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IMF Warns Of Impact Refugee Crisis Could Have On Afghanistan’s Economy, Neighbors

Afghan refugees sit inside a makeshift tent shelter on the outskirts of Quetta on September 6.

The International Monetary Fund (IMF) says Afghanistan's economy could contract up to 30 percent this year, threatening to push millions of Afghans into poverty and trigger “important economic and security spillover” into neighboring countries, Turkey, and Europe.

Afghanistan has suffered “multiple shocks” since the Taliban returned to power in mid-August that have resulted in a fall in imports, a depreciation of the local currency, the afghani, an acceleration of inflation, and a drop in living standards that has fueled internal displacement and could trigger a "surge" in refugees abroad, the IMF said in its Regional Economic Outlook for the Middle East and Central Asia, released on October 19.

Without giving estimates of potential numbers, the IMF said a large influx of refugees “could put a burden on public resources in refugee-hosting countries, fuel labor market pressures, and lead to social tensions, underscoring the need for assistance from the international community.”

By the end of last year, there were 3.5 million people displaced inside Afghanistan and nearly 3 million Afghan refugees around the world -- half of them in neighboring Pakistan.

Assuming 1 million more Afghans flee their homeland and settle in other countries in a way that is proportional to the existing distribution of refugees from Afghanistan, the annual cost of hosting them would amount to $100 million in Tajikistan, or 1.3 percent of GDP, about $300 million in Iran, or 0.03 percent of GDP, and more than $500 million in Pakistan, or 0.2 percent of GDP, according to the IMF.

The report noted that a drop in exports to Afghanistan will likely be "important sectoral and social implications" in Iran, Pakistan, Turkmenistan, and Uzbekistan.

“Exports are concentrated in agricultural and basic consumer goods, fuel, and raw materials, production and distribution of which employ vulnerable populations, such as farmers and small traders,” the report said.

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