Afghanistan low on dollars with currency reserves inaccessible to Taliban


Afghanistan’s currency reserves are primarily held in foreign accounts and are probably unavailable to Taliban rulers, leaving the country desperately low on dollars.

The Taliban took over Afghanistan with startling speed, but it appears dubious that the militants will get quick access to most of the Afghan central bank’s roughly $10 billion in assets.

According to an Afghan official, Da Afghanistan Bank (DAB), the country’s central bank, is thought to hold foreign currency, gold, and other treasures in its vaults.

The bank controlled about $9 billion, some $7 billion of which was born as a mixture of cash, gold, bonds and other investments at the U.S. Federal Reserve.

Ahmady, the acting governor, who has now fled Afghanistan, said on Twitter.

Nearly all of the assets are held outside Afghanistan, in other international accounts, at the Bank for International Settlements, a bank for central banks based in Switzerland.

Afghan officials possibly put most of them beyond the insurgents’ reach, leaving the country desperately low on dollars, including the bank’s acting governor, Ajmal Ahmady, who has fled Kabul.

“It is expected that such assets will be frozen and not accessible to Taliban, given that the Taliban are still on international sanction lists,” Ahmady Twitted.

“The next shipment never arrived,” he wrote. “Seems like our partners had good agility as to what was going to happen.” “The amount of such cash abiding is near to zero caused by the stoppage of shipments while the security situation deteriorated.”

The Taliban, who now control Kabul, said that the treasury, public facilities and government offices were the property of the nation and “should be closely guarded.”

The most current financial statement posted online shows DAB holds total assets of about $10 billion, including $1.3 billion worth of gold reserves and $362 million in foreign currency cash reserves, based on currency conversion rates on June 21, the day of the report.

Ahmady estimated total resources to be at $9 billion last week.

A U.S. administration official has also mentioned to Reuters that no assets of the Afghan government held in the United States would be made available to the Taliban.

The Taliban, who now control Kabul, has said treasury, public facilities and government offices were the nation’s property.

Ahmady said he came to know that the Taliban were asking bank staff about the location of assets but added that they should have foreseen it would be impossible to access them.

He now expects the local currency, the Afghani, to fall as the central bank cannot supply enough dollars to local banks and for the Taliban to use capital controls to prevent outflows.

“Inflation will rise as currency pass-through is very high,” he said. “This will impair the poor as food prices elevate.” The “Taliban won militarily – but now have to govern,” he wrote. “It is not easy.”

Many assets clenched abroad

Central banks, especially in developing nations, often park their assets overseas with institutions like the Federal Reserve Bank of New York (FRBNY) or the Bank of England (BoE).

DAB’s consolidated statement stated that the FRBNY held gold bars worth 101.77 billion afghanis on behalf of the Afghan central bank in its vaults by the end-2020.

The DAB’s June statement also states that the bank-owned investments stand at $6.1 billion.

The June report did not provide details of those investments, but a breakdown in the year-end information showed the majority were in the form of U.S. Treasury bonds and bills.

Investments were made through the International Bank for Reconstruction and Development (IBRD), an arm of the World Bank, or the FRBNY and held in New York.

Its smaller items are shared in an investment pool by the Bank for International Settlement (BIS), based in Switzerland, and the Economic Cooperation Organisation Trade and Development Bank in Turkey.

“As per international standards, most assets are safe, liquid assets such as Treasuries and gold,” Ahmady said on Twitter, confirming assets were all held at the Fed, BIS, through the World Bank program or other bank accounts.

Asked about the holdings, an FRBNY official said the bank does not acknowledge or discuss individual account holders but is generally in contact with U.S. government agencies to monitor events that may impact control of a foreign central bank.

“Any central bank assets the Afghan government have in the United States will not be made available to the Taliban,” an official in U.S. President Joe Biden’s administration told Reuters Wednesday.

Access to SDRs in hesitation

The Afghan central bank’s international reserves at $9.5 billion in the 2021, estimated by the International Monetary Fund (IMF) in its latest review published in June.

Well above the import cover of three months seen as a safe minimum – this translates into more than 15 months.

A key question will be handling Afghanistan’s share of a pending $650 billion allocation of Special Drawing Rights (SDR) currency reserves to the fund’s 190 member countries on Aug. 23.

This dispersal of SDRs, the fund’s unit of exchange based on dollars, euros, yen, sterling and yuan, aims to shore up the reserves of developing countries strained by the COVID-19 pandemic.

IMF member Afghanistan is entitled to about $455 million, based on its 0.07% quota shareholding in the fund.

The Taliban obtaining access to those assets would be hard to digest in capitals around the globe, but not all countries have access to the SDRs allocated.

A familiar source with the matter said that the views of its members guide IMF actions in such cases. The IMF membership has not reached a consensus on recognising Myanmar’s military leadership since they seized power in February.

“It’s not sure if that allocation will now proceed concerning Afganistan,” said Central Bank Governor Ahmady.

Nimmy Mathew
Nimmy Mathew
An undergraduate BTech student obsessed with the world of journalism and content writing. Avid reader and researcher. Has a knack for writing content that interests people. Finds solace in Sunday edition newspapers and philosophical content. Passionate about things that bring a sense of escapism especially fictional content.


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