The Biden administration has no plans to release billions in Afghan gold, investments and foreign currency reserves parked in the United States that it froze after the Taliban’s takeover, despite pressure from humanitarian groups and others who say the cost may be the collapse of Afghanistan’s economy.
Much of the Afghan central bank’s $10 billion in assets are parked overseas here, where they are considered a key instrument for the West to pressure the Taliban here to respect women’s rights and the rule of law.
Any unfreezing of these assets may be months away, financial experts said.
Officials from the U.S. State Department, U.S. Treasury, White House National Security Council and other agencies have been in regular discussions about Afghanistan’s finances since the Taliban took over in mid-August, ahead of what the United Nations and others see as a looming humanitarian crisis.
Any decision to release the funds would likely involve top U.S. officials from several departments but will ultimately be up to President Joe Biden, the experts said.
Food and fuel prices are soaring across Afghanistan, amid a shortage of cash triggered by a halt in foreign aid, a halt in dollar shipments and a drought.
The U.S. Treasury this week said it had granted a license here authorizing the U.S. government and its partners to continue to facilitate humanitarian aid in Afghanistan. It also gave Western Union, the world’s largest money transfer firm, and other financial institutions a green light to resume processing here personal remittances to Afghanistan from migrants overseas.
The Treasury Department is not easing sanctions on the Taliban or loosening restrictions on their access to the global financial system, a spokesperson told Reuters.
“The United States government has been in touch with humanitarian partners in Afghanistan, both regarding security conditions on the ground and about their ability to continue their humanitarian work,” the spokesperson said.
“As we maintain our commitment to the Afghan people, we have not reduced sanctions pressure on Taliban leaders or the significant restrictions on their access to the international financial system.”
Shah Mehrabi, an economics professor in Maryland and long-time member of the Afghan central bank’s board, a senior Russian official and humanitarian groups are among those urging the U.S. Treasury to also unfreeze the Afghan assets, saying that lives are at stake.
“The gravity of the situation is so immense. Every day that passes is going to result in more suffering and more exodus of people,” Mehrabi said.
The International Monetary Fund has also blocked the Taliban from accessing some $440 million in new emergency reserves, or Special Drawing Rights, issued by the global lender last month.
Adnan Mazarei, former deputy director of the IMF and now a fellow at the Peterson Institute for International Economics, said the United States could not legally release the Afghan assets until there was an internationally recognized government, and that could take many months to occur. The IMF could not act until its board voted, once a government was recognized.
He said a central bank’s reserves are typically not touched except as a last resort. Even Iran, struggling under intense international sanctions, has not used its IMF emergency reserves, he said.
Brian O’Toole, a former Treasury Department official now with the Atlantic Council, said a release of the Afghan assets would not solve Afghanistan’s considerable problems.
“Just releasing those funds doesn’t stabilize the Afghan economy, or do anything like that. What it does is give the Taliban access” to billions of dollars, he said. “I don’t think there’s gonna be a lot of appetite in the U.S. to do that, nor should there be.”
TAPI project suspended in Afghanistan until situation ‘stabilizes’
The implementation of the TAPI (Turkmenistan – Afghanistan – Pakistan – India) project has been suspended until the situation in Afghanistan stabilizes, Pakistan’s Federal Minister for Economic Affairs Omar Ayub Khan told Russia’s TASS news agency this week.
“The work on the TAPI, as well as on other projects like CASA-1000 (power transmission system project), is on hold due to the situation in Afghanistan.
“According to the information that we have, at the moment no one is working on this project in Afghanistan as well as on other projects. Many people have been evacuated, and representatives of the World Bank are no longer represented in Afghanistan,” Khan told TASS.
“After stabilizing the situation, we will be able to return to the issue of construction. But for now, the project has been suspended until the situation is cleared up,” he added.
Afghani falls to record low amid pressing currency shortage
Economists are warning of an acute currency shortage in Afghanistan and the subsequent economic predicament as the Afghani has plummeted to its record low in trading.
The United Nations Development Programme (UNDP) issued a report earlier this week urging prompt actions to prevent the Afghan banking system from collapsing, which is now “in disarray” featuring inadequate liquidity and decreased deposits.
The largest currency exchange market in Kabul now has been crowded with people and the Afghani has dropped to its all-time low.
Before the Islamic Emirate of Afghanistan (IEA)’s takeover of Kabul in mid-August, one U.S. dollar was equal to about 70 Afghanis. But now the exchange rate hovers around 90 Afghanis to the dollar. The continued depreciation of the Afghan currency sparked fears among residents, with many flocking to the exchange market.
“Unfortunately in these two weeks the Afghan currency has been dropping down against foreign currencies with one dollar costing 95.5 Afghanis last week. Then the Afghanistan Bank released a statement that they will put 10 million U.S. dollars into the market, more than the 2.5 million dollars they actually took out. However, the price [of the U.S. dollar] didn’t go down but unfortunately have increased day by day,” said Zirak, spokesman from the all money dealers of Afghanistan.
Zirak said the country’s currency shortage was fueled by the combination of its assets frozen by the United States, the increasing domestic demand for U.S. dollars, as well as banks’ restrictions on dollar withdrawal.
The UNDP report noticed that non-performing loans in Afghanistan had increased from around 30 percent at the end of 2020 to 57 percent in September this year.
With the current trend and withdrawal restrictions, approximately 40 percent of the country’s deposit base will be lost by the end of 2021, said the report.
The currency shortage also comes along with rising prices. Some residents and businessmen in Kabul said that the prices of major commodities, such as food and fuel, have almost doubled compared with last year.
A Kabul resident is calling for the U.S. to release the frozen assets to save people’s lives.
“The U.S. blocked the money of Afghanistan, leading to the economic downturn. The poverty rate has reached its peak and people will die, so we urge the U.S. to release money of Afghanistan because [if not,] sure the people will die,” said Mustafa Bahram.
Pakistan to allow India transit access to Afghanistan for humanitarian aid
Pakistan Prime Minister Imran Khan on Monday announced that Islamabad will allow the transit of 50,000 tonnes of wheat and winter shelters offered by India to Afghanistan.
This was among announcements by Khan after visiting the newly-established Afghanistan Inter-Ministerial Coordination Cell (AICC), along with Pakistan’s army chief General Qamar Javed Bajwa, Foreign Minister Shah Mehmood Qureshi and NSA Moeed Yousaf, where he chaired its first committee meeting.
Pakistan will also facilitate the return of Afghan patients who had gone to India for medical treatment and are stuck there, he announced, Tribune India reported.
Pakistan will also immediately ship in-kind humanitarian assistance worth Rs 5 billion, including 50,000 tonnes of wheat and winter shelters.
According to the Tribune India, Pakistani authorities have not however said whether Indian trucks will be allowed to travel to Afghanistan or whether they will have to offload the goods at the border and load the aid onto Pakistani or Afghan trucks.
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