The Lifeline Of Afghanistan: Understanding The Power Of Remittances

Remittances are critical to the Afghan economy and families, with Afghans abroad sending money to their families in Afghanistan for decades. In 2020, formal remittances to Afghanistan totalled USD 788 million, which was approximately 4% of Afghanistan's GDP. However, the country's financial system is collapsing, and the Taliban's takeover has caused uncertainty around this vital flow of finance. The United States froze USD 7 billion of Afghan reserves, and the International Monetary Fund (IMF) halted financing to the country. As a result, Afghan banks are struggling to refill their coffers, causing cash shortages, soaring prices for essential goods, and fears of food shortages and higher inflation. Despite the resumption of banking in late August, Afghanistan's Central Bank only has limited access to financing.

Remittances are a lifeline for many Afghan families, allowing them to buy food, pay rent, and cover other essential needs. With limited job opportunities in Afghanistan, remittances from Afghans working in countries like Pakistan, Iran, Turkey, Gulf countries, Australia, Europe, and the United States are crucial. The recent crises in Afghanistan have further highlighted the importance of these remittances, and there are concerns about the impact on families and the economy if the flow of remittances is disrupted.

Remittances are a vital source of income for many Afghan families

The money sent home by Afghan migrants working abroad is crucial for both individual families and the broader economy. With limited job opportunities and unreliable livelihoods in Afghanistan, many families send their men to work in other countries. The most common destinations for Afghan migrants have been Iran, Pakistan, and Gulf countries like Saudi Arabia and the United Arab Emirates (UAE). These migrants often send a significant portion of their earnings back to their families in Afghanistan, which can be a lifeline for their loved ones.

Remittances allow families to meet essential needs, such as food, education, healthcare, and housing. For example, Zeenat, a woman from a rural village in Afghanistan, relied on the money sent by her husband working in construction in Saudi Arabia. The remittances enabled Zeenat to send her children to school, avoid loan sharks, and purchase essential winter goods. Other interviewed women in similar situations received remittances ranging from $160 to $580, which they shared with extended families of up to 30 people.

The impact of remittances extends beyond individual families to entire communities. A community elder from Khost described the role of remittances in the local economy as "oxygen," stating that several districts rely solely on remittances as their primary source of income. Without these remittances, he believes the economic situation in Khost would be dire and susceptible to collapse in the face of economic shocks.

However, the flow of remittances to Afghanistan has faced challenges in recent years. The Taliban's takeover of the country and the subsequent freezing of Afghan reserves by the United States have disrupted the financial system. Additionally, the COVID-19 pandemic and security developments in 2021 have reduced the frequency and amount of remittances. These factors have created uncertainty and a pressing need for humanitarian assistance in Afghanistan.

Remittances form a large part of Afghanistan's GDP

The importance of remittances to Afghanistan's economy is underscored by the fact that jobs are scarce, and livelihoods are often unreliable. As a result, many families send men from their households to work in other countries, with the money they send back home serving as a lifeline for their families and communities.

The most common destinations for Afghan migrants in recent decades have been Iran, Pakistan, and the Gulf countries. However, the political and economic situation in Afghanistan has led to an increase in remittances flowing out of the country and into Pakistan, and this flow is expected to remain steady until the situation in Afghanistan stabilizes.

The COVID-19 pandemic and the Taliban's takeover of the country in 2021 have also impacted remittance flows. The pandemic reduced the frequency and amount of remittances, as potential senders abroad faced economic difficulties themselves. The Taliban's return to power further complicated the situation, with Western Union and MoneyGram temporarily halting their services in Afghanistan, and the country's financial system collapsing.

Despite these challenges, remittances remain a vital source of income for many Afghan families and the broader economy. With Afghanistan's financial system in disarray, remittances from Afghans abroad are more important than ever in helping families meet their basic needs and avoid falling into poverty.

The US allowed personal remittances to flow to Afghanistan in 2021

On September 2, 2021, the US Treasury Department told financial institutions that they could process personal remittances to Afghanistan. This decision was made to prevent the Afghan economy from collapsing after the US and other countries halted foreign aid and froze about $9 billion in Afghan assets following the Taliban takeover on August 15.

The US Treasury's guidance from its Office of Foreign Assets Control allowed Western Union and MoneyGram to resume operations in Afghanistan. It also applied to other banks and financial institutions.

Remittances from Afghans working abroad are critical for families and the country's economy. In 2020, formal remittances to Afghanistan totalled over $788 million, which was about 4% of Afghanistan's GDP.

The US Treasury's decision was intended to ensure that people could continue to send support to their families in Afghanistan. However, despite this decision, concerns about US sanctions continued to prevent the passage of basic supplies, including food and medicine.

Western Union and MoneyGram are major money transfer services to Afghanistan

Western Union and MoneyGram are two of the major money transfer services to Afghanistan. Both companies temporarily suspended their services in Afghanistan in 2021 following the Taliban's takeover of the country. However, they have since resumed operations.

Western Union is the world's largest money transfer firm and has been transferring money to Afghanistan for over 150 years. They offer several convenient and flexible options for sending money to Afghanistan, including online transfers, in-app transfers, and transfers at one of their many agent locations. Western Union is committed to keeping its customers' data secure and offers free registration and cost estimates.

MoneyGram is another global remittance provider that offers online money transfers to Afghanistan. They have thousands of locations across the country where recipients can pick up cash in minutes. MoneyGram also offers promotional pricing with $0 fees for online transfers to Afghanistan.

Remittances have a cultural impact on Afghan society

Remittances have had a significant cultural impact on Afghan society, particularly in rural areas. The money sent home by Afghan migrants has empowered younger men in their families, who now have more control over their households and communities. This shift in power dynamics has disrupted the traditional dominance of elders and heads of families, who previously made all the decisions. With greater earning power, younger men can challenge the established norms and old traditions, such as arranging marriages without consulting their parents. They also have more say in economic and cultural matters, including decisions about education for their siblings and sisters.

Remittances have also exposed Afghan society to outside influences, as migrants become familiar with different ways of living and thinking. For example, exposure to life in the Gulf has led migrants to value education more highly, and some have expressed a desire to educate the girls in their families. Migration has also brought about changes in social norms, such as the expectation that spouses will know each other before marriage.

In addition to these social and cultural impacts, remittances have helped Afghan communities remain independent of government and fluctuating political developments. Money sent home has meant that families and communities do not have to rely on the state for jobs or services, maintaining their autonomy. This is especially important in the southeast of Afghanistan, where independence has been highly valued throughout history.

Remittances have also had a protective effect, shielding households from the full impact of political and economic disasters, such as the Taliban takeover in 2021. When the Afghan currency lost value and prices rose, families with access to remittances were less affected. Remittances have also helped households cope with natural disasters, such as droughts and floods, by providing the funds needed to recover.

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