 Good morning, good afternoon or good evening depending on where you're joining us. My name is Scott Worden and I am the director of the Afghanistan and Central Asia program for the US Institute of Peace. It's my pleasure to pick off this very timely and important discussion on the economic and humanitarian crisis that is facing Afghanistan. We want to discuss this morning not just the dimensions of the crisis but also ways that we can mitigate the impact of a rapidly unfolding catastrophe. I'd like to thank everybody for joining us as well as our esteemed panelists for taking time out of your busy schedules to discuss this important issue. We invite all of you to take part in today's discussion by asking a question using the chat box function which is located just below the video player on the USIP event page and we ask that you please include your name and specify where you are joining us from in your questions. You can also engage with us and with each other on Twitter with today's hashtag hashtag Afghanistan USIP all one word. USIP was founded 35 years ago by the Congress to prevent mitigate and resolve violent conflict. We've had an office in Afghanistan since 2008 focusing on reducing drivers of conflict but now the biggest driver of conflict is the humanitarian crisis that is precipitated by a failed economy. In the three and a half months since the Taliban took over the country foreign assistance has been suspended the banking system is ground to a halt and hunger is a paramount concern for the majority of Afghans. We'll hear from our expert panel speakers today who are on the ground in Kabul as well as following policy developments in Washington about what are the dimensions of the crisis and ways to address it but I want to underscore the outset the need for action is not just to alleviate human suffering which should be enough but it's also to protect national security. A failed state due to economic collapse will create a refugee crisis that destabilizes the region and enables greater safe havens for terrorist groups like ISIS and al-Qaeda. This was the original reason that US intervened in Afghanistan and still a present threat so addressing the humanitarian crisis is also addressing core US national security concerns. To moderate this discussion let me introduce Kate Bateman. Kate is the newest member of the Afghanistan team here at USIP. She joins us as a senior expert after serving for several years leading lessons learned reports at SIGAR and working on policy and intelligence positions on South Asia at the State Department. Kate over to you. Thank you Scott for the introduction. My name is Kate Bateman I'm a senior expert at USIP. I'm thrilled to be moderating today's important panel discussion. We have an excellent lineup of expert practitioners joining us from Afghanistan and the US as Scott said and I'll ask a series of questions to our panelists before turning to the audience for your questions. As a reminder you can take part in today's discussion by asking a question using the chat box function located just below the video player on the USIP event page. But first it is my great pleasure to introduce our panelists Vicky Akin, Abdullah Al-Daudari, Khalid Payenda and Bill Bird. First Vicky Akin has served as the country director for the international rescue committee in Afghanistan since 2017. Before joining IRC Vicky served as country director for the humanitarian organization Goal in Syria, Sudan, South Sudan and Sierra Leone. Abdullah Al-Daudari has been the resident representative of UNDP Afghanistan since May 2019. Prior to that he was the senior advisor on reconstruction at the World Bank Middle East and North Africa vice presidency. In his home country of Syria he served as deputy prime minister for economic affairs and chair of the state planning commission during the early 2000s. Khalid Payenda served as the acting minister of finance of the Islamic Republic of Afghanistan the former government from January to August 2021 as well as secretary of the high economic council. He joined the ministry of finance as senior advisor to the minister in 2010 and has prior experience with the World Bank. And last but not least is USIP's own Dr. William Bird who has been a senior expert on Afghanistan since 2012. During 2002 to 2006 he was stationed in Kabul where he served as the World Bank country manager for Afghanistan and then as economic advisor. To those listening in you can find our speakers more complete bios on the event website. So I'd like to turn first to Vicky. Vicky as the Afghanistan country director for IRC you are on the front lines of the response to this humanitarian and economic crisis. But because of the Taliban takeover and much lower presence of international news outlets information about the situation on the ground is very limited perhaps much more so than even in in recent years as insecurity worsened. So can you describe for us what Afghans are living through right now of how are people even obtaining food and medicine staying warm as cold temperatures set in with little access to cash and the entire economy near collapse. Vicky. Yeah. Sure. Thank you Kate. I'd like to talk about six elements that are leading to an unprecedented humanitarian catastrophe within Afghanistan. The first is the drought. We're experiencing a severe drought and every single province in Afghanistan is classified as being either in food crisis or at emergency levels of food insecurity. 23 million people are in need of food assistance and one million children are facing secure acute malnutrition with below average precipitation expected for this winter. This is likely to get even worse come spring. The second is covid although the official numbers are low our community health workers throughout the country are still reporting large numbers of symptomatic people. But with clinics closed with the labs not working it's incredibly difficult to get the official numbers of that. And in addition to that covid had a devastating impact on the economy over these last few years. The third is the conflict. Now in the last several months conflict has greatly decreased which is one of the few positives. But in the first half of the of this year over 660,000 people were displaced from their homes. Critical infrastructure was healthcare infrastructure was destroyed when the the conflict heated up this past summer and now there's no money for repairs. I went into one hospital in Logar where all of the incubators were completely destroyed in a bombing and so all of the premature babies are just laying under blankets. The likelihood of their survival is very low. The fourth element is the sharp economic decline. With 9.5 billion in assets frozen with inflation and devaluation of the currency the average Afghan is struggling just to survive on a day-to-day basis. In recent WFP studies they noted that the average family the average labor is getting maybe one day of work a week and in normal times they need that just to feed them for themselves for that day. So most families don't have even the cash to survive and the the next one was the fifth element is the freezing of the development assets. This has led to a near collapse of the healthcare system which was almost fully funded by these funds. Now while they are working on solutions again as I mentioned we're facing unprecedented levels of need and even in the best of times the healthcare system would be overwhelmed by that so we immediately immediately need a solution not only for basic healthcare but for the hospitals as well. Schools are also struggling to reopen because there's no money to pay teachers. Again there's people are looking at solutions but we've already lost a year of education to COVID. We can't afford to lose a further year. And then the sixth element is winter. Winters in Afghanistan are quite harsh. I mean the only positive of the the drought is that people that normally live in areas that are inaccessible due to snow at least we have a little bit more time to reach them. With with people's immune systems compromised because they don't have enough food and all of the other elements the cold will be devastating. I've never seen so many malnourished children in this country and I've been here for four and a half years. The clinics are full of mothers and severely malnourished that children under five and so it's important that we're able to get them things immediately like blankets and fuel and winter clothes. We have to do that this now or some people will be out of reach. Thank you. Thank you for so well summarizing all the factors that are that are contributing to this unfolding disaster. Can you speak a little more to the experience of the humanitarian organizations on the ground? How many are there actively working? What are the main challenges that they're facing in getting aid to those who need it most? And do you see do you see any positive opportunities developing? Yeah there are both challenges and positive things. The challenges mainly come from the liquidity crisis and our inability to get cash into the country to buy the goods that we need to pay our staff. There are many alternative ways to do that but not all donors will allow or are worried about some of the alternative methods for getting cash into the country. But right now we could only get $25,000 a month out of our bank accounts here whereas we need about a million dollars a week to deliver the aid that we need to deliver. So you know the UN is working on alternative systems. Many people are working on alternative systems but we need those alternative systems now or we can't use the money that that donors are providing to us. And then there's of course there's challenges in getting people and goods into the country. You know we definitely need a functioning airport to help that along. But I would say there's also been a lot of positive developments. As I mentioned the conflict is lessening and places that we could only fly to before we can now get to by road so we can access a lot more people in rural areas where we haven't had access, some areas where we haven't had access to in years. It's now opened up for some but not all. The de facto government has been very cooperative and welcoming for assistance. They've eliminated a lot of the bureaucratic impediments that have been in place. They have welcomed some. It hasn't been the experience of all agencies but we've been allowed to to fully operate and to scale up and with all of our female staff who've been allowed to come back to work. So that has been something we were very worried about and have been glad to see that we're able to do that. In terms of the numbers I know some agencies are struggling and may have to shut down if they can't figure out a way to get cash in and to access their accounts. But we're all trying to fill a gap that humanitarians aren't meant to fill. We need the development funds to come back online as well. Right. Thank you very much for that. That's very helpful. I'd like to turn to Abdullah Aldardari now. As UNDP's resident representative in Afghanistan, you're also deeply engaged in trying to mitigate the crisis. So what's your assessment of the need and what has UNDP been able to do so far to address it? The phrase of the century. You're muted. Let's first agree that no humanitarian crisis can be solved with the humanitarian aid only. A humanitarian crisis of such magnitude requires economic policy, requires politics, requires national assistance and institutions. And do you know that the current political and sanctions situation does not allow to do all of that? So we need to maneuver to find the best solution possible within these limitations. Now financially the country just let's think about that. Last year's budget was about $12 billion, with about $7 billion in grants. Now who is going to give Afghanistan $7 billion in grants this year or next year? So that's a very big question hovering over the country. It's a dual shock that I have never seen in modern economic history. I have never seen a country that has a demand shock. So the immediate fiscal cliff of the grants and at the same time the freezing of the assets and also a supply shock with trade interruptions and so on. So it's a dual shock that is unique. For example, it took Syria five or six years of conflict to reach to the same level of GDP deterioration Afghanistan has already reached and we are not yet at the end of the year. So this is a massive situation. And if it continues, we are talking about the 97% poverty by June 2022. That's the universal poverty level that we've never seen before in any other conflict. So and do you know the relationship between development and humanitarian? If we do more development, we can reduce the humanitarian load down the road. So it has to be a very well coordinated operation. So now in the UN we have the humanitarian fund and the humanitarian response program, which is a large appeal. And we are talking about more than $4.5 billion for the humanitarian work next year. But we also need more than $3 billion at least to maintain some resemblance of a functioning economy to reduce this dramatic drop towards absolute poverty and to create livelihoods. And from day one the UN has been saying lives and livelihoods. You cannot save one without the other. And you cannot save livelihoods without some sort of national systems. We can introduce for example solar power and we will do a lot of solar panels. But who will determine the tariffs of those solar panels and of this power? That's just a simple example of the complexity of the situation. So the country needs humanitarian and I'm calling upon the humanitarian to to be generous about this and they have been generous. But we also need what we call a humanitarian plus. And we call it basic human needs. And it is allowed in the current license on sanctions. So UNDP has set up a large program called ABADI which connotes resilience and recovery in Pashtun and Dari. We have set up a special trust fund for Afghanistan bringing together 13 UN agencies to work as one in the area of livelihoods. And we started in Herat, in Nazar, in Jalalabad, in Kandahar supporting women-owned enterprises. We are targeting 65,000 women-owned enterprises and a lot of public work at the local level to rehabilitate infrastructures, cash for work. I went to Herat and we have a cash for work project where we are cleaning a canal, simple projects. And all the men who are digging and trudging this canal told me we were about to go to Iran and try to get to Europe. Had it not been for this temporary job, so we need to maintain and expand dramatically on these activities to keep some livelihoods while some sort of resemblance of normal governance returns to the country. Thank you very much. Thank you, Abdullah. Thank you. Can you can you follow up on that in terms of playing out, walk us forward the next four to six months. It's springtime, Vicki alluded to this, but if changes in policy and if the politics don't line as well as you emphasize, then how bad will the situation get? And if changes, policy changes can be made, which ones are the most important? Which ones are most needed to have an immediate and necessary impact? Well, if we continue like this for the next six months with a 97% universal poverty, it's unimaginable, to be honest. I cannot imagine what would that mean. People will leave their lands. That's the most important thing. Most people that we have talked to in the cities have come from the rural communities and they have spent the last cash they had to travel to the city with the hope of finding a job in the city and they could not find a job in the city. So if we don't quickly move on job creation, there will be an implosion of some sort with catastrophic consequences regionally and globally. So it's actually a public good to invest in social protection in poverty reduction and in the providing of essential needs of chance. Now what type of policy could be beneficial? We are not talking yet about full-fledged development cooperation, but short of that a lot could be done. We can talk about early recovery, we can talk about resilience and expand the policy space. I need to be allowed to work in local infrastructure in an expanded manner. I need to be allowed to work with systems instead of recreating the educational system because we cannot pay 220,000 teachers because they are state civil servants. We need to find a way to channel funds to keep these systems alive and so on and so forth. So space to work on systems, space to work on policies, space to work on, for example, how can I save the banking sector and the central bank is falling apart because it has no capacity. So all these are complex issues. We are studying carefully. We are putting out some research on these matters and we are trading very carefully at the same time because it is a minefield. You are walking in a minefield while the time is your enemy at the moment. Time is our main enemy and we need resources and policy space immediately. Right, thank you very much. I think beneath both Vicky and Abdel's remarks are there's the elephant in the room is the technical side of the financial crisis. So now let's turn to the economists among us to enlighten us on the nuts and bolts of what needs to happen on the fiscal side. So turning to Khaled Payenda first, as the former acting finance minister of the previous government, the Islamic Republic of Afghanistan, you understand perhaps better than anyone the dire fiscal situation. And what does it mean for the Afghan economy and the people for the banking system and the Taliban government? What tools are available to the Taliban government to address the fiscal crisis? Thank you very much. Good morning and good evening to everybody, including the esteemed panelists. It's a dire situation as Mr. Dardari said that the magnitude of the catastrophe is unimaginable. Wiping out 30 to 40 percent of GDP in less than six months of the year, as he said, is unprecedented. I haven't seen it anywhere. So the magnitude is extremely worrying. On the fiscal side, the government budget coupled with the donations that the donors provided made a big chunk of the economy, 30, 40 percent of the economy was the government budget. It implied a lot of people, the biggest employer in the country was the government, including close to a million people directly employed by the government. So if you assume a family size of five to six, that's four or five million people that depended on government salaries that immediately stopped in being paid for for a few months. And then coupling that with the liquidity issues in the banking sector that made it extremely bad. I think Vicky started it very well with pointing out what were the pressures on the economy. COVID and drought displacements caused by conflict were issues that were inherited by the de facto Taliban government right now. But they emerged during the summer. So the economy wasn't in distress then as well. The government had limited and has limited tools at its disposal. When you have a budget that is 75 percent covered by external donations and they are stopped, frankly, there is not much you can do. The best I think the Taliban can do is to sustain salaries. I have heard that they have reduced the amount of salaries with an intent to make sure that all people that were implied by the government are paid. I think it's the right step under the circumstances, but it's not going to be a long term solution. Now who provides the services, the services that the government provided with the help of the civil society, the donors, all of them, including the health sector that Becky mentioned, need to be packed up immediately. It's not just the humanitarian, it's the humanitarian plus that needs to be taken forward. And that's where urgent need and intervention is required by the donors. Probably, you do not have to go through the government to provide some of these services. You can do it as UN and other international agencies through direct mechanisms. There are programs that could still be used going forward. The health program, the basic package of health services could still be delivered. You don't have to go through a Ministry of Public Health to coordinate UN agencies, perhaps WHO or somebody else could do the coordination. And those same exact NGOs could deliver those services. But there needs to be clarity on what mechanisms are in place to make sure that the liquidity flows into Afghanistan. I think the choking point right now is that there isn't enough clarity on that. While there are two general licenses issued, the details of working out how would you take physical cash into Afghanistan, how would banks feel comfortable enough? A city bank in New York setting needs to be comfortable enough that it's not going to be pursued in a couple of years through anti-money laundering lawsuits to be able to finance. So I think for the service delivery and job creation and labor intensive work, the donors in the UN has to step up immediately. Taliban should focus on revenue generation, whatever is possible. I know that the trade has collapsed. We don't have a trade of $8 to $9 billion a year anymore, but whatever is possible through customs to be able to pay for a functioning government. So later when the politics has settled, it could retake some of these rules. The banking sector needs injection of money and guidance. A central bank or role of a central bank has to be played by some independent party that could make sure that there are settlements between different commercial banks, but also movement of money. Otherwise, I think the current crisis, regardless of the liquidity, is a huge dent in the confidence of banking sector. I think it will take perhaps decades for Afghans to feel confident putting their money back in the banking sector because the meager savings that they had, they had a huge problem and they still have a huge problem taking it out and being able to to serve. I think the problem in the short term needs to be addressing to provide humanitarian plus assistance to Afghans all over the country and that should be done through the UN and other agencies. And in the long run, as Dr. Dardari said, you have to have a functioning economy. Otherwise, you cannot have things move forward. For the donors, I believe it's important not to forget the aid effectiveness principles. I think creating new mechanisms where old ones and the ones that have worked and the ones that were showcased globally as success stories are coming out of Afghanistan should not be replaced and they should be used. I think community development and the basic package of health services that was provided in an excellent collaboration manner between the civil society, the then government, and then the donors, they could still be used. They should still be used rather than creating new ones. Afghanistan Reconstruction Trust Fund, the R needs to move from reconstruction into relief fund, but still how it could be linked with the UN. So it could provide services as some of the answers that should be done. But I close by saying that urgency is extremely important. We do not have four to five or even three months to address the problem. It gets worse exponentially every day that we do not address this. Right. Thank you very much, Khalid. You provided the perfect segue to turn to Bill about the liquidity crisis. But I'd like to pause for a moment, go back to your comment about that you'd heard that Taliban has reduced salaries in order to essentially make what limited cash there is go further by spreading it widely. You've also implied that perhaps the donor's reluctance to provide and deliver humanitarian and development assistance is a bigger constraint than is maybe one of the biggest constraints on on getting more aid and money or cash into the country. And I want to ask how much confidence do you think the donors can have that if more liquidity is provided and cash is provided to the central back to the Afghan central bank, how much confidence do you think donors can have that the Taliban will not divert money that it will get to the right people that will actually reach civil servants, especially healthcare workers and teachers. Thank you. Just a clarification. I think donors are not reluctant. They are very, very concerned about the situation. It's the politics that's that's creating the reluctance. I think the White House's position not to engage in Afghanistan is disabling everybody. And so that politics needs to be, you know, the clear guidance to US Treasury and others how to engage on this would help the donors as well on isolating the finances that go to through the country from Taliban using it 100% isolation is impossible. You know, it was never isolated. You know, the Taliban tax development 10 to 20% over the last 20 years. But there are mechanisms and the mechanisms, you know, some of the things that the US the UN has been exploring and I've been part of the discussions is you use set up a hub where you you send financing and physical cash to Afghanistan or offset with with, for example, some big companies who need cash abroad and then you need Afghanis in Afghanistan. So playing a role of the central bank, but by a third party that is independent that does not go through the the central bank. There are mechanisms, you know, if the UN, for example, needs $200 million and the telecom companies needed outside, you know, that could be an offset mechanism set up in Dubai or somewhere else where the UN hands the money and US dollars to the telecom companies and the equivalent of it could be taken from the banks and these companies in Afghanistan. So there are mechanisms. There are also mechanisms on on health sector workers. These workers are not government employees. These are employees of NGOs that provide services on behalf of the government and donors. So that contracting what the Ministry of Public Health, for example, then in this case was was to coordinate, you know, to lead contracting issues that could still that whole function could be moved to a UN agency and and these health workers could be could be paid on some other areas. For example, female teachers and others. New solutions have to have to be found, you know, they could be mechanism where you make sure that, you know, that the money you send is spent and those areas you get those reports. You you use something that the World Bank, for example, used as a third party monitoring monitoring agent to make sure that the salary that was sent was actually spent to these areas for for the teachers. Salaries. So there are solutions. There are solutions. But it needs political guidance for it to move to move ahead. That that's my understanding. Okay, thank you very much. Let's turn to to Bill Bird now. Bill, as a development economist and former World Bank country manager, you also understand the structural problems at play here. So to have some hope of saving Afghan lives and and going as well to the the national security interests for the US and the region and the world in preventing a complete collapse of the state, you know, what immediate steps can the international community, particularly the US take? Thank you, Kate. One of the luxuries I have as being the final panelist, almost everything has already been said and it's been very said quite well by the other panelists. So just a quick note on the national security side, I think that is actually a downside risk. And I think typically in these kind of conflict affected countries, actually a success factor is if the country is not on the frontline of the war on terror. So I would be cautious about emphasizing too much the national security interest because that may trigger various other kinds of interventions, which may not at all be helpful and actually may not even stabilize the country. So I would be really cautious on that. There is maybe some interest, some national security interests, but that doesn't mean automatically, for example, to target people within Afghanistan with drone strikes or other kinds of kinetic measures that might be currently being considered. Look, I'll just make a few points and mostly they're emphasizing points. In terms of the immediate priorities, one is still to make absolutely sure that humanitarian aid and aid for basic needs, which is explicitly allowed by the general licenses, actually can be easily transferred into Afghanistan and is not hindered by the sanctions and in particular by the massive risk avoidance by foreign banks, for whom it is, this is not a source of major income, and they would, other things equal would simply just not make the transfer because of the risk of subsequent running afoul of the sanctions or AML CFT regime. There needs to be a very clear message beyond the general licenses, which I've heard indirectly that the foreign banks don't consider that those provide them sufficient comfort. You need comfort letters and they should not be case specific because then it will be an endless dragged out process of getting approval for each. There need to be general comfort letters, if you want to call them that, and my argument would be that it would be very great good if the US government made at least the template, if not actually making the individual letters public, at least make the template public and inform that this is the kind of communication they're giving to foreign banks. Then it can be sorted out that why or if the banks consider that insufficient, then they can respond to that publicly, but otherwise they would not have an excuse to refuse to make transfers. The second and actually probably bigger problem is the liquidity in Afghanistan, which has already been raised. I won't go into that in any detail. There are many good ideas out there. I think there just needs to be a top level push to try the various schemes and maybe that more than one scheme will be needed. I've not heard of any single scheme that would actually address the problem. We should also remember that the Afghan economy is going through a violent adjustment. Nothing that can be done in terms of liquidity is going to change that fact of a double-digit decline in GDP. What is important, at least especially in the short run, is to ensure there's enough liquidity for basic needs and humanitarian assistance to be delivered and for people to survive. It's not a fix for the economy as a whole. I won't go into more on that, but there are specific proposals, many of which seem promising, but probably none of which by itself will solve the problem. It's already been alluded that keeping the Afghan banking system afloat is important. It's not a very large banking system, but it is important. I think the other alternatives to using banks are inferior, including, by the way, from the sanctions and AML CFT perspective. There's an interest on all sides to keep the banks, at least the credible, better managed banks afloat. As I'm sure many already know, several of the banks have been actually invested in and supported by the international financial assistance and donors. There's a clear record of probity in at least a few banks in terms of the anti-money laundering and countering the funding of terrorism. Let's make sure that at least the trade financing works. This gets into the private sector. We don't want UN agencies to import all the humanitarian goods. They do a great job, especially in response to a temporary disaster, but this is likely to be a prolonged need for imports of food that are not funded by the Afghan economy itself. Let's use the private sector more, and I think that will be efficient. They actually have a track record of that. Let's make sure that the sanctions and money laundering controls at least don't prevent trade financing from going smoothly. It gets to more than to the issue of the private sector, which Abdullah has rightly emphasized. You don't want the private sector to just collapse. That will make the humanitarian problem even worse. The point on the access to humanitarian, I think Vicky gave some good news, at least in principle, at least for some agencies that access is there, so I won't speak on that further. I would particularly welcome the baseline thing, which would need to be checked for other agencies. But if the Taliban are allowing Afghan women to work on delivering assistance to Afghan women and girls, that is a minimum requirement, and it's glad that they appear to be meeting it. But let's look a little bit farther afield. The immediate problems are immense, but it is also clear that this economic crisis and humanitarian catastrophe is not like a one-time natural disaster. It will be prolonged over time, measured in years, not months. And I think it is not too early, therefore, to start thinking ahead about scaling up things, even while dealing with the emergency needs. And clearly, over time, I don't want to give it a mount, but it will certainly be in the billions of dollars per year by my feeling, given donor attitudes and everything. It won't be many billions of dollars a year, but it surely will be at least one to two billion. And how do you deliver that? There's well-studied syndromes associated with prolonged humanitarian aid. It's not even clear that at some point it doesn't actually inadvertently promote conflict rather than assuage conflicts. And there are also issues of cost and efficiency and dependency and inadvertent competition, say, between the humanitarian aid and the private sector. So these things, it's not really too early to start thinking about these things and to think about, basically, which Khaled already mentioned, the aid effectiveness issues. It's not like by shifting from development aid when, during the last 20 years, we were, many of us, were concerned about aid effectiveness and how to deliver it and cost, et cetera. It's not that those issues disappear when you shift to humanitarian aid. It may be in the short run as an emergency basis, but if humanitarian aid continues for two to three years, then those issues will come up. And I do think we urgently, it's good to start thinking about those things. And the last point, two quick final points. One is, I think, in line with this kind of longer term approach, it's really important to get the World Bank and the IFIs involved. They have experience. They have demonstrated the ability to distribute large amounts of aid. And I think it's unfortunate that they are, at the moment, at least being the laggards rather than at the forefront of some of these issues. And related to that, you know, we can't leave out the Taliban. They really have to step up on the economic management. I know they, I assume they think that they were given a very bad deck of cards from the previous government. And that's certainly true, but they're responsible now at a very minimum staffing the Ministry of Finance and Central Bank with competent technocrats, which there's no shortage of, and some of them are still in the country. That would be a kind of signal. And then getting the World Bank and perhaps the IMF involved, not financially, but in terms of the economic management side. I think this will be important and realize these are not necessarily the front burner issues right now until the winter, but I do think it's not too early to start thinking about these kinds of issues as well. And I do think the Taliban do need to step up on economic management, rebuilding confidence. Maybe they have a basis if conflict is less and security is better, but they really need to do more. So that's all for me. Thank you. Okay. Thank you, Bill. I'm going to ask, turn to you, Bill, first to answer a question that then I think anyone on the panel would be very well positioned to answer. But it sounds like you've all, you've all emphasized the short window, the small window that we have to act. You've emphasized there are many options on the table. They're more proactive messaging from Treasury, reassurance to foreign banks and so on on the general licenses that were already issued for humanitarian aid and aid for basic needs. The UN has proven that it's possible to pay salaries of health and education workers without going through the government. You've laid out a variety of options here. Bill, what do you think, what is the main constraint in why has the United States, other countries, international financial institutions not already taken these steps when, I mean, the crisis, it's not imminent. It is upon us. A winter is upon Afghanistan. Why are these steps not already being taken? Is it a matter of legal and technical know-how or is it mainly a political, a lack of political will or is it logistics or all of the above? Could you please speak to that? And then I'd be happy to love to hear from other panelists. Well, that's a tough question. I mean, I think speaking for myself and all of us probably, it was a profound shock in August 15th. And some people have taken longer to deal with it personally than others. I guess paradoxically, I was somewhat helped because I had actually gone through directly or more indirectly the 1978 coup, the 1980 Soviet invasion, the 1990 civil war, and then not least, the surprisingly quick and easy victory over the Taliban in 2001. So I really feel sorry for the younger generation who's only been engaged since 2001. They haven't seen that this kind of problem has happened before in Afghanistan. And it may be even worse quantitatively, because the economy has been built up over time on an aid-dependent basis, and therefore has much more farther to fall than it did in the 1980s and 90s. But this is not the first time that either international community has let down Afghanistan or that Afghanistan has gone into a kind of crisis. So with that preliminary, I think one thing I hope we avoid is that this becomes a failure of imagination. I think that's really something we should avoid. There are creative and good ideas out there, and let's just push them forward. I think a unified signal from the US government that, look, this is an emergency, people are going to be dying. Let's do everything we can, would be helpful. In a way, I would draw the analogy to the airport evacuation, how however messy and imperfect it was, it was a sizable effort, and it was done quickly. And one could say, well, not without many disruptions and problems, but I'm just pointing it out as an example of what can get done quickly if there's a real focus and a will. And that same kind of priority and effort needs to be put right now, I would argue, on the financial engineering. I mean, there are also options, for example, to print some more currency, Afghan currency, that might be a better option because when you're in a liquidity trap, the risk is that let's say you send back $9 billion of Afghan reserves. Most of it will go out to Iran or Pakistan within months, perhaps. You provide the banking system with more resources, people will take out their deposits as soon as they can, and the banks will collapse. So I think there may be a case, for example, I'm just giving this as a specific point on the liquidity issue of modestly printing more Afghanis, making sure that the Afghanis in private companies' vaults circulate, which would be through the swap arrangement that Khaled made. So I sort of am pleading, both let's not let our imagination fail us, and then let's really push it. Okay, thank you. I'd like to move very soon to audience questions, but just before we do so, does anyone else have a response to that last question about why where's the urgency to take more of these creative approaches? Would any of the other panelists like to comment? If I may, we are exploring options in order to save the banking sector, for example. We have estimated in UNDP that loss of the banking sector, a complete collapse of the banking sector, would cost an additional 30% loss to GDP, in addition to the loss we have seen so far. That swiping out 350 billion Afghanis of people's savings, that's not a small amount of money that could have been a reconstruction starting at one day. But we need to put together a comprehensive system. You are talking about deposit guarantees, credit guarantee, trade finance facilities. We are designing all of those as we speak, and we issued a policy brief recently about Afghan stand-backs. So let me take this opportunity to say another warning signal that if we don't really move and give the space to allow such elaborate structures to move, and this is an immediate term, we are also thinking about the immediate, how do you bring money immediately to the country, and we are moving forward with that. We moved $15 million to the health sector, paid salaries for 26,000 health workers. It worked, but it was like pulling teeth through the banking sector, through money service providers, and I don't think we can do large amounts. The $15 million was very difficult. So imagine when we talk about billions of dollars that the country needs in the next 24 months. Right, Vicky? Yes, thanks Kate. WFP have said that if something's not done, up to 9 million people could fall into the famine category. And if that happens, that would be because of an entirely preventable, entirely man-made crisis. So my fellow panelists have offered a number of solutions, and I know there are a number more. We need to move quickly on some of these solutions. Thanks. Thank you. I'm going to share the first question from the audience now, and I'd like to just remind everyone tuning in that you can please use the chat function located on the USIP event page to submit your questions. First question is from Alice Thomas. She asks, can the panelists please discuss how the sanctions are affecting girls and women specifically, including with respect to education? Would anyone like Vicky? I'm happy to take that. They're really hurting women and girls. Let's take, for example, the issue of female humanitarian workers. In order to reach women in Afghanistan, you need to have female staff. But note that only about 30% of women in Afghanistan are literate. Note that we lost a lot of the educated women in the evacuations. But humanitarian aid doesn't extend to secondary education. It doesn't extend to tertiary education. And we need new generations of girls to be trained as healthcare workers as teachers. We need to have the economic opportunities for them. And then let's think about the local women CSOs. For international organizations with international bank accounts, it has been, and the UN, it has been a struggle for us to get money in to operate. These local CSOs are really, they're almost working on a volunteer basis because there's no way for them to operate at the scale that they need to operate. And we need to continue to support civil society. There are local CSOs that are up and running. And if they're not allowed to operate, if they can't access money in their bank accounts, if they can't pay their staff, then that civil society is going to disappear. If I may, Kate, in the report that we just published two days ago, we spoke about what does all this mean for women and what does the fact that women are not fully active in the economy? What does it mean for Afghanistan? It means a loss, an immediate loss, additional loss to GDP between $600 million and $1 billion. It means a loss of $500 million in household consumption. And most seriously, if women and girls stay out of education, the medium to long-term consequences to productivity and opportunities for recovery will be harmed seriously. So the question of women and girls, in addition to it, as a human rights question, we need to fight for it as such, it is also an economic imperative. So we want to make that call to all parties to keep this issue center stage for in the next few days and weeks in Afghanistan. Right. Thank you. Thank you both. I'm going to move on to a question from Noor Sadiq. Asks, reports say that of 4 billion Afghanis available in country, only about half of a billion are in circulation. The private sector is keeping money in safe and under the mattresses. How can trust be built? From your understanding, is that an accurate picture of the situation that people are hoarding cash out of fear of spending it or a fear of even worse conditions setting in, perhaps? Maybe Bill or Khaled or anyone, if you would like to comment. I could take a crack. Excellent question. I think people are hoarding cash, but it's mostly in foreign currencies than the Afghanis. There was before the crisis, the previous government was going to print new money because we had less Afghani in circulation. The banknotes were getting old, the lower 10 Afghanis, 50, 20, they were all running out of them. There was a need for more money in circulation, but I believe it's mostly and US dollars and other currencies that people who have access to them hoarding them. But overall, yes, with such uncertainty, people would be hoarding cash. I think one big issue right now is that the economy is not moving. You don't have fiscal sector moving money to the velocity of money or moving. It's almost none. They have to restart that, but also slowly easing the sanctions or limits on how much money you can you can take out. But then you definitely need mechanisms or a swap mechanism that I mentioned earlier through which if money, people would want to take out money, they should be able. Otherwise, it's very difficult to build that confidence. But I'd reiterate again that for some people, this experience the past three months will be so excruciating that they would never trust the banking sector again, although none of the banks fault. But the money in circulation, I think one thing that the Taliban did was commendable was to make sure that and transactions Afghani is used that makes it the money in circulation better. But then you need to have a working economy. Otherwise, it's really difficult to regain or rebuild that trust. I just add to that. I think in addition to the hoarding, there is capital flight. There may be some Afghanis being hoarded. That's hard to know, but seems less likely, as Khalid said. But in addition to being hoarded, dollars are flowing out of the country to Pakistan in particular, and they're also being used to fund human flights, so resulting in both flight of the capital and of humans. I think this is actually the essence of a liquidity trap with the difference from the classical one of the U.S. Depression that there's the option of taking money out of the country and also frankly people themselves going out of the country. This is why also I think there is a case for modestly increasing the amount of Afghanis printed. As far as I know, the larger Afghan private companies like telecoms, et cetera, they are now scared to put the cash they receive from their business. Telecom is still going on. They're getting paid, so they're keeping the cash in their vaults rather than putting it in the banks. This is where there might be a modest benefit from allowing them to put these Afghanis into the bank account for humanitarian work, and then it can be immediately withdrawn for humanitarian assistance while the humanitarian agency then pays the Afghan company's bank account in the foreign country Dubai or elsewhere. This swap arrangement is actively being discussed. The point is it should be done quickly, and also I suspect by itself it won't be enough, but it is a promising initiative. Over. I have a question for Vicky now. How much has IRC received clear guidance on compliance requirements regarding in terms of dealing with the new government? Has the Taliban government provided clear guidance on, for example, the use of Huala networks, the informal money, the informal financial sector, and paying taxes to the new government? Sure. It's a difficult question. In terms of the Huala system, they haven't really provided, they haven't, they're interested in us being able to deliver however we can deliver, so they're kind of leaving the humanitarian agencies alone when it comes to that. There have been different guidance listed that the government has sent out to various sectors, but so far, we're okay on that. In terms of paying taxes, under the 2005 NGO law, we, I believe it's that law, we have to, we're supposed to pay, they haven't put on any new taxes. So it's the same taxes from before. So it's basically withholding tax for income and contracts and rent. And they had, for agencies, they had given some a break on when you could start paying it. But it's not, the government is much clearer than the donors. So for us, the struggle is, what is the guidance from the different donors? And we have donors from many different governments. So that's what's making it much more difficult. And it takes up a lot of discussion amongst humanitarian agencies on whether we can or whether we can't, under OFAC licenses, we should be able to. But under the UN sanctions, maybe not, maybe, who knows. So yeah, so the guidance from the government is much clearer than the guidance from the donors. Thank you. I'm going to shift briefly to, well, a regional question from from USIP's Michael Phelan. Michael asks, what is the regional impact human and fiscal of this accelerating humanitarian emergency? And how has the region responded, if at all, either individually or in concert with others? Maybe Abdullah, first would you like to take that? Yeah. Our analysis shows that a 4% drop, this was the COVID-19 analysis. A 4% drop in GDP in Afghanistan causes a 1.5% drop in GDP in Pakistan and similar drop in Iran. The economies of the region are interconnected. And therefore, a further deterioration in the Afghanistan economy will have direct and indirect consequences on the neighboring countries. And we haven't even spoken yet about migration. Hundreds of thousands of people have moved into those countries already, and the security threats and so on and so forth. So it is extremely important that we there should be a regional perspective of dealing with Afghanistan on trade, on connectivity, on security, all these issues. We in UNDP and the UN system have started working on the studies on what does it mean? What does all this mean for the economies of the region? And then what are some of the mitigation measures that one could use? Trade is in fact the oil for Afghanistan. It is the pull factor that could take it out of its economic rules. So it is very important to have a regional approach to whatever we are planning for the medium term for Afghanistan. Maybe I could just add that actually the regional countries had a cohesive, in my view, a cohesive view and strategy about the need for a negotiated solution. And almost if not universally, I think universally they said there should not be an Islamic Emirate. So the regional countries were also taken by surprise by what happened. And I think it's taking them some time to respond. They vary right in their views toward the Taliban. Pakistan arguably a foundational supporter of the Taliban. Maybe somewhat now in a beware of what you wish for situation. Iran very concerned. Northern Central Asia and Russia worried about the terrorist issues particularly. So there's different views among the region and unfortunately what seemed like a fairly cohesive regional position before August 15th has fallen apart. I don't think anything has yet replaced it, but they will be feeling the consequences. Particularly I would argue with a human flight, but also as Abdullah mentioned, even a purely economic effect. I'd like to use that opportunity to kind of shift back to the politics of how the crisis, how the international community responds to the crisis and how the Taliban do. The Taliban don't seem to be making a distinction between humanitarian and development assistance. They argue that the sanctions and asset freezes are sanctions effectively on the whole country, all Afghan people. Are they right about that? And is there a way to, how do you see international donors navigating the question of actually delivering aid and addressing the liquidity crisis while also not formally recognizing the Taliban government or trying to manage the politics of a kind of signal to the Afghan government that we're willing to accept your authority despite the military takeover? Bill? Yeah, I mean, I think we need to be practical here. The official recognition, I believe the UN credentials committee has just put it off. That's a likely situation and was there in the 1990s as well when the Taliban were increasingly frustrated that the party controlling less than 10% of Afghanistan was the official representative. I would hope the UN would somehow be able to vacate the seat, even if they're not going to seat the Taliban. But there are a lot of issues here. But I think the practical way forward is to just not focus on the recognition issue for the reserves, which will be very naughty. And actually the freezing of reserves was not, it badly affected confidence and the banking system. It was not the prime mover. It was the discontinuation of $8 billion or so of foreign aid that really was the economic shock. And then the freezing of reserves, which everybody seems to be focused on, including the Taliban, was definitely a problem and a secondary problem. But it's not as if the previous government was suddenly going to use $8 or $9 billion of reserves and it would be a terrible move for the Taliban to try to make use of the reserves, even if they were released. These are reserves built up by the country over many years and they should be used prudently. It relates also to my point about the central bank having decent staffing and leadership as with the Ministry of Finance. So I think my suggestion is just that we move forward practically within the realm of the possible. And it's quite possible to do a good bit if there's a will, without sort of touching these third rails of sanctions and recognition, et cetera. Becky. Sure. I can tackle the if they're right if the entire country is affected and not being able to distinguish between humanitarian and development. Every year when we decide what is going into the humanitarian response plan, there is a debate amongst seasoned experts about what is humanitarian and what is development. So I think we can forgive them for not understanding what the line between the two is. And if you look at this year's HRP, we've had to put in what we call the humanitarian plus activities because the entire country is affected by all of those six elements that I mentioned. And so, yeah, with what colleagues said, about 97% of the country being under the poverty line with education not happening. And it's not clear if education is covered under the sanctions. Yeah. I think the entire country is affected. Yeah, sorry, quickly to jump in. I think there's an OFAC release and discussion that said that basic education is included for USAID programs but not necessarily for other programs. It's a good example, though, but I think there is a statement somewhere by OFAC that basic education, like primary, is considered one of the basic human needs, at least for the purpose of USAID programs, which then raises the issue of other donors and how they're treated. Sorry, to jump in on that, I think there's a very good case that basic education is part of basic human needs and apparently the US Treasury has agreed with that. Okay. I'm going to go to an audience question now from Arbab Nasebullah Kasi asks, as the limitation of withdrawing money from banks in Afghanistan is currently up to $25,000 US dollars a month, what is, and that's, as Vicki explained, that's not sufficient to meet your many organizations, even salary needs. What's the alternative way to share, to, what's the other way to get support in kind support and financial support into the country? Maybe primarily for Vicki and UPDELDA, but anyone? Sure. So as mentioned, there are a number of different methods that are being tested, including the exchanges that they talked about, how well a system, microfinance banks, and a number of others that can't do things at scale. And I just wanted to clarify that that $25,000 a month is for organizations, it's not for individuals as well. So there are a number of options. It's like you have to piecemeal everything and some are okay with some donors, some are okay with others. So we need a, we need a better solution. Abdullah? Just to give you an example of how complex this is. We are setting up a risk management unit, which will have to have a database of UN, US, EU, UK sanctions on sanctioned lists of names, enterprises, and so on, entities, and so on. And then we have to do a check on every possible vendor and every possible recipient. So we are now targeting to create a million jobs through cash reward programs in the next 18 months. It means I have to verify the million recipients and we have to vet them through these risks, through this risk unit. It's only making things slower and more complex. And therefore we have to be extra cautious. It will make things costly and we have to make sure. So we are now doing due diligence for every possible financial channel we can bring money through. It's all fine, but people are dying. We are in this situation. So while we are trying to build up, not trying, we are building up all these systems and the human resources that need to be in Afghanistan, people are dying. So as I said, time is our enemy and we need policy space today if we can. Thank you both. We're going to use the prerogative of the moderator to extend just until 11.20 and if we can quickly address two last questions. One is from Tara Moyaed for Khaled Payenda. The Taliban are collecting large amounts of revenue. As we know they should still have access to significant amounts over a billion dollars. You probably know the exact amount that they were collecting annually to fund the insurgency. Can donors put more of the onus on the Taliban to govern and use those revenues for people's needs like salaries and electricity? Thank you very much, Tara. I think the only leverage that the donors have right now is the aid. This should, if the Taliban are thinking of a sustainable sustainability to be in power, they have to make sure that the population is not too much in distress and causes a lot of problems and headaches for them. They could rule it without any economics involved. We've seen it in 1990s, but I hope that they've learned from that. That's the leverage that the international community has. I think there has to be some pressure on Taliban for next years, for example, budget that they're preparing right now. At least covering the salaries of civil servants that were on the government's payroll. The services, including humanitarian and basic health and education services, could be picked up by UN and others and paid. Half a million to a three-quarter of a million civil servants and people employed by the public sector get some sort of salaries that in itself helps the situation. You consider it as a cash transfer to the poor. If they want legitimacy, I think they have to prove that they have treated a public purse as public's money and tried to do a good budgeting. I would be looking at the next year's budget. I think the best intention of a government is to look at their budgets on where they would be spent. If they do care about people and the economic situation, their part to do is to make sure that the budget then is prepared in such a way. It's transparent enough that we could see that. I hope I've answered the question. Bill, would you like to add something? Just to add a complete agree on the Taliban, to the extent that they understand and remember their own history, and some of the figures in the cabinet were also governors or ministers in the 1990s. This was one of the biggest sources of illegitimacy of the Taliban in the 1990s, that they were not able to pay civil servant salaries. The hyperinflation led to the largest 10,000 Afghani note being worth about 25 cents. They really failed on the economic management side. If they're cognizant, and as Khaled said, that they want to stay in power, then paying civil servants is one of the signs of illegitimacy that urban Afghans in particular pay attention to. Abdullah, did you? Yes, Kate. There is something in the hands of the authorities to do is allowing women to work. Women actually represent a large part of the informal economy in Afghanistan, and usually when a formal economy shrinks like the one in Afghanistan today, the informal economy picks up the slack. But because women are not active as they used to, we don't see the informal economy picking up pieces of the national economy and moving ahead with it. So that's a decision that could be taken. It's not an external decision. This is a domestic policy issue that could be determined domestically. Vicky, did you have any? No. Okay, I'm going to ask a final quick question along the lines of what we've just been discussing about the Taliban, what's within the Taliban's power to do like come up with even a basic budget for donors to respond to? A larger question is why is bad governance in Afghanistan a U.S. problem and not a Taliban problem? Is that a fair question? Why are we more concerned perhaps about, I guess another way of asking is how do we employ whatever leverage we do have to press for better governance on behalf of the Taliban or on the part of the Taliban? Khaled? Yeah, I think let's not forget to see why are we in this situation. I think it's part of the deal, the so-called peace deal that was made in Doha. It's gotten us here. Yes, the government made its mistakes, but they used government's deal with Taliban, ignoring completely the legitimate government, brought us here. And there hadn't been absolutely no discussions on issues that we are tackling right now. What would the transition look like? I think it's a U.S. problem. Unfortunately, it's going to be a U.S. problem for a long period of time, regardless of whether people in power here want to think that Afghanistan is over, evacuation was the last effort, and it's gone. Unfortunately, it may come back to haunt the U.S. and the West, leaving Afghanistan where it is. And the whole region there, I think it is a U.S. problem, whether it admits it or not. And that's why my point about guidance on urgency and getting into issues in Afghanistan, making sure that humanitarian aid follows and then some sort of engagement, I think it's important to continue that. I think it's important also to continue engaging with Taliban, whether you like them or not, because they are still right now in power. And rather than having no engagement with them, engagement is good, because if you banish them, you lose all the leverage that you have. So it's a U.S. problem, unfortunately, and requires U.S.'s leadership. It requires engagement because most of the international community is looking at what the U.S. wants to do. I know that the IMF and the World Bank are paralyzed because they don't have guidance from the executive directors of the U.S. treasury. So I think it's important for the U.S. to show that leadership and resolve these issues. Thank you, Khalid. I think, Bill, did you have a response? Just to add, I mean, I'm afraid in this failure, there are many, many cooks who produced it. So there's much to go around. And anybody who stays, they are blameless, and the others are all responsible, I think, is wrong. But I'm a little puzzled by the question, because it seems to imply that governance was so good under the previous republic, and now the Taliban are doing a bad job. There were innumerable problems of corruption and governance, well-understood politicization, the whole national unity government problem. So it's a bit odd for somebody to say, I think, or to imply, maybe the question didn't really mean this, but somehow governance was better under the previous government. I think that's, sure, there was some better protection of rights and everything, but in the quality of governance, it was not by a wonderful situation that then somehow disappeared after August 15th. Great. Abdullah or Vicky, would you like to, these would be last comments here before we wrap up. I'd like to bring in the question of governance from an economic perspective. We could see from the analysis that what compounded the impact of the dramatic loss of grants and the overall macroeconomic situation is a drastic drop in productivity, almost a 10% drop in productivity that started before the 15th of August. You know, usually it takes a generation to lose 15%, 10% productivity in an economy. To lose it in a year or two is an incredible shock to this, and that requires governance. You cannot, so that's why I was saying, if we want to really have a resolution of this economic situation and the humanitarian situation, you have to address those systems and how they function and how effective and efficient they are. And that is a very politically sensitive question at the moment. Thank you very much. Back to you. Thank you, Abdullah. Vicky, you get the last word. And I'm going to ask the humanitarian. I'm also going to bring in the issue of moral responsibility. Good governance. We can't just leave the Taliban to deal with all of the problems that have been left behind on their own. There are still 38 million people in Afghanistan, 23 million of them who are in desperate food insecurity. I would say 37 million or more had absolutely nothing to do with the conflict, and we can't abandon them. Thank you. I think that's the urgency, the urgent and kind of moral imperative that we want to end on, close on. So thank you, everyone, for your generosity of time and expertise, and we look forward to continuing this discussion. Thank you all for joining us.