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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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Pakistan to import coal from Afghanistan in rupees

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(Last Updated On: June 28, 2022)

Pakistan’s Prime Minister Shehbaz Sharif has approved the import of coal from Afghanistan in rupees instead of US dollars, saying the move will help the country save precious foreign exchange.

Sharif on Monday chaired a meeting on improving the transportation system of coal imported from Afghanistan in the country, the Express Tribune reported.

He expressed deep concern over the rising price of coal on the international market, saying it was the main reason for generating expensive electricity from coal-fired power plants in the country.

“The coal imported from Afghanistan in rupee terms will not only generate cheap electricity but also help save the country’s precious foreign exchange,” Sharif said.

The prime minister was informed that import of coal from Afghanistan would save more than $2.2 billion annually.

Sharif also directed the Ministry of Railways to take all necessary steps to ensure prompt delivery of coal imported from Afghanistan to power plants.

The PM ordered the formation of a committee of all officials concerned headed by the defence minister to expedite the import process.

Esmatullah Burhan, a spokesman for Afghanistan’s Ministry of Mines and Petroleum, told a press conference on Tuesday that Pakistan was a good market for coal exports, which should not be lost.

He said that revenue from coal exports under IEA rule were far higher than under the last government.

Ahmad Wali Haqmal, finance ministry spokesman, said tax on coal exports was increased to 30% from 20%.

The official said that until now coal was being sold at $90 per ton, but from now on it will be sold at $200 per ton.

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Four killed, 11 injured in traffic accidents in Badghis and Takhar

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(Last Updated On: June 28, 2022)

Four people were killed and 11 others were injured in two separate traffic incidents in northern provinces of Badghis and Takhar, officials said on Tuesday.

The incident in Badghis involved a Land Cruiser vehicle which crashed on the road between the provincial capital of Qala-e-Naw and Bala Murghab district on Tuesday morning, said Baz Mohammad Sarwari, the provincial director of information.

Four people were killed and eight others were injured in the incident, he said.

Those injured were transported to Kabul by helicopter, the official said.

The incident in Takhar involved a TownAce truck that ran off the road on Monday evening, injuring three people.

The vehicle was on its way from the provincial capital of Taluqan to Warsaj district when the incident happened, said Abdul Mobin Safi, a spokesman for Takhar police.

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Afghanistan leads world in negative experiences

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(Last Updated On: June 28, 2022)

Afghanistan in 2021 displaced Iraq from the top spot on the Negative Experience Index that the latter had occupied for the two previous years, Gallup said in a survey report released Tuesday.

According to the report, worry, stress and sadness soared to record levels in Afghanistan in 2021: 80% of Afghans were worried, 74% were stressed and 61% felt sadness much of the day.

No other population in Gallup’s 16 year trend has ever reported feeling this much worry, the reported noted.

Gallup said Afghans’ lives were already in a tailspin before the Islamic Emirate of Afghanistan (IEA) returned to power in 2021. Most Afghans were struggling to afford food and shelter, few felt safe, and they saw their lives getting worse with every passing year, it said.

Gallup surveys conducted in August and September — as the U.S. withdrew and IEA took control — reveal Afghans were losing the remaining joy that they had, the report said.

Afghanistan’s score of 59 on the Negative Experience Index was the highest score on record for the country and the highest score in the world in 2021. However, Afghanistan falls short of having the highest score on record for any country: The Central African Republic posted a score of 61 in 2017.

Bilal Karimi, deputy spokesman of IEA, rejected the report as “propaganda.”

“The reality is that after IEA’s takeover most citizens are feeling safe and have a sense of ownership and they are happy,” Karimi said on Twitter.

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