0:10

Hello, and welcome to another episode

0:13

of the Odd Thoughts Podcast. I'm Tracy Allaway

0:16

and I'm Joe Wasn't you

0:18

know, Joe. It's obviously the start of

0:20

a new year, and I'm just thinking back

0:22

to and there were so

0:24

many things that happened.

0:27

It's kind of crazy when you think back. I

0:30

mean, just think back this time last year.

0:33

Game Stop hadn't even really begun

0:35

to take off, and then it suddenly became such

0:37

a big thing. But it feels like that

0:39

happened, I mean absolutely

0:41

ages ago. Yeah,

0:44

it really does. I feel like there were some

0:46

really big themes obviously we don't

0:48

need to go over them that happened, but

0:51

there were also just a bunch of smaller,

0:54

remarkable stories. Yeah, and

0:56

you mentioned remarkable stories. So one of

0:58

the very big thing things that happened

1:01

last year was the fall of Afghanistan,

1:04

and we had those dramatic scenes out

1:06

of Cappel as people scrambled

1:08

at the airport to try to get out

1:10

of the country. And it's

1:13

one of those things, you know, at the time, people

1:15

were talking about how those pictures were going to go

1:17

down in history. It was all

1:19

over the news. The news cycle focused

1:22

on it a lot and we did an odd Lots episode

1:24

on it at the time, but it's

1:27

sort of fallen off the front

1:29

pages since then, and in

1:32

the meantime, Afghanistan

1:34

has really been struggling under Taliban

1:37

rule. You see these news reports now

1:39

again they're not on the front page, but somewhere

1:42

in the back of the newspaper talking about

1:44

mass starvation, inflation,

1:47

absolute economic collapse.

1:50

And I think it's important that

1:52

we do a follow up on what

1:54

is actually going on in the Afghanistan

1:57

economy right now. Right,

1:59

So, Afghanistan was in

2:01

the news for about two weeks

2:03

near the end of I think it was around the end of summer.

2:06

And obviously one aspect of

2:08

it was just the withdrawal after you

2:10

know, basically two decades of

2:12

the U. S Forces being there. But then the other

2:15

aspect was simply the

2:17

dramatic pictures at the airport and

2:19

around the airport and people

2:22

there was an evacuation, and then of course the

2:24

cameras left, and you don't see much Afghanistan

2:27

in the news. But to your point, everyone

2:30

anticipated that there would be extreme

2:33

economic fragility and likely

2:35

inflation due to the balance of payments

2:37

issues and the loss of aid that would come

2:39

along with a rule by the Taliban,

2:42

and now we seemed to be seeing exactly that

2:44

that an economy that was already in bad shape

2:46

is an extremely bad shape right now, Yeah,

2:49

exactly right. And there's clearly an informational

2:51

challenge here, right, which is that there aren't

2:53

a lot of journalists operating in Afghanistan

2:56

at the moment for obvious reasons. There isn't

2:58

a lot of clear financial data necessarily

3:01

coming out of the country, and so that

3:03

can be difficult um or make

3:05

it difficult to actually report on the situation

3:07

there. We are going to try our best. In

3:09

this episode, we are going to be speaking

3:12

once more with Ashmal Ahmadi.

3:15

He's the former governor of Afghanistan

3:17

Central Bank, now a senior fellow

3:19

at Harvard University. So Ashmal,

3:22

thank you so much for coming back on the show. Thank

3:25

you very much for had It's a pleasure to be here.

3:27

So maybe just to begin, could

3:29

you give us your impression

3:32

of the situation on the ground

3:34

in Afghanistan since we last

3:36

spoke to you back in August.

3:39

You know, I mentioned some of the things that

3:41

we've seen, reports of starvation,

3:44

double digit inflation, currency

3:46

volatility. I think there was one day in December

3:49

where apparently the Afghani

3:51

fell something like in

3:53

one day, and that's obviously been challenging

3:56

for people on the ground. But what

3:58

are you hearing from your

4:00

contacts in the country. I

4:03

think it's it's in line with what you're hearing

4:05

as well. The economic situation

4:08

continue to deteriorate. The

4:10

situation is getting worse.

4:13

So, you know, back in August

4:15

when when we first spoke, I've

4:18

mentioned a few things. One that you likely

4:20

see a large GDP contraction, which

4:22

is what we're seeing now. You're

4:24

likely to see an effects depreciation

4:27

which will pass on through to inflation, which we're

4:29

also seeing. And we're likely

4:31

to see an increase in refugee flows. UM.

4:34

So I think all of that is in line. And so

4:37

the people I speak with, um, you

4:39

know, are are seeing the same things. Unfortunately.

4:43

So when we last talked, we

4:45

talked about I mean, you you basically anticipated

4:48

this, you know, we talked about the

4:50

difficulty that Afghanistan would

4:53

have important dollars. We talked about

4:55

the current account and what would

4:57

happen with the loss of aid,

4:59

but you know, just sort of sort

5:01

of talked about what's changed from

5:04

a sort of like external perspective

5:06

where we're where was the Afghanistan getting

5:09

its money prior to the

5:11

change in rule, how is it financing itself?

5:14

And what do sort of domestic operations look

5:16

like now. So

5:18

originally, let's say

5:21

the current account deficit or the trade

5:23

deficit, I'm sorry, it was approximately

5:26

seven billion dollars which was being financed

5:28

by international aid flows. And so

5:30

obviously the eight

5:32

flows have have stopped, the assets

5:34

have been frozen, and so you

5:37

know, what you're seeing is a contraction

5:39

of the imports that are flowing

5:41

into the country because they can no

5:43

longer be paid for. No official

5:46

numbers have come out, but I would expect that current

5:48

account more trade deficit to significantly

5:51

contract over the course of two

5:54

you know, to be honest, Actually the currency

5:57

depreciation hasn't been as significant

5:59

as I would expect, so it's it's

6:01

appreciated. Um, it's gone to about

6:03

I think the latest figures roughly and

6:05

ten. It went higher than that came back,

6:08

um, But that's depreciation.

6:11

Given the economic shock and stoppage

6:14

of aid flo as, I was expecting even

6:16

a larger um depreciation.

6:18

But I think what you have is the transmission

6:21

mechanism being instead of the

6:24

currency being g d P, so you've

6:26

had a larger GDP contraction than

6:28

I would have expected. So, something

6:31

that we talked about a lot back in August,

6:33

UM, and you just mentioned it then, was the

6:36

fate of this nine billion in

6:39

dollar reserves that Afghanistan

6:41

actually owned but was held by

6:43

the US. So my understanding

6:46

is the US still doesn't want

6:48

to hand it over because they don't

6:50

want to give money directly

6:52

to the Taliban. But can you maybe walk

6:54

us through the situation around those deposits

6:57

right now and what the likelihood is that

7:00

Afghan Afghanistan actually gets

7:02

them at some point. Yeah,

7:04

So the currency reserves are still

7:06

frozen, UM, and the

7:08

situation has become even more complicated

7:11

since the last time we spoke. So the

7:13

New York Times has reported on this a

7:15

few times. On September, there

7:18

was a rid of execution that

7:20

was provided to to the

7:22

legal department of the Court system saying

7:25

essentially that the plaintiffs

7:27

of the September eleventh attacks would

7:30

like to have access or gain

7:32

access to the reserves. If

7:34

you recall, you know, perhaps twenty

7:36

years ago, UM, there was a court

7:38

case against al Qaeda and Taliban, and

7:41

a court found that defendants in this

7:43

case, Al Qaida and Taliban liable

7:45

by default more than paid damages of seven

7:48

billion. Now that core case was,

7:51

you know, on paper, there's no way to actually collect

7:53

on that. So what happened is these

7:56

victims, approximately a hundred fifty

7:58

of them, gathered together and on September

8:01

provided this brid of execution.

8:04

What what happens now is

8:06

is a little bit unclear. My understanding

8:09

is the court system seeks

8:11

to have the opinion of

8:14

the U. S Government in such cases, and

8:16

originally the US government and the

8:18

Biden administration were to provide their

8:20

opinion back in December, but

8:23

now that's been delayed until the end of August.

8:26

So all this to say is that you have

8:28

these reserves. Of course, the

8:30

Taliban would like access to them.

8:33

At the same time, it's being held up through the U

8:35

S. Court system, where the defendants or the victims

8:38

of surrender eleventh would like access to them.

8:41

And it's my understanding that as sometime this

8:44

year, in perhaps January

8:46

February, there will be a decision made as

8:48

to the status of those within

8:51

that. You know, The Times pointed out

8:53

that perhaps a portion of it could be

8:55

used to pay the victims of September

8:58

eleven, and a portion could be read

9:00

up to provide humanitarian assistance

9:02

for the people of Afghanistan. So that's

9:04

the current situation as I understand. So

9:07

just to be clear, who would make that

9:09

choice, it would have to be a court ruling,

9:11

and would that be a final ruling or

9:13

if there or a court ruling, would that just go to potentially

9:16

another appeal. It's a good question.

9:18

I guess I'm not clear if

9:21

it would be a final ruling, but it's my understanding

9:23

that the court system would have to um

9:25

decide on this case, and there might be

9:28

negotiations between the

9:31

Justice Department and the plaintiffts

9:33

to see what the final outcome would be. But I'm

9:35

unsure if whether it be able to go

9:37

to um An Appeals Corton, But

9:40

just thinking out loud, probably wouldn't

9:42

because in this case, the Taliban

9:45

or al Qaeda is not going to represent themselves

9:47

in court, so I

9:49

don't know who would actually appeal to that judgment.

9:52

The other thing that's happened since we

9:54

last spoke is I

9:57

guess you've got a replacement at

9:59

the Central Bank. Um Mohammed address

10:02

is the new Afghanistan Central Bank

10:04

Governor as far as I know, there

10:06

aren't a lot of details available about

10:09

his previous experience in

10:11

economics or monetary policy.

10:14

But what do you know about him,

10:16

and what's your impression

10:18

of how he's been running the central

10:21

Bank or how the central Bank has been running

10:23

in general so far? So

10:26

he is um the new central

10:28

Bank governor. He was previously on the

10:31

Taliban Economic Commission, and

10:34

my understanding is that he doesn't have

10:36

a strong background in economics

10:38

or finance issues, and as

10:40

such he's dependent on senior

10:42

staff that remained there to run the operations

10:45

day to day and run the policies.

10:48

I think he's kept some members of

10:50

the staff that were there when when

10:53

I was governor, and some others have been

10:56

fired or relieved from from working

10:58

at the Central Bank. The policies

11:00

that he's implementing are roughly in line

11:03

with what I would have expected. So I

11:05

mentioned in our previous call that one of

11:07

my last actions was to limit the withdrawals

11:09

that people could take out given the

11:11

shortage of dollars, and so I

11:13

think that's continued, and so they've placed

11:16

a limit which has slowly increased

11:19

over time. So I think people can UM.

11:21

I think it was two hundred originally, and I think

11:23

it might have increased to three hundred or four hundred

11:25

over time, so I think that that's the

11:27

right approach. I've also read

11:30

that the Taliban are collecting approximately

11:32

three million per day in revenues,

11:35

so roughly a billion dollars per

11:37

year in revenue, so that's

11:39

given them some flexibility, I think, to

11:42

provide currency to the

11:44

business community and the financial

11:46

sector, um. So overall, you

11:49

know, I think, again it's a

11:51

tough situation. He probably doesn't have the background

11:53

or experience, but again, anyone

11:55

even with experience in this situation would

11:58

find it tough to run central bank understanctions.

12:18

So I remember, one of the things that really struck

12:21

me about your description

12:23

of your time on the job was obviously

12:26

sort of like monetary policy

12:28

as it's understood, with part of it, but also

12:30

real nuts and bolts stuff like how do you

12:32

get cash out to provinces

12:35

that are further away from the capital, how

12:37

do you get cash to places where it's safe

12:40

and unlikely to be stolen

12:42

or unlikely to be under the control of the Taliban

12:44

obviously the whole countries under the control

12:47

of the Taliban to some extent. What's

12:49

your impression of that aspect of

12:51

how the central bank is working in

12:53

terms of like just the just the mechanics

12:56

of cash distribution. It's

12:58

a good question. I don't have that much

13:01

insight or into how they've changed

13:03

their operations. You know, I

13:05

would expect it to be along the same lines

13:07

of what we manage, just with much fewer

13:10

dollars. So we had,

13:11

um, you know, anx

13:13

auction system where banks and

13:16

currency traders came in and bid electronically

13:19

for dollars to be auctioned

13:21

off. And you know, on average, you

13:24

know, we have a certain amount that we would auction off

13:26

three times a week. So I would

13:28

imagine they have the same system going,

13:31

but at a much lower dollar

13:33

auction rate. The one thing that has

13:35

changed is I believe the

13:37

u N now is providing some

13:40

dollars to the central Bank.

13:42

I believe, not for them to auction themselves,

13:45

but they are now providing it to a private

13:47

bank, a i B bank, which is larger bank

13:49

in Afghanistan, so that they could provide dollars

13:52

to the market. And this this, you know, brings

13:54

in a larger question of how

13:56

to provide dollars in this economy because

13:59

the central bank is as such, a sanctioned

14:01

entities of dollars can't be bit brought in and

14:04

provided to them. But some

14:06

people are proposing that instead of providing

14:08

to the central bank, it's provided to a

14:10

private bank who then conducts the

14:12

functions of the central bank. Yeah,

14:14

this is something that I wanted to ask

14:16

you about. So there, I mean, we can get

14:18

into the sanctions issue um

14:21

in a little bit. But one of the ideas

14:23

floating around is that you

14:25

could maybe give money directly

14:29

two people or to certain groups

14:31

and bypass the Taliban completely.

14:34

But I imagine in order to do that

14:37

you need to have a functioning

14:39

banking system. And as we discussed

14:42

the last time you were on, so much of

14:45

the Afghanistan financial sector is

14:47

informal. There are these informal

14:49

money lenders called I want to say,

14:52

Sarafa's is that right?

14:56

And so I guess my question is like, what

14:58

is the current stay of Afghanistan's

15:01

banking system and would it be able

15:03

to handle those kind of direct

15:06

payments or would you inevitably

15:09

expect to see more and more

15:12

financial activity

15:14

taken up by informal

15:16

money lenders or the black market.

15:19

Again, you know, the informal Whoala dealers

15:22

you know already provide financial services

15:24

to the majority of Afghans. There's only banked

15:27

market. But but again the

15:30

banking sector, you know, if it's even only

15:33

the banking sector provides the financial services

15:35

for the who walas or provides dollars for the

15:37

who aalas who then provided to the

15:39

rest of the population. So

15:41

it is difficult to

15:44

move forward without a functional financial

15:46

sector. And so the broad question

15:48

I think that um some people

15:51

in in the international community or

15:53

thinking about, is, you know, how do we

15:55

either deal with the central bank as

15:57

a sacient entity or be how

16:00

do we create a financial

16:02

sector without the central bank? And so under

16:05

the second option, what

16:07

some people have proposed is simply to say,

16:10

look, the central bank is sanctioned,

16:12

we can't provide dollars through it, So why don't

16:15

we have a private bank perform

16:17

the functions of the central bank. And so I

16:19

think that's something people are taking a look at and

16:21

on a trial basis. It's my understanding

16:23

that the UNDP, for example, has

16:26

provided some money for a I B to

16:28

distribute it um to

16:30

the business community, so

16:32

that could be potentially one option moving

16:34

forward. One question I have about

16:37

the tail band's cash management

16:40

needs is who is supporting

16:42

it right now? And there's the

16:44

US and the sanctions, which we'll talk about shortly,

16:47

But is it getting cash

16:49

and support and do you have any sense of what

16:51

scale from any allies right now? They

16:54

are not to my knowledge, getting any dollars

16:56

from directly from

16:58

any donors or many international

17:00

organizations. There only sources funding

17:03

right now is um for example, through

17:06

taxes and customs.

17:08

So you know, as I mentioned before, approximately

17:10

three million a day, so approximately a billion

17:12

a year. How long can this situation

17:15

go on for? Like? What is the ultimate

17:18

end game here? I

17:20

think broadly speaking, you

17:23

know, one of the goals we had

17:26

in the government was to

17:29

build state institutions that could take

17:31

on more and more responsibility

17:33

from the international community. So for

17:36

example, you know, there were some

17:38

services that the u N agencies

17:40

or NGOs were providing that

17:43

over time we wanted the government to take

17:45

on. And I think in some sense

17:47

you're seeing a reversal of that.

17:50

What's happening now is there's

17:52

fewer and fewer functions that will be taken

17:54

up by the government and more and

17:56

more responsibilities will fall on

17:59

the u N and NGOs to

18:01

provide. So you know, some examples of

18:03

that is, you know this financial

18:05

services or money transfer system. Instead

18:07

of going to the central bank, may I go,

18:10

may go to a private bank to conduct

18:12

central bank activities. Another

18:15

example is education and health

18:17

services will likely

18:19

be provided through NGOs

18:21

or through the u N. Some

18:24

of those functions people

18:26

argue should be retained by the state.

18:28

So, for example, the education sector, instead

18:30

of the u N hiring a

18:33

hundred thousand teachers, we have already

18:35

in the civil service a lot of teachers.

18:37

Why don't we go ahead and just pay them? And

18:39

under the new carve outs

18:41

of the sanctions regimes, the new exemptions

18:44

u S Treasury has provided. My

18:46

understanding is that the u N is

18:48

able to pay for teacher salaries. So in

18:51

some it's you know, the flow will be

18:53

now a donor,

18:55

whether it's the u S or European

18:58

Union or another country, will

19:00

provide aid to the u N and

19:03

the u N can then pay

19:05

for teachers directly without

19:08

paying them through the Ministry of Education,

19:11

which might be a sancition entity. Or

19:14

the donor will give money to an NGO

19:17

who provide health services and therefore

19:19

won't touch the Taliban government. Um.

19:22

So you have a number of these workarounds,

19:24

which in some ways is hollowing out

19:26

of the central government, but it's

19:29

it's a way to deal with the situation as it

19:31

stands. What are

19:33

the dollar amounts we're talking about

19:35

with these alternative arrangement relative

19:38

to the to the gross level

19:40

of a that was going in previously, uh

19:43

previously through the government. So

19:45

previously we had what was around

19:48

two and a half billion going to

19:50

the central government and another three billion

19:53

for the military. So let's call it roughly five billion

19:56

of international aid and two and a half billion

19:58

from domestic revenues, so seven

20:01

and a half total. That's a large

20:03

figure. You have to take into account

20:05

that now a significant

20:08

portion of that is no longer required. A

20:10

significant portion of our budget was

20:12

for military salaries and

20:14

police salaries, and given

20:17

that now the conflict, with the level of

20:19

conflict has significantly reduced, those

20:21

amounts should be much less and

20:24

likely you can pay or they'll

20:26

be forced to pay the teacher, the police

20:29

and military, the Taliban

20:31

military less.

20:33

So that's one way I think you'll see a contraction

20:36

of what's required. The

20:38

second is the amount that the

20:40

u N has thus far stated

20:43

they want to collect for if

20:46

I are remembers they said they want to

20:48

raise approximately four billion for

20:50

humanitarian purposes and

20:54

another perhaps four billion four

20:57

other programs, and

20:59

and I think that's probably over optimistic. Probably

21:01

even the original four billion maybe

21:04

too optimistics, But that that gives you an indication

21:07

roughly, right, So seven a

21:09

half billion total government budget, A

21:11

lot of that can be it can be much

21:13

less, and so therefore you have, you

21:16

know, perhaps if the un a successful

21:19

four billion being raised and provided for

21:21

humanitarian purposes as

21:23

well as teacher and teacher

21:26

salaries and healthcarec delivery. So

21:29

I get that maybe you could work all of

21:31

that out from a budget perspective.

21:33

But I guess my question is, is that

21:35

a valid way

21:37

of state building for

21:40

the Taliban? This idea that you know,

21:42

they only take on very

21:45

limited government functions and

21:47

basically outsourced things like healthcare

21:50

and education to NGOs or non

21:52

government entities who have the money

21:54

and are able to do this. I

21:58

mean, it's probably not the best possible

22:00

outcome, but I think it's you

22:03

know, this is the best possible outcome

22:05

given the situation. Right, So,

22:07

thus far no country

22:09

in the world has recognized

22:12

the Taliban, and so therefore no

22:14

money is going to float to them. I think the Biden

22:17

administration has made it relatively

22:19

clear that they won't be any recognition

22:21

anytime soon. But on the other

22:23

hand, you have the humanitarian needs of the

22:25

population, so you

22:28

know, it's it's not the best case where you're building

22:30

up the state capability, but it's

22:32

a mechanism by which humanitarian

22:34

assistance can be provided without

22:37

the money reaching Taliban hands. I

22:39

guess what I was trying to get it was would

22:42

the Taliban be satisfied with

22:44

this arrangement or at some point

22:46

would it be seen as as undermining

22:49

their authority in the country or do they

22:51

not really care about that? No, No, of course

22:54

they care very much about it. On November

22:56

seventeen, the acting Taliban Foreign Affairs

22:58

Minister released the public letter to the United States

23:01

Congress, you know, stating that

23:03

the funds must be released. There

23:05

have been many comments and some

23:08

demonstrations, I think just a few days ago

23:10

in Cobble, demanding the release

23:12

of the funds and demanding

23:15

additional aid and for the aid to be directed

23:17

through the government. UM but I think at

23:19

this stage the international community just is

23:22

not listening. And to that point, after

23:24

that Taliban statement was released on November

23:28

the U s Special Representative for

23:30

Afghanistan tweeted that the

23:32

US, you know, has already provided five million,

23:35

and US officials made it clear

23:37

the Taliban that if they pursued a military

23:39

takeover rather than a negotiated settlement,

23:42

that they would not be recognized. So

23:44

you do have a situation where the Taliban are unhappy

23:46

with the situation, but it doesn't

23:49

look like the international community thus far as budget.

23:52

I want to go back to something

23:54

you talked about a little bit in the beginning, and you

23:56

talked about the central bankers reliant

23:58

to some extent on existing staff

24:01

and some of the staff who probably worked

24:03

close with you at the Central Bank. One

24:06

of the big questions that people wondered

24:08

about what would happen to the

24:10

sort of like civil servants who had worked

24:12

in government under a certain

24:15

expectation of how the government would be run

24:17

and then rapid change. How

24:19

many staffords have they kept in place, and what has

24:21

changed for the people who are essentially

24:24

doing the work of running the government. And

24:26

I guess based on the people you speak to and

24:29

um your sense of the professionals

24:31

basically running things, well,

24:34

I think the first thing that comes to mind is female

24:37

staff have been told to stay at

24:39

home. So you know, I had a few

24:41

directors who are female and Davids

24:43

and she said stay at home and

24:46

in other words, you know, they're they're

24:48

not working there. Um So I

24:50

think that's a big loss um and continues

24:53

to be um. You know, we can talk about the education

24:55

and the fact that they're not opening up schools

24:57

as well, but you know, so, so that's a very

24:59

import an aspect that needs to be discussed.

25:03

Secondly, I think that I

25:05

think they're hiring or valuing,

25:08

you know, people who they know

25:11

and people who they trust.

25:13

So there's a number of people that I brought on professionals

25:16

that have been released over the past year,

25:19

and I think that's unfortunate for the

25:21

Central Bank and for the country,

25:23

and so they're forced to find other opportunities

25:26

and the people who remained or in some

25:29

cases people who have been there for thirty years.

25:31

So I think I mentioned last time even we

25:33

spoke that you know, I had one

25:35

of my directors who has worked

25:38

at the Central Bank since the since

25:40

the Taliban were there previously,

25:42

and so you know, he's someone that they kept

25:44

on because there's some level of trust, I think. Um

25:47

So, so it's a mix some people left

25:49

or and went into hiding, and because

25:51

they were afraid of that, what the reaction

25:53

might be some people that were able to leave the

25:55

country, and so it's it's it's

25:57

a mix for for all the people who

26:00

previously there. Can I ask

26:02

a potentially sensitive

26:04

question, So Ashraf Ghani, the former

26:07

president, he infamously, I

26:09

guess at this point fled Capal, you

26:11

know, apparently right when the

26:13

US and the Taliban were negotiating some sort

26:16

of handover and UM.

26:18

He gave an interview a

26:20

few days ago where he basically

26:23

defended his decision and said that

26:25

he had done the best thing and that he'd saved

26:27

Capple by leaving UM.

26:30

And you know, I'm aware that obviously you've

26:32

left UM quite quickly as well.

26:34

But after the president, or

26:36

after it had become clear that the president had already

26:38

left, what do you think of

26:41

that? Of like Ghani's explanation for

26:43

why he left, I probably

26:45

haven't changed my view from when we

26:47

first spoke, which is he

26:50

was placed in a very difficult situation.

26:53

You know, some might say impossible, and

26:56

so I recognize that. But at the same

26:58

time, the decision on the last day for him

27:00

to depart was his to take

27:03

and you know,

27:05

there should have been some planning or some recognition.

27:08

You know, people debate

27:10

whether, you know, if he should have stayed or

27:12

left, but I think the

27:15

key part is he should have known that things were

27:17

deteriorating to such an extent that

27:20

some planning had to take place. And

27:22

I think, you know, the decision to leave

27:24

on that last day, leaving me, leaving

27:27

you know a lot of people to fend for

27:29

themselves. Is you know where where

27:32

I follow him? Ore?

27:34

There's still people evacuations

27:36

happening, are not formal evacuations, But

27:38

are there still people who are finding

27:41

their way out of the country at this point

27:43

or to what degree has that been

27:45

has that become impossible? There

27:47

are still some people receiving approvals

27:50

for SIV status

27:52

or P one or P two status. The

27:54

issue then becomes they have to travel to

27:56

a third country um in

27:59

order to apply and move the process forward,

28:01

and that becomes really challenging for for

28:03

some people. So there's still efforts,

28:06

but I think the flow has has significantly

28:08

declined. So there's

28:11

just one more thing on the economy that I wanted to ask

28:13

you about, and this is the idea of

28:16

somehow retooling the existing

28:18

Afghanistan economy in order to

28:20

generate more revenue that the

28:23

Taliban could actually be in charge

28:25

of. And I think there was an official from the

28:28

Taliban administration that talked about

28:31

maybe boosting exports in

28:33

order to get that money and

28:36

avert economic collapse. And I guess

28:38

my question is how viable

28:40

is that given that Afghanistan

28:42

has always been um you know, imports

28:45

have always heavily, heavily

28:47

outweighed its exports, which

28:49

you talked about a little bit at the beginning of this discussion.

28:52

Yeah, I think it's challenging. Right.

28:54

So previously, before I was Central

28:56

incouvernment as Minister of Commerce and UM,

28:59

we tried to push exports up to a billion

29:01

for the first time, but our imports

29:03

for seven billion, right, so you can very

29:05

easily see this the huge gap

29:07

we have in our trade balance. So you know, even

29:10

if they're successful, let's say they push up exports

29:12

to know one point two billion, one

29:15

point five billion, right, you're still going

29:17

to have this very large trade deficit

29:19

that you're gonna have to finance through some means.

29:21

So you know, if it's possible,

29:23

if they're able to get some mining projects

29:26

going and increase exports.

29:29

Um, that would help on the margin, but I think

29:31

the larger question still remains. You know, the

29:33

international community. Without the

29:35

support of the international community becomes a very challenging

29:37

situation. You know, back in August,

29:40

there are these theories that

29:42

China would come in or you

29:45

know, a large mining projects potentially

29:47

could come in and and support the Taliban

29:50

government. And I was skeptical then, and

29:52

I think that's um, you know, played out

29:55

the way that I projected, in the sense that those

29:58

kind of flows might be marginally supported, but

30:01

um, the fundamental issue probably won't be

30:03

resolved until there's some yes,

30:05

it's until the international community finds out how

30:07

to support them. And so you know,

30:09

part of the solution is what we talked

30:11

about just a few minutes ago, which is, you

30:14

know, if international community does

30:16

provide let's say four

30:18

billion to the u N to spend

30:20

in Afghanistan, and there

30:23

has to be some oversight of the u N, but let's

30:25

say that that gets

30:27

spent in Afghanistan, Well, that's already

30:30

providing a significant portion of

30:32

funding for the trade deficits. You

30:51

know, it's interesting. I was reading through some of

30:53

the Inspector General reports

30:55

and I hadn't read through them before until the

30:58

fall, basically about its various

31:01

aid and development initiatives that had

31:03

taken place over the last twenty years to

31:05

build up greater domestic industry and

31:07

things like tech, textiles and crafts

31:10

and other services. And it was sort

31:12

of like it was a depressing read because

31:14

it read like, you know, all of these endeavors

31:16

were a large string of failures, and these

31:19

programs that were designed to create jobs

31:22

they largely didn't or numerous ones didn't.

31:24

And they would say after five years that created

31:26

four jobs after spending eighty million dollars

31:28

or whatever it is. Do you have a sense

31:30

and you're like, what is it about

31:32

that approach to development that

31:35

didn't work? Because obviously lots of money was

31:37

poured in with the hope of creating

31:39

some sort of some sort of sustainable industry,

31:42

creating export, not a lot of successes.

31:45

Why didn't it work? And is there a better was

31:48

there? Is there a better model or was there a potential

31:51

superior model? That's

31:53

an important question. I think there

31:55

is a better, better model, and there's a lot

31:57

of flaws with the existing model you

32:00

have is you know, and I remember

32:02

back working in the ministry of Finance back

32:04

in two thousand three when these eight flows

32:07

were picking up. What happens

32:10

is you have a lot of people coming

32:12

in from various embassies.

32:15

So you know, you have USAID, do you have UK aid?

32:17

You have these various development agencies and

32:20

they're looking for projects. So they're

32:22

saying, hey, you know from d C or

32:24

London, we just received X

32:27

million dollars or billion dollars that

32:29

we need to spend in Afghanistan. And

32:32

then like you have the military

32:34

aid contracting sector. So in the

32:37

US UM there's a big three

32:39

famous U said contractors,

32:41

Camonics, d Ai, and I

32:44

think one other who put

32:46

together these projects. And then

32:48

they also subcontract to local

32:50

NGOs and and what happens

32:53

is, without a lack of focus, a

32:56

lot of aid agencies and geos

32:58

come with projects that are you

33:00

know, in some ways you could say important, but

33:03

perhaps not useful for state

33:05

development or helpful in the long run. Right,

33:07

So you have you know, someone

33:10

saying we need to provide bicycles for the

33:12

handicap we need UM. I think

33:14

there's a Washington Post article recently

33:16

that said UM that cited

33:19

a project where they imported Kashmir

33:21

or goats from I forget where

33:24

Nepal for Afghanistan and at the

33:26

end, you know, at a very high cost,

33:28

and at the end it didn't really support local industry.

33:31

So you have a lot of these at Hawk projects

33:33

going on that at the end

33:35

don't add up. And so when you do that

33:38

over a course of many, many years, you look

33:40

back and you say, what was the impact

33:42

of all that? And I think that's where the cigar reports

33:44

come in, and and it's, as

33:47

you said, perhaps a disheartening read. Um.

33:49

So some you know, structural thinking needs

33:51

to be had around how to provide better

33:53

aid in these contexts, and especially now

33:56

right, so it's not something that's

33:58

passed. And now the at donors

34:01

will provide funding to the u N

34:03

and NGOs, a

34:06

significant portion will go for

34:08

humanitarian purposes and so that's more

34:11

clear cut. You're but you're buying food or

34:13

you're providing health services for the people, and

34:15

it's not at Hawk projects, but a portion

34:17

of that, you know, I think might go to

34:20

such projects. And so some oversight needs

34:22

to be continued, even even in the current environment,

34:25

or perhaps more so in the current environment. Yeah,

34:28

sorry, I just um, I started googling

34:31

for that goat story Apparently the

34:33

US spent six million dollars on a project

34:35

to import nine Italian goats to

34:38

boost Afghanistan's Kashmir market

34:41

and it didn't work. Interesting, So

34:44

I guess my last question is are

34:46

there any catalysts on the horizon

34:49

to improve the situation?

34:53

It just feels like there's

34:55

a very big well. It feels

34:57

like there's a very negative dynamic in

34:59

the Gghanistan economy right now, and it feels

35:02

like it's incredibly difficult to

35:05

correct it. I mean, it was challenging

35:07

before when you were a central bank governor,

35:09

and it seems even more challenging now

35:12

given that the entire economy is so heavily

35:14

dollarized but now doesn't have any

35:17

access to dollars. So is there

35:19

any point that you see where

35:21

things might get better or where

35:24

the system might end up getting fixed.

35:28

I think we're not probably not going to end up with an

35:30

optimal outcome. I think we're going to have to

35:32

deal with a second best or third

35:34

best type of situation that

35:37

at its heart, it's not as

35:39

stable as we would like. So you

35:43

know, you're going to have a situation where the

35:45

Taliban are going to be in power for

35:48

the foreseeable future, there might be some

35:51

issues or inter Taliban issues, but they're

35:54

there right now. Money

35:56

will not be flowing to them. It will

35:58

be flowing through the u N

36:00

and through NGOs to provide humanitarian

36:03

assistance to the people. That

36:05

amount will likely not be enough

36:08

to grow the economy or

36:10

raise living standards, or perhaps not even

36:12

to sustain existing level extent. It's just

36:14

going to decline to

36:16

a lower state over time, and

36:18

so that's on the negative

36:21

side, I guess on the positive side, what I'd

36:23

say is the U. S. Treasury has released

36:26

three new general licenses which

36:29

provides greater clarity to donors

36:31

and and NGOs and the UN

36:33

that they can provide services, and so

36:35

that I think should open up the flow

36:38

of humanitarian assistance in Afghanistan

36:40

to a greater extent, so that we

36:42

likely won't see the worst outcome which

36:44

we've heard and read about over the past few

36:46

months, which is, you know, as we move into

36:49

the winter season, there's perhaps

36:51

upwards of twenty million people who are food

36:54

insecure, and so you know the risk

36:56

to them of a severe negative

36:58

outcome, and so I think we're

37:01

likely to avoid that with these recent changes.

37:04

But it's not going to create a situation

37:06

that's going to improve. It's probably going to be

37:09

a relatively stable but a

37:11

situation where both parties are unhappy.

37:14

Unfortunately, there's not better news.

37:16

I don't think looking back at everything

37:19

that's happened in the past few

37:21

months, is there anything that you think you

37:23

would or should have done

37:26

differently with the benefit of hindsight.

37:29

Yeah, yeah, it's a good question.

37:31

Um. I'll answer

37:33

in two parts. I think first,

37:37

this was a state collapse on the grandest

37:39

scale, and as such

37:41

there's a lot of anger, and I understand

37:44

that anger. And if there's a part that

37:46

I contributed to that, then I take my responsibility.

37:50

But what I will say is this

37:53

was not a state collapse like

37:57

it wasn't Lebanon where the central bank was

38:00

at the heart of the collapse. This has not Venezuela

38:02

or Syria where hyper

38:05

inflation was taking place. You

38:07

know, at the central bank,

38:09

inflation was at four we

38:13

had central bank reserves of fifteen

38:15

months in port coverage, that provided fifteen

38:18

months in port coverage ratio, and

38:20

we're implementing payment systems that I

38:22

think few central banks in the world have done.

38:25

If there's something that I should have done, what it

38:28

was you know to resign earlier

38:30

and left. Um, and

38:32

perhaps you know, seeing what was

38:34

going on, recognized that I was

38:37

not going to change the situation and

38:39

leave. Well, Ajmal,

38:41

thank you so much for coming back on

38:44

the show and giving us an update on the situation.

38:46

I appreciate it. Thank you very

38:48

much for having It's a pleasure. Thank you,

38:50

Jamal so

39:06

Joe. Um, I can't say

39:08

that was a fun conversation. Um. Obviously

39:10

it was a very depressing conversation to hear

39:13

about an economy collapsing and people

39:15

being at very real risk

39:18

of dying of starvation and things like that.

39:20

But it was good to speak with Ashmal

39:23

and get an update on the situation

39:25

and also, you know, as he mentioned some

39:27

of the accusations that have

39:30

emerged since the fall of Trouble. Yeah,

39:33

I mean, it's obviously I don't know if

39:35

I would say it's an impossible situation,

39:37

but certainly seems like a near impossible

39:40

situation to have a sort

39:42

of like robust thriving economy

39:45

in in in a situation which are cut

39:47

off and which are not not getting significant

39:50

amount of dollar a at at least

39:52

nothing like it was before, in which there isn't

39:54

much of an export sector. It's

39:57

pretty minor. Yeah, I mean it was already

40:00

it is already difficult, and it's interesting to

40:02

hear that how much of it is, how

40:04

much of the leg down has

40:07

been through is was

40:09

surprised about it the shrinking GDP as

40:12

opposed to sort of surging inflation,

40:14

which I guess hasn't been as bad as he had expected.

40:17

Yeah, that was interesting. The other thing

40:19

that struck me is this idea of all the workarounds

40:22

of how to actually get aid to people

40:24

without it flowing through the Taliban, and

40:27

this idea that I guess you're going to end

40:29

up with the Taliban as

40:31

a centralized government, but one that doesn't

40:33

actually provide that many

40:36

services other than I

40:39

guess security, um and the army,

40:41

and then everything else just ends up getting

40:43

sort of outsourced to NGOs.

40:46

Yeah, that's probably and it's very easy to

40:48

imagine that that would be like it

40:51

will also be interesting. This didn't come up in our

40:53

discussion, but of course people

40:55

often talk about the difficulty that any

40:58

centralized authority in Cobbal would

41:00

have in terms of uh the affairs

41:02

of the state across the entire territory

41:05

of Afghanistan, and it

41:07

is somewhat easy to imagine

41:10

that state of affairs as you're describing

41:12

and as Jamala described of, Yeah,

41:15

the NGOs delivering some of

41:17

these services, donors rerouting around the Taliban,

41:19

and that's sort of being the status

41:22

quo for some time. Yeah,

41:24

all right, well shall we leave it there? Let's

41:27

leave it there. Okay. This has been

41:29

another episode of the All Thoughts Podcast.

41:31

I'm Tracy Alloway. You can follow me on Twitter

41:34

at Tracy Alloway and I'm Joe

41:36

Why Isn't All? You could follow me on Twitter

41:38

at the Stalwart. Follow our producer

41:40

Laura Carlson. She's at Laura M.

41:43

Carlson. Follow the Bloomberg head of podcast,

41:45

Francesca Leaving at Francesca Today,

41:48

and check out all of our podcasts at Bloomberg

41:50

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41:53

for listening to