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

UN Fears Rights Violations in China-backed Projects

UNHCHR investigates link between financing development and ignoring safeguards for human rights More

Boko Haram Violence Tests Nigerians’ Faith in Buhari

New president has promised to stem insurgency; he’s scheduled to meet with President Obama at White House July 20 More

Social Media Network Wants Privacy in User’s Hands

Encryption's popularity in messaging is exploding; now it's the foundation of a new social network More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Making Music, Fleeing Bombs: New Film on Sudan’s Internal Refugeesi
X
Carolyn Weaver
July 06, 2015 6:47 PM
In 2012, Sudanese filmmaker Hajooj Kuka went to make a documentary among civil war refugees in Sudan’s Blue Nile and Nuba Mountains region. What he found surprised him: music was helping to save people from bombing raids by their own government. VOA’s Carolyn Weaver has more.
Video

Video Making Music, Fleeing Bombs: New Film on Sudan’s Internal Refugees

In 2012, Sudanese filmmaker Hajooj Kuka went to make a documentary among civil war refugees in Sudan’s Blue Nile and Nuba Mountains region. What he found surprised him: music was helping to save people from bombing raids by their own government. VOA’s Carolyn Weaver has more.
Video

Video Rice Farmers Frustrated As Drought Grips Thailand

A severe drought in Thailand is limiting the growing season of the country’s important rice crop. Farmers are blaming the government for not doing more to protect a key export. Steve Sandford reports from Chiang Mai, Thailand.
Video

Video 'From This Day Forward' Reveals Difficult Journey of Transgender Parent

In her documentary, "From This Day Forward", filmmaker Sharon Shattuck reveals the personal journey of her transgender father, as he told his family that he always felt he was a woman inside and decided to live as one. VOA’s Penelope Poulou has more.
Video

Video Floodwaters Threaten Iconic American Home

The Farnsworth House in the Midwest State of Illinois is one of the most iconic homes in America. Thousands of tourists visit the site every year. Its location near a river inspired the design of the house, but, as VOA’s Kane Farabaugh reports, that very location is now threatening the existence of this National Historic Landmark.
Video

Video Olympics Construction Scars Sacred Korean Mountain

Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Xenophobia Victims in South Africa Flee Violence, Then Return

Many Malawians fled South Africa early this year after xenophobic attacks on African immigrants. But many quickly found life was no better at home and have returned to South Africa – often illegally and without jobs, and facing the tough task of having to start over. Lameck Masina and Anita Powell file from Johannesburg.
Video

Video Family of American Marine Calls for Release From Iranian Prison

As the crowd of journalists covering the Iran talks swells, so too do the opportunities for media coverage.  Hoping to catch the attention of high-level diplomats, the family of American-Iranian marine Amir Hekmati is in Vienna, pleading for his release from an Iranian prison after nearly 4 years.  VOA’s Heather Murdock reports from Vienna.
Video

Video UK Holds Terror Drill as MPs Mull Tunisia Response

After pledging a tough response to last Friday’s terror attack in Tunisia, which came just days before the 10th anniversary of the bomb attacks on London’s transport network, British security services are shifting their focus to overseas counter-terror operations. VOA's Henry Ridgwell has more.
Video

Video Obama on Cuba: This is What Change Looks Like

President Barack Obama says the United States will soon reopen its embassy in Cuba for the first time since 1961, ending a half-century of isolation. VOA White House correspondent Luis Ramirez reports.
Video

Video Hate Groups Spread Influence Via Internet

Hate groups of various kinds are using the Internet for propaganda and recruitment, and a Jewish human rights organization that monitors these groups, the Simon Wiesenthal Center, says their influence is growing. The messages are different, but the calls to hatred or violence are similar. VOA's Mike O’Sullivan reports.
Video

Video Blind Somali Journalist Defies Odds in Mogadishu

Despite improving security in the last few years, Somalia remains one of the most dangerous countries to be a journalist – even more so for someone who cannot see. Abdulaziz Billow has the story of journalist Abdifatah Hassan Kalgacal, who has been reporting from the Somali capital for the last decade despite being blind.
Video

Video Rabbi Hits Road to Heal Jewish-Muslim Relations in France

France is on high alert after last week's terrorist attack near the city Lyon, just six months after deadly Paris shootings. The attack have added new tensions to relations between French Jews and Muslims. France’s Jewish and Muslim communities also share a common heritage, though, and as far as one French rabbi is concerned, they are destined to be friends. From the Paris suburb of La Courneuve, Lisa Bryant reports about Rabbi Michel Serfaty and his friendship bus.

VOA Blogs