The American newspaper, the Financial Times, published a report by writers Benjamin Barkin and Tommy Stubington, in which they discussed the decline of the Afghan currency by nearly a quarter since the Taliban seized power, exacerbating the economic crisis that left millions in the import-dependent country in the face of the threat of starvation. .
The report indicated that the price of the Afghani currency fell to 105 Afghanis against the dollar, after it was around 80 Afghanis before the Taliban entered the capital, Kabul in August, making it among the worst performing currencies in the world during the past six months.
The report pointed out that the withdrawal of the United States and allied forces from Afghanistan led to the suspension of funding that constitutes 80% of the government’s budget, the freezing of more than $9 billion in central bank reserves, and the imposition of sanctions that paralyzed the Afghan financial system. As a result, the banks were not able to continue operating properly, and the salaries of public sector workers such as doctors and teachers were not paid.
The depreciation of the Afghani currency has fueled what international aid agencies consider the world’s worst humanitarian crisis, pushing the prices of basic commodities beyond the capacity of desperate Afghans, with more than half of the population facing food insecurity, a catastrophe that has only worsened. Because of the harsh winter.
The authors indicated that over the 20 years of occupation by the United States and NATO since 2001, the Afghan economy has become dependent on foreign aid and on the dollar, as the dollar currency is flown into the country, and the Afghan Central Bank has conducted regular auctions to support the Afghani currency, and the sanctions imposed mean Afghans, businesses, and public institutions are cut off from savings, clients abroad, and international donors, exacerbating an economic contraction that the International Monetary Fund expects to reach 30%.
The authors added that last month the United Nations and the United States announced waivers to allow humanitarian aid into the country, but critics believe the sanctions are aimed at punishing ordinary Afghans, not the Taliban; “It is the economic strangulation imposed by the West that creates the need for humanitarian assistance,” said Graeme Smith, senior adviser at the International Crisis Group.
“The existence of a central bank is an essential service to the economy of the modern state, and the easiest measure that can be taken is to allow the central bank to do its work,” said Shah Mehrabi, professor of economics at Montgomery College in Maryland, and a member of the Afghan Central Bank’s board of directors – according to the article. That the United States allow transfers, valued at approximately $150 million per month, to allow the Central Bank to resume currency auctions and stabilize prices.
The report went on, noting that currency dealers are found everywhere in Kabul, where they are stationed near traffic lights or congregate in the markets, and many of them stated that dollars are smuggled from the country to Pakistan, which was also affected by the sharp devaluation of the currency; “When Pakistani businessmen see that their currency is depreciating, they try to buy dollars, but there are no bases in Afghanistan, they buy from Afghanistan and smuggle dollars to Pakistan,” said 22-year-old merchant Muhammad Mirzai.
Moreover, some analysts said – as stated in the report – that the Afghani currency has deteriorated further given the scale of the crisis, but it is the difficulty of accessing savings that has boosted the demand for liquidity.
Also, Charlie Robertson of the investment bank Renaissance Capital said – according to what the authors reported – that in other cases of economic collapse, in countries such as the countries of the former Soviet Union or Zimbabwe, central banks resorted to printing money to pay their bills, but the Afghan central bank relied on companies foreigners to print invoices, which made him lack the facilities to do so himself.
The authors stated that while the relatively limited collapse of the afghani currency has helped prevent hyperinflation, high prices still make vital foodstuffs expensive, increasing the risk of widespread hunger.