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Fitch expects Afghanistan’s GDP to decline after Taliban’s takeover

Afghanistan's GDP

Fitch has not ruled out losing 10 to 20% of Afghanistan’s gross domestic product (GDP).

These forecasts, issued by the research and analysis arm of Fitch Agency, came in the wake of the Taliban’s takeover of the country.

“It is likely that the economy will contract sharply this year,” Anwita Basu, head of Asia Country Risk at Fitch Solutions – the analysis and research arm of Fitch Group – told Reuters.

Afghanistan’s GDP

In another context, the International Monetary Fund decided to withhold Afghanistan’s access to its resources in light of the lack of recognition in its government, in the wake of the US administration’s misgivings in this regard.

The US Treasury has begun taking steps to prevent the Taliban from obtaining funding from the IMF, according to a US official.

IMF said Afghanistan will not be able to access the Fund’s resources and the new allocation of special drawing rights reserves.

An IMF spokesperson said it was due to “lack of clarity within the international community” over recognising a government in Afghanistan.

“As is always the case, the IMF is guided by the views of the international community,” the spokesperson added.

Access to the IMF’s reserves in Special Drawing Rights (SDR) assets, which can be converted to government-backed money, have also been blocked.

SDRs are the IMF’s unit of exchange based on sterling, dollars, euros, yen and yuan.

IMF

The IMF was to release a final batch of aid to Afghanistan under a program approved on November 6, 2020, totaling $370 million.

The 42-month program resulted in an immediate down payment of $115 million.

The second tranche, amounting to $149.4 million, was released in early June after a first assessment of the progress made in implementing the program.

The final payment of $105.6 million remains.

The SDR, launched in 1969, is neither a currency nor a physical existence. Its value is based on a basket of five major international currencies: the dollar, the euro, the pound sterling, the renminbi (yuan) and the yen.

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