What will the Taliban do with a $22 billion economy?

No sooner had the Taliban taken Kabul than questions began to be asked about how they would manage Afghanistan's economy. Do the insurgents-turned-rulers have the skills to run, say, a modern finance ministry and central bank? Will foreign donors trust them with aid? Can they do business with investors interested in the country's mineral wealth? 

Throughout their two decades in the wilderness, the Taliban have shown themselves capable of generating resources to maintain an insurgency, mostly from the drug trade, illegal mining and donations from supporters abroad, but also from taxes and rents in areas under their control. In good years, the Taliban's revenues amounted to upwards of $1 billion.

But the Afghan budget is more than five times that size. The country's gross domestic product, estimated at $22 billion, has grown nearly threefold since the Taliban were driven from power in 2001. And the economy has for several years been in precarious health, propped up by foreign aid. By the World Bank's reckoning, three-fourths of the government's budget is funded by international donors, led by the US

Managing that economy has been a cohort of Afghan technocrats, many of them Western-educated or trained. Very few of them are expected to remain in the country, despite the Taliban's promise of "amnesty" for anyone who worked with the deposed government.

The most urgent economic challenge for the new rulers, then, is a yawning skills deficit in government ministries and departments. The Taliban will struggle to find ministers and administrators whom foreign donors and investors can trust.

Right now, new donors or investors are not inclined to trust the Taliban anyway. The Biden administration has frozen $9.5 billion in the Afghan central bank's assets and halted shipments of cash to the country; European governments have suspended development aid; and the International Monetary Fund has cut off access to Afghanistan's special drawing rights.     

Western governments, multilateral agencies and donors will slap strict conditions on the resumption of funding. Aid will be predicated on the Taliban preserving many of the freedoms — especially for women — introduced in their absence, and on preventing the resurgence of terrorist groups such as al-Qaeda.

Western investors will take their cues from their governments, paying heed to economic sanctions. They will also be influenced by public perceptions: Most US and European companies will be mindful of the likely domestic backlash against doing business, directly or otherwise, with the Taliban.  

Might non-Western investors feel unconstrained by such considerations? There has been some speculation that China and Russia are keen to fill the vacuum created by the American withdrawal. Beijing, especially, is thought to have its eye on Afghanistan's mineral deposits, worth anywhere from $1 trillion to three times as much.

Beijing and Moscow have plenty of security concerns about Afghanistan that will motivate them to engage closely with any Taliban-led government in Kabul, but serious investment is another matter altogether.

Chinese banks and companies are less risk-averse than their Western counterparts, but they tend to be leery of unstable economies. The experience of Venezuela, where Chinese loans are having to be renewed simply to avoid huge writedowns, is a cautionary tale for investors.

Although Beijing has talked a good game about investing in Afghanistan for some years now, very little money has materialized. The showpiece Chinese venture, a $2.8 billion copper project funded by the state-owned Metallurgical Corporation of China at Mes Aynak, near Kabul, has long since stalled.  

The infrastructure requirements for extracting Afghanistan's mineral wealth are huge: The country is severely lacking in transportation networks, for instance. Getting the minerals out of the ground and into China would require investments of a magnitude larger than the Mes Aynak project. Chinese investors have other, safer places to put down that kind of money.

The Taliban may covet Chinese aid, but they will have to compete with governments across the developing world, most notably in Africa. For its part, Russia is hardly the most generous aid giver, trailing far behind the world's richest countries in disbursement of development assistance.

Bobby Ghosh is a Bloomberg Opinion columnist. He writes on foreign affairs, with a special focus on the Middle East and Africa.

Disclaimer: This article first appeared on Bloomberg, and is published by special syndication arrangement