Barriers to Afghanistan’s critical private sector recovery

Published 05. Apr 2023|Updated 03. Apr 2023
Since the Taliban’s return to power in 2021, the living conditions of the Afghan people has deteriorated into an unprecedented humanitarian crisis.

Humanitarian assistance alone is inadequate and unsustainable to address the needs of the population. A stable economy, private sector, and development assistance is essential to compliment the actions of humanitarian actors in the country.

This report seeks to understand the challenges facing private sector actors and trade in Afghanistan, with a focus on the supply of essential goods. It is based on 25 anonymised interviews carried out in mid-2022 with a range of private sector, development, and banking actors operating in, or with, Afghanistan.

The report finds that:

  • Afghanistan should be open to business despite sanctions: The country as a whole is not under sanctions. Business activities and payments needed to address the basic needs of the populations are permitted. The humanitarian exemptions introduced in December 2021 to the sanctions against Taliban leaders have been essential.
  • Widespread misconceptions and sanctions overcompliance: Despite the exemptions there remains widespread misunderstandings and lack of awareness about what activities and transactions are permissible. This results in the ‘chilling effect’ whereby firms restrict their activities due to perceived risks of sanctions mis-compliance.
  • Access to financial services: Restricted access to formal banking services is limiting private actors’ ability to conduct trade internationally. Hawala is now a dominant payment system, but it is not accepted by many international firms.

 The report provides recommendations based on input from Afghan firms and those operating in the wider region.

Read the full report here.