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UN sets up trust fund to support Afghan economy

An Afghan man waits for customers at his shop in Kandahar, Afghanistan, 15 April 2021. (Keystone/EPA/Muhammad Sadiq)

The United Nations announced the launch on Thursday of a new emergency trust fund to provide urgently needed cash directly to Afghans and help prevent the collapse of the country’s economy two months after the Taliban seized power.

The UN Development Programme (UNDP) said the emergency programme aims to support local communities by providing grants for small businesses, cash-for-work schemes and support for more vulnerable populations.

“The country needs immediate humanitarian assistance, but we also need to keep the local economies going – this is fundamental to ensure that people still have livelihoods and feel that they have a future in their communities,” UNDP administrator Achim Steiner told a news briefing in Geneva.

"We have to step in, we have to stabilise a ‘people's economy’ and in addition to saving lives we also have to save livelihoods," he added. "Because otherwise we will confront indeed a scenario through this winter and into next year where millions and millions of Afghans are simply unable to stay on their land, in their homes, in their villages and survive. The implications of that are not difficult to understand.”

Afghanistan’s roughly $10bn foreign assets held overseas were frozen following the Taliban's takeover and access to international funds was suspended. The implications for Afghan people have been dire. Food prices have soared, access to basic services has declined, banks are running out of cash and civil servants have not been paid.

Afghanistan’s economy is set to contract up to 30 per cent this year, according to the International Monetary Fund. The deteriorating economic and humanitarian situation in the country is predicted to force thousands of Afghans to leave to neighbouring countries.

UNDP projected in September that up to 97 per cent of the population may be at risk of sinking below the poverty line next year, unless a response to the country’s political and economic crises is urgently launched.

"Discussions over the last few weeks have focused on how we can find a way to be able to mobilise these resources in view of the economic implosion that is now unfolding and the international community's repeated commitment not to abandon the people of Afghanistan," Steiner told the briefing.

He said the challenge was to tap into donor funds to support Afghans through the winter months and save the development gains of recent years, despite the ongoing political turmoil. He said the assistance will be provided to beneficiaries independently of the authorities, based on impartial assessments carried out in conjunction with local community leaders.

Around 80 per cent of Afghanistan's economy is informal and it is dominated by women. The fund will provide grants for small and micro-businesses, especially those owned by women, and cash-for-work schemes to provide short-term employment in public works programmes. It will also provide a temporary basic income for vulnerable groups including the elderly and disabled people.

Steiner said that the first donor Germany had already pledged $ 50m to the fund, and that UNDP was in touch with other international donors and expected additional support “in the coming days and weeks”. Kanni Wignaraja, director of UNDP's regional bureau for the Asia Pacific, said the organization would need around $ 667m to cover activities for the next 12 months.

"The effort here is to try to make sure that it is local currency that continues to fire up the local economy. And by doing that, that also keeps the macroeconomy from completely crashing," said Wignaraja.

“This will be a complex, complicated journey, but it is one that we are deeply committed to – not least because we have seen in the last few weeks how rapidly the lives of millions of Afghans have been affected by what's happening right now,” added Steiner.