Afghan economy can't withstand US aid cut, COVID-19 impact

The Afghan economy cannot withstand the $1 billion aid cut by the US and the financial pressures originating coronavirus pandemic, according to a survey.

The survey conducted by the Kabul-based Biruni Institute warned that if the Afghan government adopts austerity and a cost reduction policy, the country's economic growth rate will slump by 10 per cent, TOLO News said in a report on Thursday.

"If the government decides to apply an austerity policy in the face of an outbreak of coronavirus, and reduce the budget by $1 billion, the economic growth rate will slump by 11 percent," said Omar Joya, a researcher of Biruni Institute.

According to economic researchers, the dependency of Afghanistan on foreign aid makes the country very vulnerable to the policies of donor nations.

"In case $1 billion is reduced, the results will be devastating, because today, in view of of the coronavirus, we need incentives and financial packages to fight the pandemic, not reduction in aid or contraction," said Nazeer Kabiri, the head of Biruni Institute.

Currently, over 50 pe rcent of the national budget is being paid by the foreign donors, and of that 37 per cent is paid by the US.

But the Afghan Ministry of Finance and Ministry of Economy hit back at these predictions and called them premature judgments on the economic growth rate of the country in the view of the COVID-19 outbreak and the aid reduction, TOLO News reported.

"It will have an impact on the trade and business activities, but the inter-ministerial committees are working to tackle these issues," said Shamroz Khan Masjidi, a spokesman for the Ministry of Finance.

"The Afghan economy at this juncture is more vulnerable compared to the region and world economies," said Mohammad Younus Salek, a spokesman for the Ministry of Economy.

On Monday, the US State Department had announced thatdue to the Afghan leadership's failure to form an inclusive government, Washington has decided to reduce assistance to Afghanistan by $1 billion this year.

On February 18, Afghanistan's Election Commission declared Ghani winner of the presidential election nearly five months after the voting, but his rival Abdullah disputed the result.

Ghani and Abdullah both took oath as President of Afghanistan on March 9.

As of Friday, a total of 94 people have been infected by the COVID-19 virus in Afghanistan, while four have died.