Afghanistan dispatches: major Afghan bank faces failure as banking system wobbles under Taliban
JURIST
Afghanistan dispatches: major Afghan bank faces failure as banking system wobbles under Taliban

Law students and lawyers in Afghanistan are filing reports with JURIST on the situation there after the Taliban takeover. Here, a Staff Correspondent for JURIST in Kabul comments on reports of a pending bank failure that would be the first since the Taliban took power in August.  For privacy and security reasons, we are withholding our Correspondent’s name. The text has been only lightly edited to respect the author’s voice.

According to unofficial reports from Afghanistan’s central bank, Kabul-based Maiwand Bank will be closed in a few days if immediate and necessary liquidity/cash is not injected into it. One of my sources at the central bank says that this should have happened last week.

Recently, the UNDP issued a report assessing the status of Afghanistan’s banking and financial system prior to 15 August 2021 and during the past three months. The report said that after the seizure of power by the Taliban, the country’s financial and banking system is on verge of collapse. This comes subsequent to international sanctions under which Afghanistan’s reserves, including banking sector FX deposits at the central bank, were frozen; the SWIFT system and international money transfer were suspended; and AFN liquidity printing was interrupted, causing a dramatic adverse shock in the financial and payment systems especially for local weak commercial banks like Maiwand Bank.

It was expected that the central bank would provide the required AFN liquidity to the commercial banks, especially weak banks, but it failed to do so. Therefore, these banks failed to do the requested deposits in the country.

Lack of AFN and US dollars liquidity has forced Maiwand Bank to close all of its branches in the country except the Kabul main branch and some limited number of branches. Maiwand Bank then closed other branches within Kabul and only operates in its head office in Kabul. Maiwand Bank even operates half a day in the head office since the Taliban takeover. They were unable to make full deposits for their customers.

Maiwand Bank is also failing to collect its debts from businesses and projects due to current international sanctions on the banking system of Afghanistan. My central bank contacts also confirm that other state-owned banks as well as the commercial banks are in the same situation as Maiwand Bank at the moment. For instance, AIB, one of the best banks, has closed 16 branches out 36 branches in the country. Moreover, according my sources, Pashanty Bank, Afghan United Bank, and Ghazanfar Bank are other banks that are closing or  will close their branches in Kabul and most of the provinces in the country.