Impact of COVID19 on Afghan Economy
KABUL (Khaama Press): With the rapid outbreak of the Coronavirus (COVID-19) since the last quarter of 2019, the world economy has begun to experience a historical economic disruption.
The COVID-19 death toll has so far been more than 60,000 globally. A total of more than one million confirmed cases, of which 246,000 are confirmed to have been recovered as of the fifth April 2020. At the economic level, the first utmost impact this virus had was on one of the world’s biggest industries– the oil industry. The prices for oil have dramatically decreased rapidly due to the low demand and this decrease, which is believed to have been the highest in the last 17 years or so. China serves as an eye-catching example: the Shanghai Stock Market has fallen at about 9 points rates, while the average in the stock markets globally ranges from 5 to 10% every day. Not only the economic sector but also other sectors such as tourism have also been negatively affected due to the outbreak of this deadly pandemic.
Afghanistan has not left the world alone. The country has recently reported more than 330 positive cases (7 deaths, 15 recoveries) as of April 4, 2020. The government has adopted strict containment and quarantine measures, including a screening at borders and ports of entry to Afghanistan. Moreover, strict quarantine for those tested positive and closure of public places and public gatherings have been put in place. Schools, universities and all other government organizations were declared to be closed till the end of April. In the meantime, the Ministry of Hajj and Religious affairs had called upon all people to pray at home and do not hold any mourning/ religious ceremonies at mosques.
Afghanistan is one of the poorest countries in the world where over 40% of its population live below the poverty line. Afghanistan is a foreign aid-dependent country where its imports are way higher compared to the exports. Afghanistan’s neighboring country—Uzbekistan, has recently provided 500 tons of food aid in northern Afghanistan.
The Chinese government has also provided flour, rice and basic needs to Afghanistan along with needed medical supplies, including ventilators, COVID19 testing kits and masks for frontline health workers. Yet the prices of raw materials, goods, home supplies and food have been skyrocketing due to its borders with neighboring countries.
The Afghan government has recently replaced the imports of wheat from Central Asia with the closure of the border with Pakistan. Besides, the approval of $104 million aid by the World Bank for Afghanistan that’s financed by a grant from the International Development Association (IDA), the Afghan government has allocated about $25 million to cover the immediate expenditures related to this epidemic.
The government is still monitoring the situation very strictly in order to work on additional fiscal and other supportive measures to be installed in case the situation gets worse. The central bank of Afghanistan” Da Afghanistan Bank” or DAB has started its discussions with money service providers to make sure that the services including transactions in foreign currency are not interrupted while encouraging the enhancement of their remote services.
Globally, the banking industry has been shocked much more by the COVID 19 pandemic than it had been by the global financial crisis in 2008.
With this pandemic, banks have recently been through the worst-case scenario, a huge decline of 5% to 7% was observed in the global GDP. Yet, as Euro money communicated with many senior bankers in recent weeks, they appeared relatively comfortable with their ability to cope with even a long-term slowdown.
US Federal Reserve has recently announced a $700 billion quantitative easing program to invest in US treasury bonds and agency backed by mortgage securities. The UK Treasury introduced a £330 billion package, 15% of which is annual GDP. The Czech Republic plans to guarantee loans to businesses to the tune of 19% of GDP.
Pointing individual countries, Iran which was amongst the hardest hit countries by this pandemic, requested Islamic Development Bank (IDB’s) financial and non-financial assistance to control, combat and treat this deadly virus and stop its rapid impact on its economy.
The banking sector in Afghanistan is no different than other countries, due to strict quarantines in major cities and provinces. The banking sector too is badly affected due to this epidemic: the transaction and deposit ratios have decreased, while slight changes could be observed in the usage of e-banking and ATM services, as the usage of these services do not require much public engagement and are much convenient compared to physical banking. DAB as the authority and as the sole body that controls supply/demand of money and makes regulations for banks and carries on supervision of the financial sector is striving to control and manage the supply of banking activities and inflation in the country.
It considers itself obliged to provide monetary services throughout the county as normal. It is important to help the banking sector to smoothly carry on banking operations and fulfill the needs of people and businesses.
Consequently, the COVID19 pandemic is more dangerous than one can think of, not only for the healthcare and life of humankind but for it being a threat to the economy and banking sector in general. Precisely and emphatically, the Afghan government should take necessary steps to help the banking services continue in order to meet the needs of the people and business community like before so that they do not face the problem of providing banking services.
Banks should be able to utilize their resources and strengthen their e-payment services by providing ease and comfort to their customers in order for them to go towards e-payments and online banking.
In order to fight this deadly epidemic, the Afghan people and government should unite together to fight this virus as best as they can, in order to survive their health, economy and life overall.