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

Mali's Female Basketball Players Rebound After Islamist Occupation

Islamist extremists ruled northern Mali for most of 2012, imposing strict Sharia law, and now some 18 months later, the region is slowly getting back on its feet More

Video Vietnamese Staging Chinese Product Boycott After Oil Rig Spat

Many Chinese-made products go unsold, for now, with numerous Vietnamese consumers still angry over recent dispute More

Koreas Mark 61st Anniversary of War Armistice

Muted observances on both sides of heavily-armed Demilitarized Zone that separates two decades-long enemies More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Students in Business for Themselvesi
X
Mike O'Sullivan
July 26, 2014 11:04 AM
They're only high school students, but they are making accessories for shoes, fabricating backpacks and doing product photography - all through their own businesses. It's the result of a partnership between a non-profit organization that teaches entrepreneurship and their schools. VOA's Mike O'Sullivan and Deyane Moses met the budding entrepreneurs near Los Angeles.
Video

Video Students in Business for Themselves

They're only high school students, but they are making accessories for shoes, fabricating backpacks and doing product photography - all through their own businesses. It's the result of a partnership between a non-profit organization that teaches entrepreneurship and their schools. VOA's Mike O'Sullivan and Deyane Moses met the budding entrepreneurs near Los Angeles.
Video

Video Astronauts Train in Underwater Lab

In the world’s only underwater laboratory, four U.S. astronauts train for a planned visit to an asteroid. The lab - called Aquarius- is located five kilometers off Key Largo, in southern Florida. Living in close quarters and making excursions only into the surrounding ocean, they try to simulate the daily routine of a crew that will someday travel to collect samples of a rock orbiting far away from earth. VOA’s George Putic has more.
Video

Video Not Even Monks Spared From Thailand’s Junta-Backed Morality Push

With Thailand’s military government firmly in control after May’s bloodless coup, authorities are carrying out plans they say are aimed at restoring discipline, morality and patriotism to all Thais. The measures include a crackdown on illegal gambling, education reforms to promote students’ moral development, and a new 24-hour phone hotline for citizens to report misbehaving monks. Steve Sandford reports from Bangkok.
Video

Video Virtual Program Teaches Farming Skills

In a fast-changing world beset by unpredictable climate conditions, farmers cannot afford to ignore new technology. Researchers in Australia are developing an online virtual world program to share information about climate change and more sustainable farming techniques for sugar cane growers. As VOA's Zlatica Hoke reports, the idea is to create a wider support network for farmers.
Video

Video Airline Expert: Missile will Show Signature on Debris

The debris field from Malaysia Airlines Flight 17 is spread over a 21-kilometer radius in eastern Ukraine. It is expected to take investigators months to sort through the airplane pieces to learn about the missile that brought down the jetliner and who fired it. VOAs Carolyn Presutti explains how this work will be done.
Video

Video Treatment for Childhood Epilepsy Heats up Medical Marijuana Debate

In the United States, marijuana is classed as an illegal drug by the federal government. But nearly half the states have legalized it, to some degree. Proponents say some strains of marijuana might have exceptional health benefits, for treating pain or inflammation in chronic conditions such as cancer, multiple sclerosis and epilepsy. Shelley Schlender reports on a strain of medical marijuana developed in Colorado that is reputed to reduce seizures in childhood epilepsy
Video

Video Airbus Adds Metal 3D Printed Parts to New Jets

By the end of this year, European aircraft manufacturing consortium Airbus plans to deliver the first of its new, extra-wide-body passenger jets, the A350-XWB. Among other technological innovations, the new plane will also incorporate metal parts made in a 3-D printer. VOA's George Putic has more.
Video

Video AIDS Conference Welcomes Exciting Developments in HIV Treatment, Prevention

Significant strides have been made in recent years toward the treatment and prevention of HIV, the virus that causes AIDS. This year, at the International AIDS Conference, the AIDS community welcomed progress on a new pill that may prevent transmission of the deadly virus. VOA’s Anita Powell reports from Melbourne, Australia.
Video

Video IAEA: Iran Turns its Enriched Uranium Into Less Harmful Form

Iran has converted its stockpiles of enriched uranium into a less dangerous form that is more difficult to use for nuclear weapons, according to the United Nations’ Atomic Energy Agency. The move complies with an interim deal reached with Western powers on Iran's nuclear program last year, in exchange for easing of sanctions. Henry Ridgwell reports for VOA from London.

AppleAndroid