The US airlift for Afghan refugees drew parallels notably with its post-Vietnamese predecessor four decades ago, and the country’s displacement crisis persisted among the longest and largest in the world just 5 minutes before the return of the Taliban in power. It follows exoduses from Syria and Venezuela, also of historic proportions, with international aid chronically less than half of pledges, and private investors grappling with economic and financial implications as market performance failed. not a reference immediately after. At first, migratory flows and their fiscal and security costs were not taken into account in decisions concerning the portfolio of Turkey or Colombia.
In that sense, the last Afghan episode was a complete start, as the spillover to its neighbors was frequently cited in stock and bond prices as overall risk measures. Pakistan and Uzbekistan’s sovereign debt values barely budged, and the so-called border markets of Kazakhstan, Tajikistan and Iran were watched as additional channels.
These neighboring markets could be tapped as part of the next phase of the coordinated global refugee fundraising effort, and close the tens of billions of dollars in annual gaps in UN appeals. They are part of benchmarks already known to conventional institutional investors and are ideal for funds dedicated to the environment, social and governance (ESG) seeking to broaden the base of social offer. An entire subclass of mass displacement assets like the Green Box can be created, as a predictable long-term funding channel beyond the $ 1 billion emergency commitment of the EU.
The need for private sector innovation to address the fiscal challenges posed by the global refugee crisis was recognized two years ago in the Global Refugee and Migration Council document ‘A Call to Action: Transforming the World’. global refugee system ”. Since most of the refugee hosting countries are emerging markets where global banks and fund managers actively invest, it would be possible to adapt traditional credit and capital market instruments, including sovereign bonds for refugees and equity funds, to fill the funding gap.
Design milestones have been taken in Colombia and Jordan as part of an official-commercial partnership, but no further progress has been made.
Pakistan is already hosting millions of Afghan refugees and is struggling, under its IMF program, to widen the budget deficit of 3% for social and security spending. Bank closures and dollar shortages in Kabul automatically ricocheted across the border. Fees for the informal hawala network skyrocketed for basic trade and remittances, and the rupee’s exchange rate fell to its lowest level in a year, at PKR 165 per US dollar. It regularly issues Western and Islamic style sukuk bonds for budgetary purposes and plans to launch a green instrument for environmental projects. However, investors fear that the persistent trade deficit and the end of debt relief due to the Paris Club virus that expires this year could threaten a tightening of repayments. China, as part of its $ 60 billion economic corridor, is also renegotiating terms on energy and infrastructure loans that could weigh heavily on future obligations as another wave of refugees prepares to enter.
The stock market, in turn, had been declining for five years due to negligible inflows of foreign investors and firm size constraints and was demoted to frontier status in the benchmark emerging markets index as the end of the American side in the twenty-year conflict was unfolding. Bank, cement and energy quotes regularly provide goods and services to Afghan refugee communities, and with the return of the border market starting this month, the weighting of Pakistani stocks will account for 2% of the total attracting l attention from international fund managers. Importantly, the Shanghai Stock Exchange has a significant stake in its Karachi counterpart, and part of its strategic plan is to expand offerings around the 2030 Sustainable Development Goals, including orderly migration.
Uzbekistan began reaching out to the Taliban three years ago on diplomatic cooperation, raw materials and infrastructure projects as it reposition itself with Kazakhstan as a hub for international humanitarian assistance. . President Shavkat Mirziyoyev is running for re-election in October after a five-year term in an attempt to undo the hermetic legacy of state monopoly of his predecessor. He depreciated the currency and opened up banks, consumer goods and natural resources to foreign participation. His economics team recruited the former head of the European Bank for Reconstruction and Development (EBRD) as an adviser, and with the government still controlling half of gross domestic product, they sketched out an aggressive privatization program to sell thousands of assets. Oil, gas and mining companies feature prominently on the initial list, and a stake in local Coca-Cola bottler went to a Turkish buyer in August. The offers will go through the startups stock exchange as it develops, with price / earnings ratios now five times higher than those of its neighbors.
GDP growth last year was 1.5% despite the pandemic and could quadruple this year, but unemployment and youth poverty are both 15%, and human rights doubts persist, including on child labor. The sovereign credit rating is “B” with international bond placements in both local and hard currency, and the UN has been called upon to improve ESG scores. Uzbekistan aims to produce a quarter of its electricity from abundant solar energy by the end of the decade as part of a $ 6 billion partnership with a United Arab Emirates heritage fund. The president initially signaled the reception of hundreds of thousands of Afghan refugees before backing down, and mobilizing these nascent financial markets and relationships could facilitate that intention.
Turkmenistan alone will readily admit them to this day and has an outstanding sovereign bond to finance hydroelectric dams in addition to the large Chinese loans it seeks to reschedule. Kazakhstan is one of the top performing border stock markets this year, rising 60% in US dollars, and Iran also has a $ 200 billion market with companies serving the other oversized exiled Afghan population. of the sub-region. The rush of American investors to banks and securities in the region was a turning point. As the international community organizes itself for the Taliban era, it can seize these opportunities to raise billions of dollars in long-term private capital and badly needed credit in the region, and a future marker for the reinvention of the response to mass displacement. An immediate pilot could be developed with Pakistan as the best known and largest base under the announced EU $ 1 billion aid. On a large-scale move, global banks and asset managers can begin to contribute to sustainable policy and financing solutions based on their business interests and reputation as in other areas of the commons.
Gary Kleiman is a senior partner at Kleiman Intl Consultants, Inc.