The Afghan economic growth cannot withstand the 1 billion dollars aid cut by the US and the financial pressures originating from the spread of coronavirus, according to a report by the Biruni Institute.
The report warns that if the Afghan government adopts austerity and a cost reduction policy, the Afghan economic growth rate will slump by 10 percent.
“If the government decides to apply an austerity policy in the face of an outbreak of coronavirus, and reduce the budget by one billion dollars, 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 one billion dollars is reduced, the results will be devastating, because today, in view of the coronavirus, we need incentives and financial packages to fight the coronavirus, not reduction in aid or contraction,” said Nazir Kabiri, the head of Biruni Institute.
Currently, over 50 percent of the national budget is being paid by the foreign donors, and of that 37 percent 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.
“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.