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Afghan central bank drained dollar stockpile before Kabul fell

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(Last Updated On: September 30, 2021)

The Afghan central bank ran down most of its U.S. dollar cash reserves in the weeks before the Taliban took control of the country, according to an assessment prepared for Afghanistan’s international donors, exacerbating the current economic crisis.

The confidential, two-page brief, written early this month by senior international economic officials for institutions including the World Bank and International Monetary Fund, said the country’s severe cash shortage began before the Islamic Emirate of Afghanistan (IEA) took control of Kabul, Reuters reported.

It criticised how the central bank’s former leadership handled the crisis in the months before the IEA’s conquest, including decisions to auction unusually large amounts of U.S. dollars and move money from Kabul to provincial branches.

“FX (foreign exchange) reserves in CB’s (central bank) vaults in Kabul have depleted, the CB cannot meet … cash requests,” the report, seen by Reuters, said.

“The biggest source of the problem is the mismanagement at the central bank prior to the Taliban (IEA) takeover,” it added.

Shah Mehrabi, chairman of the central bank’s audit committee who helped oversee the bank before the IEA took over and is still in his post, defended the central bank’s actions, saying it was trying to prevent a run on the local Afghani currency.

The extent of the cash shortage can be seen on the streets of Afghan cities, where people have been queuing for hours to withdraw dollar savings amid strict limits on how much they can take out.

Even before the shock of the Western-backed government’s collapse, the economy was struggling, but the return of the IEA and abrupt end of billions of dollars in foreign aid has left it in deep crisis.

Prices for staples like flour have spiralled while work has dried up, leaving millions facing hunger as winter approaches.

Aid dries up

Under the previous government, the central bank relied on cash shipments of $249 million, delivered roughly every three months in boxes of bound $100 notes and stored in the vaults of the central bank and presidential palace, according to three people with direct knowledge of the matter.

That money has dried up as foreign powers shy away from dealing directly with the IEA.

The central bank, which plays a key role in Afghanistan because it distributes aid from countries like the United States, said on Wednesday it had finalised a plan to meet the country’s foreign currency needs. It gave no details.

The hard currency crunch is making it difficult for the IEA to meet basic needs, including paying for power or dispersing salaries to government employees, many of whom have not been paid in months.

Afghanistan’s roughly $9 billion of offshore reserves were frozen as soon as the IEA captured Kabul, leaving the central bank with just the cash in its vaults.

According to the report, the central bank auctioned off $1.5 billion between June 1 and August 15 to local foreign exchange dealers, which it said was “strikingly high”.

“By August 15, the Central Bank had an outstanding liability of $700 million and 50 billion Afghanis ($569 million) towards the commercial banks,” it said, adding that this had been a major factor in emptying its coffers.

Afghan central bank official Mehrabi said, however, that although almost $1.5 billion of auctions had been announced, the actual amount sold was $714 million.

He said the central bank had “continued its foreign exchange auction to reduce the depreciation and inflation.”

Money missing?

The report also questioned a decision by the central bank to shift some of its reserves to provincial branches, putting it at risk as IEA forces made advances across the country from late 2020 in the runup to their victory.

It said around $202 million was kept in these branches at the end of 2020, compared with $12.9 million in 2019, and that the cash was not moved as provinces started to fall to the IEA.

“Some money is reportedly lost (stolen) from ‘some’ of the provincial branches,” the report said, without specifying how much.

Mehrabi said the central bank was investigating money “stolen” from three of its branches, although not by the IEA. He gave no further details.

Former central bank governor Ajmal Ahmady, who left the country the day after Kabul fell, did not respond to emails and other messages requesting comment on his and the bank’s actions in the months before the IEA returned to power.

Ahmady has said on Twitter in recent weeks that he did his best to manage the situation, and blamed any cash shortfall on the freezing of central bank assets abroad.

In his statements, he also said the central bank had managed the economy well prior to the fall of Kabul and that he felt bad about leaving staff behind but feared for his safety. He has said no money was stolen from any reserve account.

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Senior IEA official voices concern over Daesh amid ongoing economic crisis

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(Last Updated On: November 27, 2021)

The Islamic Emirate of Afghanistan’s (IEA) designated representative to UN, Suhail Shaheen, has warned the international community that the Afghanistan affiliate of ISIS (ISIS-K) could flourish if the West continues to impose economic sanctions against Afghanistan.

In an interview with Euro News, Shaheen stated that continued economic sanctions have plunged the people of Afghanistan into poverty and that this could pave the way for ISIS-K (also known as Daesh) to recruit fighters.

“The sanctions which have led to poverty in the country, are aggravating the current situation; the humanitarian crisis is providing a recruiting ground for ISIS to benefit from,” Shaheen said.

He added: “I don’t know why they (international community) are helping ISIS by continuing the sanctions and freezing our money which is the wealth of the people of Afghanistan.”

The United States has frozen over $9 billion of Afghanistan’s foreign reserves following the collapse of the former government in mid-August.

Since then, the US and its allies have also imposed strict economic sanctions on Afghanistan, which has exacerbated an already struggling, aid-dependent economy.

Meanwhile, an IEA delegation led by Acting Foreign Minister Mawlawi Amir Khan Muttaqi met with officials from various Qatari ministries on Friday and discussed a wide range of issues.

Friday’s discussions come ahead of next week’s talks between the IEA delegation and the US special representative Thomas West.

IEA officials said that the Afghan and US delegations would discuss the release of Afghanistan’s frozen assets, humanitarian aid, education, and the reopening of embassies in Kabul among other issues.

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Xiaomi to open car plant in Beijing with annual output of 300,000 vehicles

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(Last Updated On: November 27, 2021)

Chinese smartphone giant Xiaomi Corp will build a plant that can produce 300,000 vehicles annually in Beijing for its electric vehicle unit, authorities in the capital said on Saturday.

The plant will be constructed in two phases and Xiaomi will also built its auto unit’s headquarters, sales and research offices in the Beijing Economic and Technological Development Zone, the government-backed economic development agency Beijing E-Town said on its official WeChat account.

Beijing E-Town said it anticipated the plant reaching mass production in 2024, a goal announced by Xiaomi’s Chief Executive Lei Jun in October.

In March, Xiaomi said it would commit to investing $10 billion in a new electric car division over 10 years. The company completed the business registration of its EV unit in late August.

The company has been opening thousands of stores to spur domestic sales growth for its smartphone business but eventually intends to use these shops as a channel for its plans to sell electric vehicles.

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IEA delegation meet with Qatari officials in Doha

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(Last Updated On: November 27, 2021)

Islamic Emirate of Afghanistan’s (IEA) officials said on Friday night that the Afghan delegation led by Acting Foreign Minister Mawlawi Amir Khan Muttaqi met with officials from various Qatari ministries on Friday and discussed a wide range of issues.
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Friday’s discussions come ahead of next week’s talks between the IEA delegation and the US special representative Thomas West

Officials in Doha, who are accompanying Muttaqi, include representatives from the Ministries of Education, Health, Finance, Security, and Da Afghanistan Bank (Central Bank).

Abdul Qahar Balkhi, spokesman for the foreign ministry, confirmed the delegation’s meetings and said: “Detailed discussions were held about political, humanitarian, economic and education issues.”

According to Balkhi the Qatari officials pledged to continue to provide aid for Afghans.

“Qatari officials stated they will continue to stand by Afghans and will continue providing aid during the upcoming period,” added Balkhi

According to Balkhi, “IEA delegation thanked Qatar for their assistance and for playing a positive role during the previous negotiations.”

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