News / Asia

Uncertainty Over Security Pact Drives Final Nail Into Afghan Bubble

U.S. troops listen to U.S. Defense Secretary Chuck Hagel as he speaks at Camp Bastion, Helmand Province December 8, 2013.
U.S. troops listen to U.S. Defense Secretary Chuck Hagel as he speaks at Camp Bastion, Helmand Province December 8, 2013.
Reuters
When Afghan President Hamid Karzai announced he would delay signing a vital security pact with the United States, amid the hubbub of dismay, the Afghan elite gathered in the room might have heard the sound of the country's economic bubble bursting.
 
Since late November, when Karzai defied a consensus in favor of the bilateral security agreement (BSA) that had been reached by elders at a loya jirga, or grand assembly, almost every reliable economic indicator has got worse.
 
The country's currency, the afghani, hit a record low of 59.84 to the U.S. dollar on Dec. 5. That sparked a series of flow-on effects, pushing up prices for essential items such as firewood, groceries and cooking gas by at least 25 percent.
 
“Not signing the security pact has done a lot of damage to economic perceptions in Afghanistan,” central bank governor, Noorullah Delawari, told Reuters.
 
“(It) caused a big spike in inflation because business deals here are done in dollars,” he said, adding that the central bank has pumped a record $170 million into the market this week in a bid to prop up the currency.
 
The security agreement is designed to shape the U.S. military presence in Afghanistan beyond 2014. The United States says that without the deal it would consider withdrawing all troops, leaving Afghan forces to fight the Taliban on their own.
 
If U.S. soldiers leave, other NATO nations are likely to follow suit, putting in jeopardy the $8 billion Afghanistan receives in foreign aid every year.
 
Concern about prospects had been growing anyway but the impasse over the security pact exacerbated both the fears and the volatility of the currency, prompting many Afghans to snap up U.S. dollars.
 
“Businessmen are very worried about the future and are buying dollars at a very high rate. It's the most unusual buying I've seen in years,” said Najibullah Akhtari, head of the Afghan money exchange union.
 
“The central bank is trying to reduce the damage done by  uncertainty by pumping more dollars into the market, but it won't help in the long run.”
 
Referring to Karzai's decision to delay the security agreement with the United States, he added: “It's ridiculous. Some people want American dollars, but not Americans.”
 
At Kabul's bustling main money exchange market, dealer Zemarai Jan carefully sorted afghani notes before placing them on three-foot-high piles - so high he could barely be seen behind them.
 
“Everyone is looking to buy dollars,” Jan said.
 
Boom to bust
 
Other economic indicators suggest a boom fed by billions of dollars in foreign aid is moving towards a bust.
 
Realtors say house prices and rents have fallen by almost 40 percent this year, with a particularly large fall occurring since Karzai made his statement.
 
“Business has dropped to virtually nothing in the past three weeks,” said Sayed Jawed Amiri, owner of the Dunya-e-Jadid (New World) real estate agency.
 
Abdul Wajid, chief auditor at Ghazanfor bank, said deposits fell by about 15 percent, or $20 million, in the last month. The drop in deposits restricts lending and investment, setting up a vicious circle of economic depression, he said.
 
“The month since the loya jirga recorded the lowest investment rate in Afghanistan in recent history,” said Khan Jan Alokozay, deputy head of the Afghanistan chamber of commerce.
 
Investment across the country had fallen by 30 percent in the 11 months to November, he said, but Karzai's defiant stand after the loya jirga precipitated a further 10 percentage point drop, taking the decline for the year to 40 percent.
 
Wafihullah Latifi and his brothers own Kabul's newest shopping center, the brightly colored six-story Park Mall, which boasts a 3D cinema, a swimming pool and room for more than 160 shops. But so far, they have only been able to fill the bottom three floors with tenants.
 
“There is a huge decrease in demand for space in our mall since President Karzai rejected signing the BSA,” Latifi said.

You May Like

Photogallery Strong Words Start, May End, S. African Xenophobic Attacks

President Jacob Zuma publicly condemned rise in attacks on foreign nationals but critics say leadership has been less than welcoming to foreign residents More

Video Family Waits to Hear Charges Against Reporter Jailed in Iran

Reports in Iran say Jason Rezaian has been charged with espionage, but brother tells VOA indictment has not been made public More

Video Overwhelmed by Migrants, Italy Mulls Action to Stabilize Libya

Amnesty International says multinational concerted humanitarian effort must be enacted to address crisis; decrepit boats continue to bring thousands of new arrivals daily More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Are Energy Needs Putting Thailand's Natural Beauty at Risk?i
X
Steve Sandford
April 17, 2015 12:50 AM
Thailand's appetite for more electricity has led to the construction of new dams along the Mekong River to the north and new coal plants near the country's famous beaches in the south. A proposed coal plant in a so-called "green zone" has touched off a debate. VOA's Steve Sandford reports.
Video

Video Are Energy Needs Putting Thailand's Natural Beauty at Risk?

Thailand's appetite for more electricity has led to the construction of new dams along the Mekong River to the north and new coal plants near the country's famous beaches in the south. A proposed coal plant in a so-called "green zone" has touched off a debate. VOA's Steve Sandford reports.
Video

Video Overwhelmed by Migrants, Italy Mulls Military Action to Stabilize Libya

Thousands more migrants have arrived on the southern shores of Italy from North Africa in the past two days. Authorities say they expect the total number of arrivals this year to far exceed previous levels, and the government has said military action in Libya might be necessary to stem the flow. VOA's Henry Ridgwell reports.
Video

Video Putin Accuses Kyiv of ‘Cutting Off’ Eastern Ukraine

Russian President Vladimir Putin, in his annual televised call-in program, again denied there were any Russian troops fighting in Ukraine. He also said the West was trying to ‘contain’ Russia with sanctions. Henry Ridgwell reports on reactions to the president’s four-hour TV appearance.
Video

Video Eye Contact Secures Dog's Place in Human Heart

Dogs serve in the military, work with police and assist the disabled, and have been by our side for thousands of years serving as companions and loyal friends. We love them. They love us in return. VOA’s Rosanne Skirble reports on a new study that looks at the bio-chemical bond that cements that human-canine connection.
Video

Video Ukrainian Volunteers Search for Bodies of Missing Soldiers

As the cease-fire becomes more fragile in eastern Ukraine, a team of volunteer body collectors travels to the small village of Savur Mohyla in the what pro-Russian separatists call the Donetsk Peoples Republic - to retrieve bodies of fallen Ukrainian servicemen from rebel-held territories. Adam Bailes traveled with the team and has this report.
Video

Video Xenophobic Violence Sweeps South Africa

South Africa, long a haven for African immigrants, has been experiencing the worst xenophobic violence in years, with at least five people killed and hundreds displaced in recent weeks. From Johannesburg, VOA’s Anita Powell brings us this report.
Video

Video Sierra Leone President Koroma Bemoans Ebola Impact on Economy

In an interview with VOA's Shaka Ssali on Wednesday, President Ernest Koroma said the outbreak undermined his government’s efforts to boost and restructure the economy after years of civil war.
Video

Video Protester Lands Gyrocopter on Capitol Lawn

A 61-year-old mailman from Florida landed a small aircraft on the Capitol lawn in Washington to bring attention to campaign finance reform and what he says is government corruption. Wednesday's incident was one in a string of security breaches on U.S. government property. Zlatica Hoke reports the gyrocopter landing violated a no-fly zone.
Video

Video Apollo 13, NASA's 'Successful Failure,' Remembered

The Apollo 13 mission in 1970 was supposed to be NASA's third manned trip to the moon, but it became much more. On the flight's 45th anniversary, astronauts and flight directors gathered at Chicago's Adler Planetarium to talk about how the aborted mission changed manned spaceflight and continues to influence space exploration today. VOA’s Kane Farabaugh reports.
Video

Video Badly Burned Ukrainian Boy Bravely Fights Back

A 9-year-old Ukrainian boy has returned to his native country after intensive treatment in the United States for life-threatening burns. Volodia Bubela, burned in a house fire almost a year ago, battled back at a Boston hospital, impressing doctors with his bravery. Faith Lapidus narrates this report from VOA's Tetiana Kharchenko.
Video

Video US Maternity Leave Benefits Much Less Than Many Countries

It was almost 20 years ago that representatives of 189 countries met at a UN conference in Beijing and adopted a plan of action to achieve gender equality around the world. Now, two decades later, the University of California Los Angeles World Policy Analysis Center has issued a report examining what the Beijing Platform for Action has achieved. From Los Angeles, Elizabeth Lee has more.
Video

Video Endangered Hawaiian Birds Get Second Chance

Of the world's nearly 9,900 bird species, 13 percent are threatened with extinction, according to BirdLife International. Among them are two Hawaiian honeycreepers - tiny birds that live in the forest canopy, and, as the name implies, survive on nectar from tropical flowers. Scientists at the San Diego Zoo report they have managed to hatch half a dozen of their chicks in captivity, raising hopes that the birds will flutter back from the brink of extinction. VOA’s George Putic reports.
Video

Video Exhibit Brings Renaissance Master Out of the Shadows

The National Gallery of Art in Washington has raised the curtain on one of the most intriguing painters of the High Renaissance. Mostly ignored after his death in the early 1500s, Italian master Piero di Cosimo is now claiming his place alongside the best-known artists of the period. VOA’s Ardita Dunellari reports.
Video

Video Sidemen to Famous Blues Artists Record Their Own CD

Legendary blues singer BB King was briefly hospitalized last week and the 87-year-old “King of the Blues” may not be touring much anymore. But some of the musicians who have played with him and other blues legends have now released their own CD in an attempt to pass the torch to younger fans... and put their own talents out front as well. VOA’s Greg Flakus has followed this project over the past year and filed this report from Houston.
Video

Video Iran-Saudi Rivalry Is Stoking Conflict in Yemen

Iran has proposed a peace plan to end the conflict in Yemen, but the idea has received little support from regional rivals like Saudi Arabia. They accuse Tehran of backing the Houthi rebels, who have forced Yemen’s president to flee to Riyadh, and have taken over swaths of Yemen. As Henry Ridgwell reports for VOA, analysts say the conflict is being fueled by the Sunni-Shia rivalry between the two regional powers.

VOA Blogs