According to a media report, China and Pakistan are rushing to exploit the Afghan economy, and both have declared specific enticing incentives for Afghanistan that would primarily benefit the former and later shortly. Afghanistan, which is ravaged by war, is in dire financial straits. Furthermore, the new authorities lack the necessary experience to deal with the country’s complex economic challenges.
Afghanistan’s former central bank chief had also departed the nation, leaving the financial decision in shambles. The Taliban, on the other hand, just chose a new leader. Most Afghan officials dealing with financial difficulties now have dual citizenship and have reasonable cause to be frightened of the new authorities’ fury, which might extend to their families.
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Even if it is only a series of ideas or a conversation that is not followed through on, any effort can be dangerous. This creates the possibility of Pakistani authorities, such as the military that assisted the Taliban in achieving victory last month, being conscripted to manage, or at least lead, the Afghan economy for some time.
Islamabad and Beijing have already devised strategies to take advantage of the situation. Islamabad took the first step by recently announcing that it will trade with Afghanistan with Pakistani rupees. The cause for the dollar shortage in Kabul, according to Finance Minister Shaukat Tarin. He also volunteered to assist the Taliban in filling technical posts that had become empty due to recent evacuations. The communist rule also enticed the Taliban.
China, famed for its easy money lending, has pledged USD 31 million to help the Afghan economy get back on track. In exchange, the Taliban have shown interest in collaborating with China’s Belt and Road Initiative (BRI). While other nations debate whether or not to recognise the Taliban’s temporary administration, Beijing and Islamabad have moved to address Afghanistan’s financial difficulties. However, China appears to be the bigger winner because Pakistan’s economy and currency are already reliant on China.
Since 2018, Islamabad has mainly begun trading with Beijing on the Chinese currency Yuan, transforming much of Sino-Pak commerce into Yuan-based transactions and boosting the potential of three-way economic integration. Being the strongest currency, the Chinese Yuan will profit the most, while the other two currencies will gain a slight edge.
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Pakistan appears to gain from its role as a middleman, capturing resources through transit and facilitation fees. However, the Pakistani economy is presently in a state of continuous crisis, with a significant debt servicing imbalance, among other indications. On Wednesday’s interbank market, the Pakistani rupee fell to an all-time low of Rs 169.94 versus the US dollar.
Despite receiving Western help for two decades, Afghanistan’s economy remains one of the most vulnerable and weak in the world. According to the World Bank, poverty and underdevelopment are widespread in Afghanistan. It also stated that over 90% of Afghans live on less than $2 per day, and Kabul, which received USD 4.2 billion in aid last year, will likely receive none this year. Beijing and Islamabad are keeping a careful eye on the situation in Afghanistan.
