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UN warns of ‘colossal’ collapse of Afghan banking system
The United Nations on Monday pushed for urgent action to prop up Afghanistan’s banks, warning that a spike in people unable to repay loans, lower deposits and a cash liquidity crunch could cause the financial system to collapse within months.
In a three-page report on Afghanistan’s banking and financial system seen by Reuters, the U.N. Development Programme (UNDP) said the economic cost of a banking system collapse – and consequent negative social impact – “would be colossal.”
An abrupt withdrawal of most foreign development support after the Islamic Emirate of Afghanistan (IEA) seized power on August 15 from Afghanistan’s Western-backed government has sent the economy into freefall, putting a severe strain on the banking system which set weekly withdrawal limits to stop a run on deposits.
“Afghanistan’s financial and bank payment systems are in disarray. The bank-run problem must be resolved quickly to improve Afghanistan’s limited production capacity and prevent the banking system from collapsing,” the UNDP report said.
Finding a way to avert a collapse is complicated by international and unilateral sanctions on IEA leaders, Reuters reported.
“We need to find a way to make sure that if we support the banking sector, we are not supporting Taliban (IEA),” Abdallah al Dardari, head of UNDP in Afghanistan, told Reuters.
“We are in such a dire situation that we need to think of all possible options and we have to think outside the box,” he said. “What used to be three months ago unthinkable has to become thinkable now.”
Afghanistan’s banking system was already vulnerable before the IEA came to power. But since then development aid has dried up, billions of dollars in Afghan assets have been frozen abroad, and the United Nations and aid groups are now struggling to get enough cash into the country.
The UNDP’s proposals to save the banking system include a deposit insurance scheme, measures to ensure adequate liquidity for short- and medium-term needs, as well as credit guarantees and loan repayment delay options.
“Coordination with the International Financial Institutions, with their extensive experience of the Afghan financial system, would be critical to this process,” UNDP said in its report, referring to the World Bank and International Monetary Fund.
The United Nations has repeatedly warned since the IEA took over that Afghanistan’s economy is on the brink of a collapse that would likely further fuel a refugee crisis. UNDP said that if the banking system fails, it could take decades to rebuild.
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Iran–US talks kick off in Islamabad
As Iranian and US delegations are present in Islamabad, Iranian media report that talks between the two sides have begun.
The negotiations are being conducted indirectly, with Pakistan acting as a mediator.
According to reports, Iran had set conditions for the start of the talks, including a halt to the war in Lebanon and the release of its frozen assets.
An IRIB correspondent in Islamabad reported that the US has agreed to release Iranian assets, and that the conflict in Lebanon has been limited to the southern part of the country.
However, US officials have not yet confirmed any agreement on the release of Iran’s frozen assets.
The talks come after 40 days of conflict between the United States, Israel, and Iran.
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Death toll rises in armed attack in Herat; 11 killed, 8 injured
Authorities have confirmed that one suspect has been arrested in connection with the attack.
The death toll from a brutal armed attack in the Injil district of Herat province has increased, with local authorities confirming that at least 11 people were killed and 8 others injured.
Ahmadullah Muttaqi, Director of Information and Culture for Herat, reported that the attack occurred around 3:00 PM on Friday when unidentified gunmen opened fire on a group of families who had gathered for a picnic in the village of “Dah Mehre,” located in the Injil district.
Initial reports indicated that four people were killed and 15 others injured. However, as the severity of the injuries became clearer, seven more of the wounded tragically succumbed to their injuries overnight. The latest update puts the death toll at 11, with 8 survivors, two of whom are said to be in critical condition.
Authorities have confirmed that one suspect has been arrested in connection with the attack. Security forces are continuing to investigate the incident, with efforts underway to identify and apprehend additional perpetrators.
The attack has sent shockwaves through the region, with local authorities and communities expressing outrage and concern over the rising violence in the area.
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UN warns of deepening humanitarian crisis in Afghanistan, calls for urgent aid
Dujarric also highlighted a 5.9-magnitude earthquake that struck the Hindu Kush region on Sunday, causing additional casualties and damage, including in Kabul and nearby areas.
The United Nations has raised alarm over a worsening humanitarian crisis in Afghanistan, citing the combined impact of ongoing conflict and severe weather conditions, and urging the international community to step up assistance.
Speaking at a daily press briefing, UN Secretary-General spokesperson Stéphane Dujarric said that recent heavy rains and flooding have led to significant casualties and widespread destruction across the country.
“Nearly 100 people have reportedly been killed, more than 180 injured, and several others remain missing. Thousands of homes have been severely damaged or completely destroyed, along with critical infrastructure and large areas of agricultural land,” Dujarric said.
He noted that Nangarhar Province in eastern Afghanistan has been among the hardest hit regions, already recovering from a devastating earthquake in September last year.
Dujarric also highlighted a 5.9-magnitude earthquake that struck the Hindu Kush region on Sunday, causing additional casualties and damage, including in Kabul and nearby areas.
“We and our humanitarian partners have so far reached more than 8,000 people with assistance, including food, cash aid, health services, emergency shelter, and other life-saving support,” he added.
The UN said assessments are ongoing to ensure aid reaches the most vulnerable populations, as Afghanistan faces mounting humanitarian challenges amid overlapping crises.
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