Afghanistan dispatches: ‘the commercial banks are running out of US dollars’
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Afghanistan dispatches: ‘the commercial banks are running out of US dollars’

JURIST EXCLUSIVE – Law students and lawyers in Afghanistan are filing reports with JURIST on the situation there after the fall of Kabul to the Taliban. Here, a lawyer in Kabul with experience in the country’s financial sector offers his observations and perspective on the circumstances facing the country’s banks and banking system under the new regime.  For privacy and security reasons we are withholding his name and institutional affiliation. The text has been only lightly edited to respect the author’s voice.

The Acting Governor of Afghanistan’s Central Bank has issued another letter through which the commercial banks are instructed not to allow corporate bank accounts to 1) withdraw any money for any purpose, and 2) make any electronic transaction inside and outside of Afghanistan.

Afghanistan pays approximately $7B USD in electronic form via corresponding banking. The latest restriction will significantly increase the price of imported commodities.

Additionally, only the main offices of the commercial banks are open. No branches are currently operating, at least as far as I can see see in Kabul. Furthermore, the commercial banks are running out of US dollars cash because they do not receive any from the Central Bank. The US Treasury has decided to stop supply of physical dollar banknotes to Afghanistan. This also has increased commodities prices. As an example, I used to buy a 16 liter bottle of oil for 1400 AFN. Today it was AFN 2500.

In another incident, one of the Central Bank’s Supreme Council members in an interview with Reuters urged US Treasury and IMF to take the necessary steps to provide the Taliban-led Government limited access to the country’s reserves. This has been on the media all over the day today and many have commented on it.

In Afghanistan there are 11 commercial banks at the moment, but five are not in a stable situation. Some time ago the central bank studied some of those banks and concluded that at least two of them will become insolvent in the next one year. Taking the current situation into consideration, they will be insolvent sooner than anticipated. Moreover, in Afghanistan only approximately 4 million people use banking services out of nearly 35 million people. This low number of customers is because Afghans do not trust the banking system and they think their money will be safer with themselves. This situation will become even worse because of the recent policies implemented by the Central Bank.

Surprisingly, some of the people who support the idea of the US/IMF to give the Taliban limited access to the country’s currency reserves are people who stood against the rise of the Taliban. But the impacts that the frozen accounts are predicted to have on the poor in the country may be the only reason they have said what they have said.

Meanwhile the Taliban are in direct war against the only party standing against them in Afghanistan’s Panjshir province. It is very hard for them to fund such a war and we are afraid if they have access to more money from investments now frozen, they will use it to fund their war.