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UN warns of ‘colossal’ collapse of Afghan banking system

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(Last Updated On: November 22, 2021)

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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Afghanistan now a ‘nexus for diplomatic endeavors’, says IEA

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(Last Updated On: April 25, 2024)

In the wake of dozens of meetings between high-ranking Islamic Emirate officials and visiting officials from foreign countries, and other diplomatic advances, the IEA said on Thursday that in the current geopolitical landscape, Kabul now “serves as a nexus for diplomatic endeavors and political deliberations pertaining to global affairs”.

In a series of posts on X, the IEA’s spokesman Zabihullah Mujahid said diplomatic missions and political delegations from various nations, including Russia, Malaysia, Kazakhstan, Turkmenistan, the European Union, and others, “are evident in the capital, highlighting its strategic importance in fostering Islamic cooperation”.

He said: “Recently, the honorable Minister of Transport of the Islamic Emirate, Mr. Hamidullah Akhundzada, led a significant delegation to Termez, Uzbekistan, for essential discussions aimed at enhancing bilateral relations.

“These discussions encompass a wide range of topics, from trade facilitation to security assurances, indicating a focused effort by the Islamic Emirate to strengthen and broaden its international engagements, thereby ensuring sustained development and stability.

“These initiatives, characterized by diligence and effectiveness, underscore Afghanistan’s enduring commitment to diplomatic engagement and its pivotal role in regional and global affairs,” he said.

Mujahid added that these initiatives “also emphasize the vital connection between diplomatic efforts and economic prosperity, promising favorable outcomes for Afghanistan’s socio-economic landscape.”

He pointed out that despite ongoing challenges, Afghanistan “remains steadfast in its pursuit of prosperity and resilience, defying pessimistic projections and charting a course towards political and economic renewal.”

He said: “Continued efforts are essential to fostering inclusive growth and impactful initiatives, thus advancing Afghanistan’s journey towards sustainable development and increased influence on the global stage.”

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Mullah Baradar discusses creation of railway with Kazakh deputy PM

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(Last Updated On: April 25, 2024)

Mullah Abdul Ghani Baradar, deputy prime minister for economic affairs has met with Erik Zhumangarin, the Deputy Prime Minister of Kazakhstan, and discussed the establishment of a railway network from Kazakhstan to Pakistan through Turkmenistan and Afghanistan, the deputy PM’s office said in a statement.

During the meeting, Baradar emphasized the need to sign agreements to solve the banking problems of traders from both countries, the creation of Afghan-Kazakh joint companies, and the facilitation of visas for Afghan traders.

According to the statement, the Deputy Prime Minister of Kazakhstan said that the Kazakh government intends to establish a joint chamber of industry and commerce and a joint trade and labor group between the two countries, and is ready to cooperate with Afghanistan in the sectors of e-governance, industry, higher education, education, health, and banking.

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Iran, Pakistan leaders raise concerns over ‘terrorist groups’ in Afghanistan

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(Last Updated On: April 24, 2024)

Following a two-day official visit to Pakistan, Iranian President Ebrahim Raisi and Pakistan’s Prime Minister Shehbaz Sharif issued a joint statement emphasizing the need to further expand commercial and economic cooperation and transform the common border of the two countries from a “border of peace” to “border of prosperity”.

The two leaders also strongly condemned aggressions and crimes of Israel in Gaza, and demanded an immediate and unconditional ceasefire, as well as unimpeded humanitarian access to the besieged people of Gaza.

Numerous other issues were also discussed but on the topic of Afghanistan, they jointly declared their commitment to the development of Afghanistan as a peaceful, united, independent country free from the threats of terrorism and drug trafficking.

According to the statement the two countries pointed out that the existence of terrorist organizations in Afghanistan is a serious threat to the security of the region and the world.

The two sides stressed their desire to strengthen cooperation in the field of fighting terrorism and ensuring security and creating a united front against terrorism.

They also discussed the importance of coordinating regional and international efforts to ensure security and stability in the region.

“While respecting the sovereignty and territorial integrity of Afghanistan, the two sides recognized that increasing participation of all strata of Afghans in basic decision-making will lead to the strengthening of peace and stability in this country,” the statement read.

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