Business
Liquidity crisis at core of Afghanistan’s economic challenges: SIGAR

Afghanistan continued to face a severe liquidity crisis this quarter with access to physical bank notes constrained and banks facing major liquidity challenges due to declining economic activity, lack of trust in the banking center among Afghans, and an inability to transact internationally.
The US Special Inspector General for Afghanistan (SIGAR) said in its latest quarterly report that Da Afghanistan Bank (DAB), Afghanistan’s central bank, will require significant technical support from the international community to tackle these challenges.
The report stated that prior to the Islamic Emirate of Afghanistan’s (IEA) takeover in August last year, Afghanistan’s financial system had been underdeveloped relative to the context of its growth in recent decades, with a low assets-to-GDP ratio and a heavily dollarized banking system.
Approximately 60% of deposits in the country were made in foreign currency. The report stated that in this monetary environment, maintaining financial stability requires both domestic currency (AFN) liquidity and, more importantly, foreign exchange (FX) liquidity.
However, DAB is limited in its ability to control the AFN monetary supply and value due to several factors including the lack of domestic technical capabilities to print currency, which Afghanistan outsources to foreign companies.
“For years, DAB would prop up the value of the afghani (AFN) by regularly auctioning US dollars pulled from its foreign reserves. Prior to August 2021, Afghanistan’s central bank reportedly received quarterly shipments of $249 million in US banknotes from its foreign reserves. This stopped after the Taliban (IEA) takeover prompted the United States to place a hold on US-based Afghan central bank reserves.
“The loss of these US dollar transfers and other sources of foreign currency plunged Afghanistan’s financial system into free fall,” SIGAR stated.
With Afghanistan’s international reserves, including banking sector foreign exchange deposits at the DAB, frozen; the SWIFT system and international settlements suspended; grant transfers suspended; and AFN liquidity printing interrupted, a dramatic adverse shock in the financial and payment systems ensued.
The resulting liquidity crisis has caused salary disruptions for hundreds of thousands of government employees, teachers, and health-care workers, and has imposed limitations on the operations of international aid groups in the country.
“The banking system is totally paralyzed. The central bank is not operating,” according to Robert Mardini, director general for the International Committee of the Red Cross as cited by SIGAR.
Mardini said that his organization is instead paying 10,000 doctors and nurses via the informal hawala money-transfer system.
This has also contributed to a worsening domestic credit market. In the absence of international support, banks have ceased extending new credit to small- and medium-sized enterprises.
In recent months, the increased supply of US dollars from humanitarian channels, averaging around $150 million per month, has helped stabilize the value of the afghani.
However, these humanitarian channels are viewed as stopgap measures that are an insufficient substitute for the normal functioning of a central bank, SIGAR stated.
In her March 2 statement to the UN Security Council, UNAMA head Deborah Lyons cited the “lack of access to hard currency reserves, lack of liquidity, and constraints on the central bank to carry out some of its core functions” as key challenges to reviving the Afghan economy.
Total international DAB reserves were $9.76 billion at the end of 2020, according to the most recent data available to the IMF. Of this amount, $2 billion was deposited in financial institutions in the United Kingdom, Germany, Switzerland, and the United Arab Emirates.
Some $7 billion in DAB reserve funds deposited at the Federal Reserve Bank of New York are now frozen by the US government.
Economists at New York University and the University of Chicago suggested that if central-bank reserves were placed directly with households or with other financial intermediaries, it could enhance the desired increase in liquidity.
Liquidity is a concern for households as well as for the banking system and businesses. Raising household liquidity in Afghanistan is challenged by rising unemployment, the fact that only 10–20% of Afghans have bank accounts, the uncertain status of DAB’s electronic payment system and the declining volume of market transactions as reflected in the country’s declining GDP.
SIGAR stated however that the Biden Administration is currently exploring possible avenues for disbursing $3.5 billion of the frozen assets for humanitarian relief efforts, possibly through a separate trust fund or by providing support through the United Nations or another enabling organization.
US Special Representative for Afghanistan Thomas West has stated that the $3.5 billion could alternatively contribute toward “the potential recapitalization of a future central bank [in Afghanistan] and the recapitalization of a financial system.”
The move to freeze assets meanwhile sparked outrage throughout Afghan society, including among leaders unaffiliated with the IEA.
Shah Mehrabi, a long-time member of the Afghan central bank’s board of governors, called the decision “unconscionable” and “short-sighted.”
Mehrabi argued that the central bank should be treated as independent of the IEA regime, and that depriving the bank of its reserves could lead to “total collapse of the banking system” and further hurt millions of Afghans suffering in the economic and humanitarian crises.
The order to freeze assets has also drawn criticism from US and international policy analysts, human rights groups, lawyers, and financial experts, SIGAR reported.
Analysts have expressed concern over both the seizure of the reserves and the reported proposals to provide those funds in the form of humanitarian assistance.
Paul Fishstein of NYU’s Center on International Cooperation argues that the executive order gave inadequate attention to the macroeconomic collapse of the country.
Fishstein said the release of the central bank’s reserves could instead be used to restore unnecessary exchange rate stability and ease the liquidity crisis.
William Byrd of the US Institute of Peace (USIP) said that even if only half of DAB’s total reserves are devoted to support its basic activities as a central bank, it would “provide an opportunity to make a start toward stabilizing the economy and private sector.”
Business
Afghanistan–Tajikistan trade grows by 31 percent

New data from Tajikistan’s Statistics Agency shows a significant rise in trade volume between Afghanistan and Tajikistan in the first five months of 2025.
According to the report, bilateral trade reached nearly $40 million, marking a 31.1% increase compared to the same period in the previous year. During this time, Tajikistan exported approximately $32 million worth of goods to Afghanistan, while importing $8 million from its southern neighbor.
Tajikistan’s main exports to Afghanistan include electricity, construction materials, cement, coal, mineral fertilizers, and food products. Meanwhile, Afghanistan exports agricultural products such as figs, raisins, and cotton to Tajikistan, along with carpets and precious or semi-precious stones.
Despite strained political relations between the Islamic Emirate of Afghanistan and the government of Tajikistan, economic cooperation between the two countries has continued. Tajikistan remains the only neighboring country that has not accepted IEA diplomats at the Afghan embassy in Dushanbe.
Nevertheless, officials from the Islamic Emirate have stated that dialogues are underway to improve political relations between Kabul and Dushanbe.
Business
Ghulam Khan border crossing in Khost temporarily reopened after two-week closure
The crossing had been closed by Pakistani authorities nearly two weeks ago without any formal explanation.

The Ghulam Khan border crossing in Afghanistan’s southeastern Khost province has been officially reopened for a period of 15 days, following a two-week closure that disrupted trade between Afghanistan and Pakistan, according to Border Police spokesperson Abidullah Uqab Farooqi.
Farooqi stated on Tuesday, July 16, that the temporary reopening would allow for the resumption of cargo transportation and trade activities between traders and freight companies. He emphasized that the move will help prevent further spoilage of perishable goods that had been stuck at the border.
Ghulam Khan is considered one of the most critical trade gateways between Afghanistan and Pakistan. It plays a vital role in the transportation of essential goods and raw materials between the two neighboring countries.
The crossing had been closed by Pakistani authorities nearly two weeks ago without any formal explanation. The abrupt shutdown caused significant disruptions for Afghan traders and truck drivers, with many reporting financial losses due to delayed shipments and rotting goods.
While the border has now reopened temporarily, Pakistani officials have yet to issue any formal statement regarding either the initial closure or the rationale behind its reopening.
Business
Afghanistan-Pakistan trade surges 25% to nearly $2 billion in 2024
The growth was largely driven by a 31 percent increase in Pakistani exports, which rose to $1.391 billion, while imports from Afghanistan grew by 13 percent, reaching $607 million

Bilateral trade between Afghanistan and Pakistan rose by 25 percent in the fiscal year 2024–25, reaching $1.998 billion, up from $1.603 billion the previous year, a Pakistani official told local media.
The growth was largely driven by a 31 percent increase in Pakistani exports, which rose to $1.391 billion, while imports from Afghanistan grew by 13 percent, reaching $607 million, The Nation reported.
Among Pakistan’s top-performing exports was sugar, which saw a staggering 4,333 percent increase, climbing from $5.93 million in FY2023–24 to $262.77 million.
Other key exports included construction materials, textiles, and pharmaceuticals.
However, some products—including rice, eggs, salts, electrical equipment, and footwear—recorded year-on-year declines of between 17 and 99 percent.
On a monthly basis, June 2025 marked a strong finish, with exports rising 90 percent year-on-year to $142 million, up from $75 million in June 2024. Imports, however, fell by 29 percent year-on-year and by 54 percent compared to May 2025.
Overall, June 2025 bilateral trade stood at $158 million, reflecting a 62 percent year-on-year increase and a 9 percent rise month-on-month, suggesting momentum in trade ties despite fluctuations in certain import categories.
Analysts attribute the surge to improved regional connectivity, enhanced trade facilitation, and greater demand for Pakistani goods in Afghan markets.
-
Science & Technology4 days ago
Camel tears show promise in neutralizing snake venom, study finds
-
World5 days ago
Zelenskiy names new prime minister, taps official who spearheaded US minerals deal
-
Latest News5 days ago
UN envoy urges urgent global response as Afghan returns surge
-
Latest News5 days ago
US appeals court temporarily upholds protected status for Afghans
-
Sport4 days ago
AFPL: Sadaqat 2–1 Zaitoon, Noorzad 2–1 Arya Forj
-
Business4 days ago
Ghulam Khan border crossing in Khost temporarily reopened after two-week closure
-
Latest News5 days ago
IEA expresses condolences over death of Pashto poet Matiullah Turab
-
World4 days ago
Trump says Zelenskiy should not target Moscow