Afghanistan: the coffers were already empty before the arrival of the Taliban

Posted on Oct 6, 2021 3:31 PMUpdated Oct 7, 2021, 2:59 PM

The financial situation of the central bank of Afghanistan was already bad before the Taliban came to power. A report written by officials of international institutions in early September and revealed by Reuters points to “mismanagement” of the previous team in charge of the country’s finances. The coffers were emptied because the Da Afghanisan Bank (DAB) had to sell dollars to support its currency in the months before the arrival of the Taliban. These interventions did not prevent the currency from plunging. This year, the dollar gained 17% to 90 afghanis. The euro is worth 104 afghanis.

In 2020, nearly $ 190 million was transferred by the central bank of Kabul to some of its subsidiaries located in the country’s seven major provinces. However, a part was stolen in three of its subsidiaries but not by the Taliban, indicates to Reuters Shah Mehrabi, in charge of the audit of the DAB. The amount of thefts is not communicated.

Bullion in New York

Since the arrival of the Taliban, the country lacks hard currencies like the dollar or the euro. Its assets are frozen. 9 billion dollars of reserves (dollars, gold…) are held abroad, in particular in the United States. $ 1.3 billion in gold bullion is held by the New York Federal Reserve. International aid is no longer reaching it. International shipments of crates full of hundred dollar bills have stopped since August.

“There are big ATM withdrawals in the country and most of the banks are not working,” the managing director of the Islamic Bank of Afghanistan told the BBC from Dubai. Withdrawals have been limited to nearly 18,000 Afghanis ($ 200) per person per week, but in practice Afghans are entitled to much less. At the end of September, the DAB indicated that it had met with the main ministers (finance and trade) to build a banking support plan to help the country meet its financial needs. The plan has reportedly been finalized but the central bank has yet to deliver details.

The country, which imports far more than it exports, is heading straight for financial bankruptcy and economic chaos. Civil servants and in particular the police receive only a fraction of their salary.

Pakistan worried

Pakistan, which has not recognized the Taliban regime, is worried about the chaos in its neighbor and the risk of contagion. He would think about financial aid, according to the newspaper “The Express Tribune”. The State Bank of Pakistan could increase its lines of credit to its counterpart, the Afghan central bank. Pakistan could print the notes in Afghanis on behalf of Afghanistan, which does not have a printing plant. Before the Taliban, it was a Polish company that printed these notes, but the sending of denominations has stopped since they came to power.

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