Letter from Afghanistan
by Warren Coats

This is my third visit to Kabul this year. The changes over this period provide a mixed picture of progress.

The central bank, which I am helping to develop its capacity to formulate and implement monetary policy, has produced an inflation rate of about 7 percent and kept the exchange rate of the Afghani quite stable for some time. The sandbags between my desk and the window in the central bank, shown in the photo below from last summer, are now hidden behind a nicely colored cloth.

Not every area has shown progress, however. Aid is wasted on a large scale. Electricity is not widely available. There are nowhere near the trained teachers and books needed for all those empty school houses to teach basic literacy. Aid is being “coordinated” by the UN, which has no capacity to deliver the infrastructure development that is needed, rather than the World Bank, which does. Afghanistan is a very poor country that can not afford to waste such aid, which will not last for ever. And no one has a solution to the fact that most of the world’s opium is grown and processed here, constituting over a third of the country’s output.

More importantly, the Taliban are on the rise again with the ambition of retaking Kabul next spring or as soon as they are able. In an International Herald Tribune article last week Taliban expert Ahmed Rashid stated that: “The abysmal failure of NATO countries at the Riga summit meeting this week to commit more troops to Afghanistan will further encourage a countrywide Taliban offensive, and portends much greater interference by neighboring states - all staking their claims as they see the West giving up the ghost on Afghanistan.”

It is snowing here now. My meeting with the First Deputy Governor of the central bank has been canceled each of the last four days because he is stuck in Dubai and unable to return. Neil McMullen, the macro economist in the next room at the IMF guesthouse, and I have had to give up our noon walks up and down our well guarded and fortified street. The muddy streets have turned to ice and back to mud again as the temperature rises and falls. I hardly notice any more the armed guards who block traffic as I leave the grounds to step into one of our armored cars for a trip to the central bank. After driving through innumerable check points and zig zagging around innumerable concrete bearers, we join the traffic of cars, pedestrians, and horse or human drawn carts on the main streets as we slowly pass the impoverished shacks and hovels that make up one of the local markets. Aside from the cars it probably looked just like this one and two and three hundred years ago.

I look forward to Christmas and will hope for, but do not expect, a better new year. What else can I do?

Warren Coats is an international monetary consultant.