The Taliban’s rapid advance into Kabul is not only causing concern about Afghanistan’s future but also about the impact on other countries in the region and their economies.
Iran and then Iraq lie to the west of Afghanistan. Tajikistan, Turkmenistan and Uzbekistan are to the north. But the immediate focus for financial markets and investors is Pakistan to the east.
Pakistan has a large public debt, a sizeable equity market and is dependent on a $6 billion IMF programme. The prospect of years of violence and waves of refugees will add pressure to its fiscal repair plans.
“It is a very troubling situation and unfortunately has set the region back many years,” said Shamaila Khan, head of emerging market debt at AllianceBernstein. “I think the neighbouring countries will have to deal with an influx of refugees in the coming months/years”.
The United Nations refugee agency UNHCR estimates 400,000 Afghans have already fled their homes this year. Only a few hundred of these displaced persons are known to have fled Afghanistan itself but the UNHCR estimates there are 2.6 million Afghan refugees worldwide, with 1.4 million in Pakistan and a million in Iran.
Kay Van-Petersen, a global macro strategist at Saxo Capital Markets in Singapore, said the impact of the crisis in Afghanistan could ultimately spread far wider.
Many Afghan refugees could seek refuge in Europe, he said, following an earlier influx of migrants, mostly fleeing war or persecution in Syria, other Middle Eastern countries and Afghanistan.
If the refugees travel via Turkey, he said, they could help Turkish President Tayyip Erdogan make political or financial demands of the European Union.
“Basically it’s a lever for Erdogan to pull with the European Union … ‘Pay us to take care of these refugees or we are just going to let them through’,” he said.
This could weigh on the euro and lift Turkey’s lira , he said.
The rest of the article is here.