U.N. has millions in Afghanistan bank, but cannot use it

The United Nations has about $135 million in the bank in Afghanistan but is unable to use it because the Islamic Emirate-run central bank cannot convert it to the afghani currency, a senior U.N. official said on Thursday.

Abdallah al Dardari, head of the U.N. Development Programme in Afghanistan, said the United Nations had taken the U.S. dollars into the country and deposited it with the Afghanistan International Bank “with a clear promise from the central bank that fresh cash will be automatically converted to afghanis.”

“This did not happen,” he told the ACAMS Global Sanctions Space Summit, adding that UNDP itself has “$30 million stuck at AIB that I cannot convert to afghanis and without afghanis as you can imagine, we cannot implement all our programs.”

The Islamic Emirate of Afghanistan (IEA), who seized power in August, banned the use of foreign currency in a country where U.S. dollars were common.

The IEA has long been under international sanctions, which the United Nations and aid groups say are now hindering humanitarian operations in Afghanistan, where more than half the country’s 39 million people suffer extreme hunger and the economy, education and social services face collapse.

Billions of dollars in Afghan central bank reserves and foreign development aid have been frozen to prevent it from falling into IEA hands. International banks are wary of breaching sanctions, leaving the United Nations and aid groups struggling to get enough money into the country.

Liquidity is also a problem. Al Dardari told Reuters in November that while there was about $4 billion worth of afghanis in the economy, only about $500 million worth was in circulation.

The United Nations and the World Bank are discussing a possible swap facility, aid groups and U.N. officials have said.

Al Dardari said on Thursday that this would allow cash for humanitarian operations to be paid into a mechanism abroad and then afghanis could be collected “from major traders and mobile companies from inside Afghanistan.”

He also said lessons could be learned from a program in Myanmar, where electronic payment systems bypassed the central bank. Myanmar’s military have been hit with a raft of sanctions by the United States and others since a coup a year ago.