, that's already
Speaker 1: providing a significant portion of funding for the trade deficits.
Speaker 1: You know, it's interesting. I was reading through some of
Speaker 1: the Inspector General reports and I hadn't read through them
Speaker 1: before until the fall, basically about its various aid and
Speaker 1: development initiatives that had taken place over the last twenty
Speaker 1: years to build up greater domestic industry and things like tech,
Speaker 1: textiles and crafts and other services. And it was sort
Speaker 1: of like it was a depressing read because it read like,
Speaker 1: you know, all of these endeavors were a large string
Speaker 1: of failures, and these programs that were designed to create
Speaker 1: jobs they largely didn't or numerous ones didn't. And they
Speaker 1: would say after five years that created four jobs after
Speaker 1: spending eighty million dollars or whatever it is. Do you
Speaker 1: have a sense and you're like, what is it about
Speaker 1: that approach to development that didn't work? Because obviously lots
Speaker 1: of money was poured in with the hope of creating
Speaker 1: some sort of some sort of sustainable industry, creating export,
Speaker 1: not a lot of successes. Why didn't it work? And
Speaker 1: is there a better was there? Is there a better
Speaker 1: model or was there a potential superior model? That's an
Speaker 1: important question. I think there is a better, better model,
Speaker 1: and there's a lot of flaws with the existing model
Speaker 1: you have is you know, and I remember back working
Speaker 1: in the ministry of Finance back in two thousand three
Speaker 1: when these eight flows were picking up. What happens is
Speaker 1: you have a lot of people coming in from various embassies.
Speaker 1: So you know, you have USAID, do you have UK aid?
Speaker 1: You have these various development agencies and they're looking for projects.
Speaker 1: So they're saying, hey, you know from d C or London,
Speaker 1: we just received X million dollars or billion dollars that
Speaker 1: we need to spend in Afghanistan. And then like you
Speaker 1: have the military aid contracting sector. So in the US
Speaker 1: UM there's a big three famous U said contractors, Camonics,
Speaker 1: d Ai, and I think one other who put together
Speaker 1: these projects. And then they also subcontract to local NGOs
Speaker 1: and and what happens is, without a lack of focus,
Speaker 1: a lot of aid agencies and geos come with projects
Speaker 1: that are you know, in some ways you could say important,
Speaker 1: but perhaps not useful for state development or helpful in
Speaker 1: the long run. Right, So you have you know, someone
Speaker 1: saying we need to provide bicycles for the handicap we
Speaker 1: need UM. I think there's a Washington Post article recently
Speaker 1: that said UM that cited a project where they imported
Speaker 1: Kashmir or goats from I forget where Nepal for Afghanistan
Speaker 1: and at the end, you know, at a very high cost,
Speaker 1: and at the end it didn't really support local industry.
Speaker 1: So you have a lot of these at Hawk projects
Speaker 1: going on that at the end don't add up. And
Speaker 1: so when you do that over a course of many,
Speaker 1: many years, you look back and you say, what was
Speaker 1: the impact of all that? And I think that's where
Speaker 1: the cigar reports come in, and and it's, as you said,
Speaker 1: perhaps a disheartening read. Um. So some you know, structural
Speaker 1: thinking needs to be had around how to provide better
Speaker 1: aid in these contexts, and especially now right, so it's
Speaker 1: not something that's passed. And now the at donors will
Speaker 1: provide funding to the u N and NGOs, a significant
Speaker 1: portion will go for humanitarian purposes and so that's more
Speaker 1: clear cut. You're but you're buying food or you're providing
Speaker 1: health services for the people, and it's not at Hawk projects,
Speaker 1: but a portion of that, you know, I think might
Speaker 1: go to such projects. And so some oversight needs to
Speaker 1: be continued, even even in the current environment, or perhaps
Speaker 1: more so in the current environment. Yeah, sorry, I just um,
Speaker 1: I started googling for that goat story Apparently the US
Speaker 1: spent six million dollars on a project to import nine
Speaker 1: Italian goats to boost Afghanistan's Kashmir market and it didn't work. Interesting,
Speaker 1: So I guess my last question is are there any
Speaker 1: catalysts on the horizon to improve the situation? It just
Speaker 1: feels like there's a very big well. It feels like
Speaker 1: there's a very negative dynamic in the Gghanistan economy right now,
Speaker 1: and it feels like it's incredibly difficult to correct it.
Speaker 1: I mean, it was challenging before when you were a
Speaker 1: central bank governor, and it seems even more challenging now
Speaker 1: given that the entire economy is so heavily dollarized but
Speaker 1: now doesn't have any access to dollars. So is there
Speaker 1: any point that you see where things might get better
Speaker 1: or where the system might end up getting fixed. I
Speaker 1: think we're not probably not going to end up with
Speaker 1: an optimal outcome. I think we're going to have to
Speaker 1: deal with a second best or third best type of
Speaker 1: situation that at its heart, it's not as stable as
Speaker 1: we would like. So you know, you're going to have
Speaker 1: a situation where the Taliban are going to be in
Speaker 1: power for the foreseeable future, there might be some issues
Speaker 1: or inter Taliban issues, but they're there right now. Money
Speaker 1: will not be flowing to them. It will be flowing
Speaker 1: through the u N and through NGOs to provide humanitarian
Speaker 1: assistance to the people. That amount will likely not be
Speaker 1: enough to grow the economy or raise living standards, or
Speaker 1: perhaps not even to sustain existing level extent. It's just
Speaker 1: going to decline to a lower state over time, and
Speaker 1: so that's on the negative side, I guess on the
Speaker 1: positive side, what I'd say is the U. S. Treasury
Speaker 1: has released three new general licenses which provides greater clarity
Speaker 1: to donors and and NGOs and the UN that they
Speaker 1: can provide services, and so that I think should open
Speaker 1: up the flow of humanitarian assistance in Afghanistan to a
Speaker 1: greater extent, so that we likely won't see the worst
Speaker 1: outcome which we've heard and read about over the past
Speaker 1: few months, which is, you know, as we move into
Speaker 1: the winter season, there's perhaps upwards of twenty million people
Speaker 1: who are food insecure, and so you know the risk
Speaker 1: to them of a severe negative outcome, and so I
Speaker 1: think we're likely to avoid that with these recent changes.
Speaker 1: But it's not going to create a situation that's going
Speaker 1: to improve. It's probably going to be a relatively stable
Speaker 1: but a situation where both parties are unhappy. Unfortunately, there's
Speaker 1: not better news. I don't think looking back at everything
Speaker 1: that's happened in the past few months, is there anything
Speaker 1: that you think you would or should have done differently
Speaker 1: with the benefit of hindsight. Yeah, yeah, it's a good question. Um.
Speaker 1: I'll answer in two parts. I think first, this was
Speaker 1: a state collapse on the grandest scale, and as such
Speaker 1: there's a lot of anger, and I understand that anger.
Speaker 1: And if there's a part that I contributed to that,
Speaker 1: then I take my responsibility. But what I will say
Speaker 1: is this was not a state collapse like it wasn't
Speaker 1: Lebanon where the central bank was at the heart of
Speaker 1: the collapse. This has not Venezuela or Syria where hyper
Speaker 1: inflation was taking place. You know, at the central bank,
Speaker 1: inflation was at four we had central bank reserves of
Speaker 1: fifteen months in port coverage, that provided fifteen months in
Speaker 1: port coverage ratio, and we're implementing payment systems that I
Speaker 1: think few central banks in the world have done. If
Speaker 1: there's something that I should have done, what it was
Speaker 1: you know to resign earlier and left. Um, and perhaps
Speaker 1: you know, seeing what was going on, recognized that I
Speaker 1: was not going to change the situation and leave. Well, Ajmal,
Speaker 1: thank you so much for coming back on the show
Speaker 1: and giving us an update on the situation. I appreciate it.
Speaker 1: Thank you very much for having It's a pleasure. Thank you,
Speaker 1: Jamal so Joe. Um, I can't say that was a
Speaker 1: fun conversation. Um. Obviously it was a very depressing conversation
Speaker 1: to hear about an economy collapsing and people being at
Speaker 1: very real risk of dying of starvation and things like that.
Speaker 1: But it was good to speak with Ashmal and get
Speaker 1: an update on the situation and also, you know, as
Speaker 1: he mentioned some of the accusations that have emerged since
Speaker 1: the fall of Trouble. Yeah, I mean, it's obviously I
Speaker 1: don't know if I would say it's an impossible situation,
Speaker 1: but certainly seems like a near impossible situation to have
Speaker 1: a sort of like robust thriving economy in in in
Speaker 1: a situation which are cut off and which are not
Speaker 1: not getting significant amount of dollar a at at least
Speaker 1: nothing like it was before, in which there isn't much
Speaker 1: of an export sector. It's pretty minor. Yeah, I mean
Speaker 1: it was already it is already difficult, and it's interesting
Speaker 1: to hear that how much of it is, how much
Speaker 1: of the leg down has been through is was surprised
Speaker 1: about it the shrinking GDP as opposed to sort of
Speaker 1: surging inflation, which I guess hasn't been as bad as
Speaker 1: he had expected. Yeah, that was interesting. The other thing
Speaker 1: that struck me is this idea of all the workarounds
Speaker 1: of how to actually get aid to people without it
Speaker 1: flowing through the Taliban, and this idea that I guess
Speaker 1: you're going to end up with the Taliban as a
Speaker 1: centralized government, but one that doesn't actually provide that many
Speaker 1: services other than I guess security, um and the army,
Speaker 1: and then everything else just ends up getting sort of
Speaker 1: outsourced to NGOs. Yeah, that's probably and it's very easy
Speaker 1: to imagine that that would be like it will also
Speaker 1: be interesting. This didn't come up in our discussion, but
Speaker 1: of course people often talk about the difficulty that any
Speaker 1: centralized authority in Cobbal would have in terms of uh
Speaker 1: the affairs of the state across the entire territory of Afghanistan,
Speaker 1: and it is somewhat easy to imagine that state of
Speaker 1: affairs as you're describing and as Jamala described of, Yeah,
Speaker 1: the NGOs delivering some of these services, donors rerouting around
Speaker 1: the Taliban, and that's sort of being the status quo
Speaker 1: for some time. Yeah, all right, well shall we leave
Speaker 1: it there? Let's leave it there. Okay. This has been
Speaker 1: another episode of the All Thoughts Podcast. I'm Tracy Alloway.
Speaker 1: You can follow me on Twitter at Tracy Alloway and
Speaker 1: I'm Joe Why Isn't All? You could follow me on
Speaker 1: Twitter at the Stalwart. Follow our producer Laura Carlson. She's
Speaker 1: at Laura M. Carlson. Follow the Bloomberg head of podcast,
Speaker 1: Francesca Leaving at Francesca Today, and check out all of
Speaker 1: our podcasts at Bloomberg under the handle at podcasts. Thanks
Speaker 1: for listening to