Afghanistan has been a major crossroads on the ancient trade routes between Europe, China and Hindustan. It has been attacked by a succession of invaders since the sixth century BC. In modern times, the Afghans have defeated three superpowers - Britain, the Soviet Union and the United States of America.

Afghanistan is an agricultural country but only 10 percent of its land area is cultivated. It produces cotton, opium, wheat, other food grains, fruits and nuts. There are large deposits of minerals in Afghanistan but mining is not developed. The country also has some small industrial units producing hand-woven carpets, cotton fabrics, soap, furniture, shoes, fertilizer and cement etc. “Opium, fruits and nuts, hand-woven carpets, lambskins, textiles and gemstones are the main exports. Machinery, foodstuffs, manufactured goods and petroleum products are the main imports of Afghanistan”. The country has also become an important producer of heroin. Its main trading partners before the Taliban takeover were Pakistan, the United States and India.”

In economic terms, to buy whatever is in the market, food or otherwise, the Afghan people need money. So the first question is: what currency will be used during the days of transition and stabilising whatever government comes to power in Afghanistan? Afghani has been associated the last regime. The Taliban need a secure banking system to replace it (to demonetarise) because using the present medium of exchange with no government backing would be both inflationary and disruptive. The Taliban have now appointed their governor of the Central Bank. (The last governor has fled the country). The banking system has to be changed to an Islamic one under the new government and it is any one’s guess what the new banking system would be and how it is going to get the trust of the international financial system.

Also to earn their incomes people have to work in their present or new positions. Therefore, the Taliban government will have to ensure that the workforce and office workers are employed and protected. The Taliban will also have to protect the businesses and freight in the country. People are afraid, in spite of the assurance given by the Taliban of their safety. If the Taliban government is going to change the market structures from capitalist to Islamic, it is yet to be seen what Islamic economic model they have in mind and whether it will help with the utilisation of natural and human resources in the country. Thousands of qualified Afghans have left or are lining up to leave. Therefore there will be a dearth of qualified people to run the country efficiently, economically and up to international standards. I believe that Muslim countries in the Gulf region would pour in investments in the Taliban Afghanistan for a foothold in the economy. The investments from these Gulf States would come mainly in the form of banking and reconstruction.

Pakistan has always been a corridor to Afghan transit trade between its Karachi port and the landlocked Afghanistan. Governments of both countries have had no objection to economic relations. On July 9, Pakistan and the Government of Afghanistan had extended their transit trade agreement of 1965 for another 6 months beyond May 2021. “The 1965 agreement granted Afghanistan the right to import duty-free goods through Pakistani seaports”. “The 2010 APTTA allows both countries to use each other’s airports, railways, roads and ports for transit trade along designated transit corridors. The agreement does not cover road transport vehicles from any third country, be it from India or a Central Asian country.”

I believe that Islamabad will have more cordial relationship with the Taliban government in Afghanistan than it had with the Ashraf Ghani’s government. So I believe that economic relations between the two countries will flourish and be beneficial for both nations. The transit trade to Afghanistan through Pakistan is open today both at Chaman and Torkhum. Both countries have an underdeveloped industrial base. Pakistan will export textiles, light engineering products and agricultural produce to Afghanistan. In 2020, Pakistan had exported cereals worth of $146.5 million, edible fruits of $87 million, pharmaceutical products of $74 million and other goods worth $74 million. A total $870.8 million.

Afghanistan had exported fruits and nuts worth $142 million, cotton worth $117 million, mineral fuels and oils $43.2 million, iron and steel $17.8 million. A total of goods worth $517.7 million. After the Taliban takeover of the country it is important first, for Pakistan to recognise the new government in Afghanistan and second, for the Taliban to endorse the APTT agreement for sustainability of peace and for mutually beneficial economic relations. It should be understood that the APTT is an important lifeline of commerce for landlocked Afghanistan.

The writer is a professor of economics and a former chairman of the R&D Committee at University of Central Punjab. He can be reached at dr.qais@ucp.edu.pk