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.