New York CNN Business  — 

Soaring food prices. Limited cash. And a surge of refugees. The economic future of Afghanistan under Taliban rule looks bleak, according to the country’s former central banker.

“Afghanistan unfortunately was already facing multiple crises,” Ajmal Ahmady, who led the Afghan central bank before escaping Kabul on Sunday, told CNN, pointing to Covid, conflict and drought.

“Now on top of that there is going to be economic hardship,” Ahmady said. “And for the people of Afghanistan, that is going to be very difficult to deal with.”

Ahmady predicted the Taliban will face trouble governing and making economic policy.

“They haven’t made clear what their policy agenda is. It’s not clear who will be running the economic agenda for them,” he said. “I think they’re going to face a lot of challenges, which they’re going to have to quickly seek to resolve.”

Inflation, cash shortages

The most pressing financial problem is that the country has essentially run out of US dollars – a disaster for a country like Afghanistan that runs a very large trade deficit.

Afghanistan’s shipments of US dollars were derailed by the violence and chaos in the days before Kabul fell to the Taliban. And now Washington has effectively frozen Afghanistan’s US-held central bank assets to prevent the money from flowing to the Taliban.

Moreover, the International Monetary Fund, under pressure from the United States, is halting $450 million in funds that were scheduled to arrive in Afghanistan early next week.

Ahmady, a Harvard trained economist, said this situation is going to cause economic hardship for the new regime as well as for the people of Afghanistan.

Specifically, he expects Afghanistan’s currency to lose value (the Afghani dropped to record lows after Kabul fell), triggering inflation, including higher food prices.

‘Please do not disengage’

Ahmady, who was an economic adviser to former Afghan President Ashraf Ghani, said the Taliban is going to have reduced access to cash flow. “There’s going to be a fiscal squeeze. Real incomes are going to decline,” he said. “I would expect over the medium- to long-term, you would see refugee flows begin to increase.”

People who remain in Afghanistan may have trouble getting their money out of banks.

The day before Kabul fell to the Taliban, the central bank limited how much money customers could withdraw from banks. Ahmady predicted the Taliban will need to continue these capital controls because of the country’s extreme financial pressures.

Ahmady pleaded with the international community to continue supporting the people of Afghanistan, if not through the government, then through the United Nations and NGOs.

“Humanitarian assistance not only needs to remain, but needs to increase over the next few days and months,” he said. “Let’s not wait until another crisis hits.”

Ahmady fears a repeat of the past when the United States backed away from the region.

“Please do not disengage. We’ve seen this story before,” Ahmady said. “The continued supply of humanitarian assistance to Afghanistan is critical, especially during this time.”

‘I believe what I see, not what I hear’

The United States, United Kingdom, Canada and other Western powers have signaled they will not recognize the Taliban as the legitimate rulers of Afghanistan.

The Taliban claims it has changed its ways from the last time it ruled Afghanistan, a period marked by severe human rights violations, public executions and terror. Women weren’t allowed to work or go to school and there was a death penalty for female adultery and homosexuality.

Ahmady is skeptical.

“I believe what I see, not what I hear,” Ahmady said. He pointed to how the Taliban attacked large cities even though it had committed not to do that.

In recent days there have also been reports of Taliban fighters clashing with activists during protests against the new regime. Witnesses told CNN Taliban fighters fired guns into crowds and beat demonstrators in Jalalabad.

“We would love it if they did adhere to those principles and allow for women’s education and for human rights and open media and no revenge or reprisal killings. That would be very good news,” Ahmady said. “But based on the actions we’ve seen, unfortunately, I do not believe those statements at the current time.”

What about Afghanistan’s untapped mineral wealth?

Afghanistan is sitting on vast amounts of untapped minerals. In 2010, US military officials and geologists estimated the country is sitting on mineral deposits worth nearly $1 trillion. That includes iron, gold, copper, rare earth minerals and one of the world’s biggest deposits of lithium – a critical component for electric vehicles.

For many years, there has been hope that Afghanistan’s natural minerals could boost the wealth of a nation that is one of the poorest on the planet.

But Ahmady is not optimistic the situation will change with the Taliban in charge.

“It’s really tough to expect that now all of a sudden, they will be extracted,” he said.

Some analysts have suggested the collapse of the US-backed government in Kabul will create an opening for China.

Ahmady said he finds it “difficult to believe” China would pour billions of dollars into mining projects in Afghanistan right now.

However, he conceded that “perhaps this is an opportunity” for China over the next five to 20 years.