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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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China regrets UN Doha meeting’s failure to have dialogue with IEA

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(Last Updated On: February 24, 2024)

China’s special envoy for Afghanistan, Yue Xiaoyong, on Saturday regretted that the United Nations’ meeting in Doha on Afghanistan earlier this week failed to have dialogue with the Islamic Emirate.

Yue said on X that the meeting was useful for exchange of views and it made a call for more pragmatic engagement and dialogue with Afghanistan.

“Pity is Doha Afghanistan meeting again failed to have dialogu with Afghan interim government or DFA (IEA) as China and regional countries have been calling,” Yue said.

The envoy said that China called more humanitarian assistance, moderate governance, and women and girls’ education.

China also called on US take major responsibility for Afghanistan’s reconstruction, unfreeze Afghanistan’s overseas assets and lift unilateral sanctions.

China also stressed that it is ready to work harder with UN and regional partners especially through Afghanistan’s nonboring countries foreign ministerial meeting and other platforms to enhance engagement with Afghanistan to help for its peace, stability, reconstruction and common prosperity.

The UN had extended an invitation for IEA officials to participate, following their exclusion from the first meeting in May.

However, the Kabul government said they would not participate in the talks unless they could be the sole representative of Afghanistan at the meetings — to the exclusion of civil society groups.

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Latest World Bank decision will support millions of Afghans: IRC

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(Last Updated On: February 24, 2024)

The International Rescue Committee (IRC) has welcomed the latest move by the World Bank to use International Development Association (IDA) funds to scale up support to Afghanistan and expand the scope of its programs, saying these funds will support the delivery of services and access to jobs for Afghans who are continuing to endure a major humanitarian crisis as a result of decades of conflict, climate change and economic turmoil. 

IRC in a statement said that the focus of Approach 3.0 of the World Bank includes the delivery of livelihoods support which will support Afghanistan to at least maintain the current trajectory of low-level economic growth.

“This will be critical to maintaining and stabilizing the Afghan economy, while ensuring the survival of businesses and sources of income for millions. However, Afghanistan’s economic crisis remains the primary driver of the high level of humanitarian needs across the country,” the statement said.

IRC stated that although the announcement of Approach 3.0 represents a new milestone for meeting basic needs in Afghanistan, IRC urges other donors to recognise their role in continuing to contribute to both the delivery of basic services through the World Bank’s Afghanistan Resilience Trust Fund (ARTF) and to the humanitarian response.

All contributions are vital to sustaining support for Afghans, and the international community must continue to provide funding to sustain basic services and prevent the humanitarian crisis from worsening, it added.

A week ago, the World Bank Group announced that its executive board endorsed a new approach to aiding Afghanistan that will deploy some $300 million from the bank’s International Development Association fund for poor countries through United Nations agencies and other international organizations.

The shift marks the first time that the World Bank’s own funds would be sent to Afghanistan since the Islamic Emirate of Afghanistan (IEA) seized power in August 2021.

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UN Doha meeting reinforced that world remains united on Afghanistan: US envoy

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(Last Updated On: February 24, 2024)

The recent UN-sponsored meeting on Afghanistan reinforced that the international community remains largely united and committed to supporting the Afghan people, U.S. Special Envoy for Afghan Women, Girls, and Human Rights, Rina Amiri, said on Saturday.

Amiri said on X that the meeting also reinforced that the international community remains committed to supporting Afghans’ struggle for economic stability, security and respect for their rights, particularly addressing the plight of Afghan women and girls.

She added that Afghan civil society representatives remained unified in their calls on the international community to factor in the “dire situation” of Afghan women when assessing the security situation in Afghanistan and the importance of including Afghan women and civil society in deliberations on Afghanistan.

The UN-sponsored meeting of countries’ special envoys on Afghanistan was held earlier this week in Doha, the second such meeting since May last year.

US special envoy for Afghanistan, Thomas West, has also said that there remains a strong consensus on collective interests in Afghanistan. 

“No country wants to see emergence of terrorism threat from Afghanistan.  All want to see women and girls return to secondary school, university, work and public life,” West said on X.

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