Taliban gains give investors cause for concern beyond Afghanistan

    People wait to cross into Afghanistan, at the Friendly Gate crossing point in the Pakistan-Afghanistan border town, Chaman, Pakistan on August 13th. REUTERS / FILE

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    People wait to cross into Afghanistan, at the Friendly Gate crossing point in the Pakistan-Afghanistan border town, Chaman, Pakistan on August 13th. REUTERS / FILE

    The Taliban’s rapid advance towards Kabul is not only a cause for concern for Afghanistan’s future but also for the impact on other countries in the region and their economies.

    Iran and then Iraq are located in western Afghanistan. Tajikistan, Turkmenistan and Uzbekistan are located in the north. But the direct focus for financial markets and investors is Pakistan to the east.

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    Pakistan’s large public debt, a significant stock market and is dependent on an IMF $ 6 billion program. The prospect of years of violence and waves of refugees will add pressure to fiscal recovery plans. “It’s a very worrying situation and unfortunately it has turned the region many years back,” said Shamaila Khan, head of emerging market debt at AllianceBernstein.

    “I think neighboring countries will have to deal with the influx of refugees in the coming months / years.”

    The United Nations High Commissioner for Refugees (UNHCR) estimates that 400,000 Afghans have fled their homes this year. Only a few hundred of those displaced are known to have fled Afghanistan, but the UNHCR estimates that there are 2.6 million Afghan refugees worldwide, with 1.4 million in Pakistan and 1 million in Iran.

    Pakistan’s bond prices have already fallen by almost 8% this year, although many economic analysts believe this may have had more to do with delays in obtaining the latest tranche of IMF money than with the security situation.

    Nearly 10,000 Pakistani civilians were killed in attacks between 2010 and 2015 Figures from the South Asia Terror Gateway show. These numbers have fallen since then, but there are concerns that they will rise again.

    “Another influx of refugees and the spread of violent groups motivated to destabilize urban areas and infrastructure, especially in the western part of Pakistan … could overturn the history of Pakistan’s recovery and reforms,” ​​said Hasnain Malik, an analyst at research company Tellimer E.

    He suggested that the risk could be reduced if the Taliban were included in the Afghan government.

    The Pakistan IMF program is the thirteenth in 30 years and is needed to help the government meet its public debt of about 90 percent of GDP. Any Taliban attacks on Pakistan could raise security concerns and make it difficult for Islamabad to achieve its IMF targets. At the same time, some investors say, they could increase Pakistan’s strategy for the West.

    “The IMF is closely monitoring the rapid development of the situation on the ground in Afghanistan,” a IMF spokesman said Friday, adding that it was too early to speculate on the impact of the security situation in Pakistan.

    “If the Taliban take control (of Afghanistan), Pakistan becomes even more strategically important to the United States,” said Kevin Daly, portfolio manager at ABRDN.

    That, he said, could help the IMF leak money.

    Kay Van-Petersen, global macro strategist at Saxo Capital Markets in Singapore, said the impact of the crisis in Afghanistan could eventually spread much more widely.

    Many Afghan refugees could seek refuge in Europe, he said, following a previous influx of migrants, mostly fleeing the war or persecution in Syria, to other Middle Eastern countries and Afghanistan.

    If the refugees travel through Turkey, he said, they could help Turkish President Tayyip Erdogan make political or economic demands of the European Union.

    “It is basically a lever for Erdogan to pull with the European Union … ‘Pay us to take care of these refugees, otherwise we will let them pass,'” he said.

    That could burden the euro and lift the Turkish pound, he said.

    Emerging market observer Tim Ash told BlueBay Asset Management that the Taliban’s advances as NATO troops withdrew damaged US credibility and fueled growing rivalry between Washington and China.

    “Comparisons with Vietnam are plentiful,” Ash said, recalling the evacuation of the last Americans and many South Vietnamese from the roof of the US embassy as Saigon fell in 1975. ” that came out. “

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