Taliban Presence in Afghanistan is Inversely Proportional to FDI Inflows

The American troops have pulled out of Afghanistan. As a result, the Taliban rose to power. Formally, the armed group is now controlling the country. Meanwhile, Biden termed the Afghanistan situation ‘messy’ while defending his decision of abandoning the war-torn country. Speaking of which, the evacuation of American citizens has resumed today. As of now, there are no reports of skirmishes between the Taliban and the US army. The US Army that were sent to streamline the evacuation process. Although a good number of Afghans have fled the country, fearing the Taliban.

With all this said, the people of Afghanistan are bound to reel under immense hardships given the world won’t recognize the Taliban government any time soon. It looks like the country is on its own. No Foreign Direct Investment (FDI) inflows hint at a feeble economy. It’s highly unethical to rule out that the country is on a brink of civil war.

Let’s look at the numbers when NATO development projects were going on in Afghanistan that greatly impacted the country’s GDP. The FDI inflows have shown a substantial increase during the NATO tenure and with the forces withdrawn, there won’t be any FDI boost to the country’s GDP. Given the volatility of the present circumstances, it’s unlikely that the country will receive any foreign investments. In 2013, Afghanistan received USD 39.6 million and the number increased to USD 163 million in 2015. The country received an all-time high of FDI of USD 271 million in 2005. According to UNCTAD 2029 World Investment Report, in 2018, inflows recovered to USD 119 million, although they fell back to USD 38.5 million in 2019. In a nutshell, during the NATO time in the country, there was some kind of FDI investment that the country received. According to the most recent data provided by UNCTAD, FDI stock — at USD 1.6 billion — represented eight percent of the country's GDP in 2019.

In addition to FDI inflows, the economic activities with the neighboring countries including China can take a serious hit with the Taliban at the gates. However, the armed group seems to have a diplomatic channel open for the Chinese.

To sum it up, Afghanistan is in a bad shape from a financial standpoint. The huge foreign investments that the country received over 20 years have profoundly impacted common Afghans. To some extent, at least!