SRSG Lyons statement at Afghanistan Economic Conference

23 Jan 2022

SRSG Lyons statement at Afghanistan Economic Conference

KABULStatement by the Secretary-General’s Special Representative for Afghanistan, Ms. Deborah Lyons

Afghanistan Economic Conference – A New Beginning, 19 January 2022

Excellencies, I congratulate you for the initiative of holding this conference. The economic situation is not the only problem facing Afghanistan today, but it is one of the most urgent problems, and above all one where action is possible and must be taken quickly.

A number of positive steps have already been taken by your administration. Foremost among these is the adoption of a national budget that for the first time is totally financed by national revenues and not dependent on any donor grants. In addition, revenue generation has been growing, despite the economic slowdown, in large part because of efforts to address corruption. Exports have also reached the US$ one billion mark for first time ever. Payment of salaries to civil servants for two months have been made with hopes for regular payments in future. The cost of government has been reduced from previously unsustainable levels. Finally, the current administration was able to address the currency crisis of last November and December and restore some confidence in the Afghani. These are all positive developments that demonstrate a commitment to economic growth and sovereignty.

But Afghanistan is going through an unprecedented economic shock. The economy is projected to contract another 20 to 30 per cent. The sudden stop in donor and government expenditure left the country unable to finance imports of medicine, machinery, and food. Disruptions to trade and the banking sector destroyed livelihoods. Over half the population was living below the poverty line before August 15. UNDP estimates that this is worsening daily and could increase to over 90 per cent in 2022.

As a result, human development gains of the last two decades have begun to unravel. Some 23 million people are in a state of humanitarian emergency. UNICEF estimates that over one million children—Afghanistan’s future generation—are at risk of dying from malnutrition and hunger-related disease.

There are many factors that have contributed over time to this situation, most notably, it has to be said, are the forty years of internal conflict. More immediate factors include the freezing of reserves held in foreign banks on Afghanistan’s behalf, the complete and sudden cessation of development aid, ongoing economic sanctions, the lack of clear policies by the current administration regarding the private sector—which I hope will be discussed today— as well as lack of capacity from the country due to migration and evacuation.

We at UN have been working with the major donor countries to address a number of factors relating to aid and sanctions. Over the past months, UNAMA and the wider UN system has persistently made the case to ease sanctions so that the economy can function. We have also urged donors to provide funding for basic services and livelihoods. We have made this case publicly and privately, bilaterally and in multilateral forums. And we will continue to do so.

I am pleased to say that our efforts have brought some results. The UN’s September 2021 humanitarian appeal raised more than US$1 billion which has started flowing in. We secured the permissions to import cash to address the crippling lack of liquidity. We imported US$121 million in December 2021 and US$32 million in January so far. We expect this will have to continue until the banking system, and the Central Bank in particular, can function more effectively.

Donors are beginning to heed our calls to go beyond core humanitarian aid and cover basic human needs, especially providing financial incentives for teachers and health workers, as well as assistance for supporting livelihoods and community resilience. The Security Council last month adopted resolution 2615 allowing humanitarian assistance and other activities that support basic human needs in Afghanistan and incidental processing and payment of funds and provision of goods and services. The United Nations has also recently presented to donors a consolidated planning document, the Transitional Engagement Framework, that provides a vehicle for up to US8 billion to be provided directly to the people of Afghanistan for further humanitarian assistance as well as for re-starting economic growth. Finally, we, along with the central bank, are working on a temporary humanitarian exchange facility which, if agreed, would help reduce the burden on the balance of payments and facilitate Afghanistan’s payments abroad on essential imports like electricity.

Yet even with all of this, our efforts are insufficient compared to the needs. Humanitarian aid cannot replace a functioning economy, and that’s what we are here to talk about today. The measures we are putting in place to increase liquidity cannot replace a properly functioning Central Bank. We are still addressing the crisis rather than the root causes of the crisis, of which I will suggest three. First, Afghanistan’s longstanding dependency on international donors which created the vulnerabilities we have seen when donor funding abruptly stopped. Second, Afghanistan’s longstanding under-development, which has been consistently blocked and undermined by four decades of conflict. Third, the most immediate challenge, the unresolved status of Afghanistan’s current situation with the rest of the world.

These root causes can only be addressed if the economy is seen not as an isolated issue but as an integral element of a process of national and international reconciliation. Indeed, economic progress, diversity and inclusion, human rights, and equality between all citizens, are closely connected. Economic growth stems from innovation, which requires education for all, creativity, technical capacity, and using the diversity and talents of the entire population. Special mention must be made here of the women and girls who represent half of the population and, as countries around the world have learned, are critical for economic prosperity. In addition, the current administration needs to generate trust and predictability 4 so that all Afghans can participate in the economy without fear, and that Afghans with money to invest can do so with confidence. A wider a process of national reconciliation and the creation of durable institutions of consultation would generate greater confidence in Afghanistan’s future and make it easier for Afghans abroad to heed the calls to return to their country and help rebuild it. A clearer commitment to enforce the statements of amnesty would also help. These measures would not only be highly beneficial for Afghanistan’s economic well-being, they would simultaneously greatly improve Afghanistan’s relationship with the rest of the world.

In the long term there are great opportunities for Afghanistan that arise from the cessation of the conflict. But succeeding in these priorities demands the creation of an enabling, peaceful and stable policy environment, which will generate trust amongst the Afghan population in the future of the country and their place in it. The government should devote its total energies on this goal, which will in addition give donors, neighbours, and investors confidence in a brighter Afghan future. Thank you for the opportunity to make these comments.

Thank you also for the initiative of holding this important conference. I look forward to recommendations that we can work on together to exit the crisis and build a strong economic foundation that can sustain an Afghan state that is responsible to its people and its international obligations.