Afghanistan is one of the world’s most resource-rich countries and has more than 1,200 mineral fields. Its mineral wealth is estimated to be worth $3 trillion and includes resources such as gold, chromite, copper, iron, lead, zinc, coal, natural gas, petroleum, gemstones, lithium, talc and various rare earth elements.

The Afghan Transitional Government recognizes the transformative potential of these resources for the Afghan economy and has sought various ways to utilize these resources. On August 31, Afghan government officials signed seven mining agreements with local and international companies.

These landmark contracts include long-term commitments ranging from five to 30 years. The projects include the development of four iron blocks in Herat, a lead and zinc block in Ghor, the gold reserves in Takhar and the copper resources of Aynak Two. Participating companies are poised to invest more than $6 billion over the next three decades.

The revenue from these projects and the associated development and employment opportunities will provide a major boost to the Afghan economy. They are essential to improving the well-being of the Afghan people.

It is currently not possible to estimate the exact profits the government will make from these projects as exploration of the mining sites is still ongoing. However, according to the contracts, the Afghan state retains 56 percent of the shares in the gold mine, 12 percent in the copper mine, 20 percent in the lead mine and 13 percent in each iron block. In addition, the Ministry of Finance will also levy corresponding taxes on these projects, which would create another source of revenue for the state.

The economic benefits arising from these contracts go beyond revenue generation. In particular, they are expected to spur industrial development across the country.

For example, the lead and zinc project handed over to Kabul-based Afghan Invest comes with the additional responsibility of completing the remaining 13 percent of a 500-kilovolt power interconnection project that would ensure power imports from neighboring Turkmenistan. This would help meet our growing energy needs and power almost all industrial parks in the country, extending their operating hours from 12 to 24.

Increasing electricity supply could also contribute to the development of Afghan agriculture. Currently, most agricultural activities in the country rely on manual labor. Better access to electricity could contribute to the mechanization of this sector. According to the head of the Afghanistan Chamber of Industry and Mines (ACIM), Shirbaz Kaminzada, the additional electricity supply from Turkmenistan could increase agricultural and industrial production by $2 billion.

In addition, the electricity interconnection project would also reduce the country’s electricity bill. Turkmenistan’s electricity is sold at lower prices; Importing would reduce costs and allow the Afghan government to negotiate better tariffs with its two other energy suppliers, Uzbekistan and Tajikistan.

The development of iron mines will also benefit Afghanistan’s industrial development as it will supply iron ore to numerous steel factories in the country. At the same time, the lead mine will ensure a continuous supply of raw materials for eight domestic battery producers and potentially turn Afghanistan into a battery exporting country.

These mining projects will also benefit the country by helping to address the high unemployment rate resulting from the termination of employment of Afghans working for foreign contractors and subcontractors following the withdrawal of foreign troops in 2021.

The activities associated with the projects are expected to create employment opportunities for more than 50,000 people in various sectors. These include jobs for geologists, engineers, miners, machine operators, transportation personnel, equipment manufacturers, logistics specialists and security personnel.

In addition, mining companies are required by their contracts to invest in community development initiatives. This will create additional employment opportunities in healthcare, education and other sectors aimed at improving the quality of life of local communities. These initiatives have the potential to alleviate poverty and raise living standards, particularly in severely underserved provinces such as Ghor.

The mining projects will also help the Afghan government with another major problem: the instability of the Afghan currency. After the withdrawal of foreign troops and the departure of many contractors, Afghan bank depositors immediately transferred hundreds of millions of dollars to foreign accounts, leaving the country facing a severe foreign exchange shortage.

This depletion had a negative impact on the value of the Afghani and the banks faced imminent insolvency. The Da Afghanistan Bank had to take urgent currency stabilization measures to save the Afghan currency, and it succeeded, but the country still needs foreign currencies.

The mining projects are expected to increase foreign exchange inflows into the country. Each of these seven mines has European and Asian partners well-equipped to facilitate the export of processed materials to international markets. This inflow of foreign currency is expected to contribute significantly to Afghanistan’s stabilization and strengthen the country’s economic prospects.

Indeed, the mining deals signed last month represent a transformative opportunity for Afghanistan. They will not only bring much-needed revenue to the government, but also improve the lives of Afghans by providing them with jobs and better living conditions. This could be a defining moment in the country’s economic history.

The views expressed in this article are the author’s own and do not necessarily reflect the editorial stance of Al Jazeera.

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