Afghanistan stepping up coal exports to Pakistan to boost local budget

May 26, 2022: The Afghan Taliban are stepping up coal exports to Pakistan and have raised duties on sales, officials said, as the group aims to generate more revenue from its mining sector in the absence of direct foreign funding.

The move comes with global coal prices near record highs after top exporter Indonesia imposed a shock ban on exports earlier in 2022 and then Russia invaded Ukraine, pushing prices up further.

No country has officially recognised the Taliban government, which has meant international financial assistance has dried up even as the country faces a humanitarian and economic crisis.

The hardline Islamist movement is now banking on its natural resources to survive. Landlocked Afghanistan has large mineral and fossil fuel deposits, most of them untapped.

"Coal exports have increased because we have paved the way for traders," said finance ministry spokesman Ahmad Wali Haqmal.

He said officials had collected around 3 billion Afghanis ($33.80 million) in customs revenue on more than 16 billion Afghanis worth of coal exports in the last six months.

As well as higher sales, the tax on coal exports was last week increased to 30% from 20%, according to an official letter seen by Reuters, the contents of which were confirmed by Haqmal.

The Taliban announced their first annual budget earlier this month, saying they would depend solely on local revenue - a big task for a country dependent on foreign assistance for the last two decades.

Haqmal said exports and revenues were far higher than under the last government, which was ousted as the Taliban swept to power after U.S.-led foreign forces withdrew from Afghanistan last year.

Khan Jan Alokozi, an official at the Afghanistan Chamber of Commerce and Investment (ACCI) told Reuters that he believed revenues had also increased because the Taliban had eliminated some corruption.

While the regime plans to award mining contracts for precious minerals, coal is already paying dividends.

Four local companies are producing coal, mostly in northern provinces, while Pakistan has increased imports of coal from Afghanistan, Mufti Esmatullah Burhan, acting Deputy Minister for Mines and Petroleum, told Reuters.

Importing coal from Afghanistan could help Pakistan reduce costs and dependence on supplies from South Africa, which is facing logistical challenges given the higher demand for fuel from Europe.

Pakistan's commerce ministry did not reply to a Reuters request for comment.

South Africa currently provides almost three-quarters of Pakistan's coal needs, mostly for the country's fledgling cement industry.

One Pakistani official, speaking on condition of anonymity, said Pakistan had increased coal imports from Afghanistan and could be importing up to 500,000 tonnes per month.

The official said that due to the country's dwindling foreign exchange reserves and higher international prices in the wake of the war in Ukraine, Pakistan is not buying as much liquefied natural gas (LNG) on the spot market.

Engineer Asif Khan, a Pakistani coal dealer who imports coal from Afghanistan, said the business was doing well but Afghan traders had raised coal prices when the Taliban increased taxes. 

Reuters