UN sets up trust fund for Afghanistan amid cash shortages

UNDP says special fund aims to inject liquidity into Afghan households as the country suffers ‘economic implosion’.

Afghan people sit besides sacks of food aid distributed by the WFP in Kandahar [File: Javed Tanveer/AFP]

The United Nations says it has set up a special trust fund to provide urgently-needed cash directly to Afghans through a system that taps into donor funds frozen since the Taliban takeover in August.

With the local economy “imploding”, the aim is to inject liquidity into Afghan households to permit them to survive this winter and remain in their homeland despite the turmoil, it said on Thursday.

Achim Steiner, UN Development Programme’s (UNDP) administrator, said Germany, a first contributor, had pledged 50 million euros ($58m) to the fund, and that it was in touch with other donors to mobilise resources.

The UNDP had costed activities to be covered over the first 12 months at approximately $667m, she said.

“What we are witnessing is not only a nation and a country in the midst of political turmoil; what we are also witnessing is an economic implosion,” he told a news conference in Geneva.

“We have to step in, we have to stabilise a ‘people’s economy’ and, in addition to saving lives, we also have to save livelihoods,” he said.

“Because otherwise, we will confront indeed a scenario through this winter and into next year where millions and millions of Afghans are simply unable to stay on their land, in their homes, in their villages and survive. The implications of that are not difficult to understand,” he said.

The International Monetary Fund said on Tuesday that Afghanistan’s economy is set to contract up to 30 percent this year and this is likely to further fuel a refugee crisis that will affect neighbouring countries, Turkey and Europe.

The Taliban takeover saw billions in central bank assets frozen and international financial institutions suspend access to funds, although humanitarian aid has continued.

Banks are running out of money, civil servants are not being paid and food prices have soared.

Reporting from Kabul, Al Jazeera’s Stefanie Dekker said: “The international community agrees that the cash needs to get here quickly”.

“This is a country that has become hugely dependent on these foreign reserves over the last two decades. [Withholding the reserves] all of a sudden is having a catastrophic effect,” she said.

“Everybody we have talked to here over the last couple of weeks tells us that they have not been paid from two to six months.”

Steiner said the challenge is to repurpose donor funds already earmarked for Afghanistan, where the Taliban, the de facto authorities, are not recognised.

“Discussions over the last few weeks have focused on how we do find a way to be able to mobilise these resources in view of the economic implosion that is now unfolding and the international community’s repeated commitment not to abandon the people of Afghanistan,” he said.

Kanni Wignaraja, director of UNDP’s regional bureau for the Asia Pacific region, said cash will be provided to Afghans employed in public works programmes, such as drought and flood-control programmes, and grants given to micro-enterprises.

A temporary basic income will be paid to vulnerable Afghans, she said.

“The effort here is to try to make sure that it is local currency that continues to fire up the local economy. And by doing that, that keeps also the macroeconomy from completely crashing,” she said.

“Yes banking system is extremely fragile, it still has a little bit of life left in it.”

Source: Al Jazeera and news agencies