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UN warns of ‘colossal’ collapse of Afghan banking system
The United Nations on Monday pushed for urgent action to prop up Afghanistan’s banks, warning that a spike in people unable to repay loans, lower deposits and a cash liquidity crunch could cause the financial system to collapse within months.
In a three-page report on Afghanistan’s banking and financial system seen by Reuters, the U.N. Development Programme (UNDP) said the economic cost of a banking system collapse – and consequent negative social impact – “would be colossal.”
An abrupt withdrawal of most foreign development support after the Islamic Emirate of Afghanistan (IEA) seized power on August 15 from Afghanistan’s Western-backed government has sent the economy into freefall, putting a severe strain on the banking system which set weekly withdrawal limits to stop a run on deposits.
“Afghanistan’s financial and bank payment systems are in disarray. The bank-run problem must be resolved quickly to improve Afghanistan’s limited production capacity and prevent the banking system from collapsing,” the UNDP report said.
Finding a way to avert a collapse is complicated by international and unilateral sanctions on IEA leaders, Reuters reported.
“We need to find a way to make sure that if we support the banking sector, we are not supporting Taliban (IEA),” Abdallah al Dardari, head of UNDP in Afghanistan, told Reuters.
“We are in such a dire situation that we need to think of all possible options and we have to think outside the box,” he said. “What used to be three months ago unthinkable has to become thinkable now.”
Afghanistan’s banking system was already vulnerable before the IEA came to power. But since then development aid has dried up, billions of dollars in Afghan assets have been frozen abroad, and the United Nations and aid groups are now struggling to get enough cash into the country.
The UNDP’s proposals to save the banking system include a deposit insurance scheme, measures to ensure adequate liquidity for short- and medium-term needs, as well as credit guarantees and loan repayment delay options.
“Coordination with the International Financial Institutions, with their extensive experience of the Afghan financial system, would be critical to this process,” UNDP said in its report, referring to the World Bank and International Monetary Fund.
The United Nations has repeatedly warned since the IEA took over that Afghanistan’s economy is on the brink of a collapse that would likely further fuel a refugee crisis. UNDP said that if the banking system fails, it could take decades to rebuild.
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Islamic Emirate strongly condemns mosque bombing in Islamabad
The Ministry of Foreign Affairs of the Islamic Emirate of Afghanistan has strongly condemned Friday’s suicide bombing at a Shi’ite mosque in Islamabad, the capital of Pakistan, which left 31 people dead and 179 others wounded.
Abdul Qahar Balkhi, spokesperson for the Ministry of Foreign Affairs, said in a statement that the Islamic Emirate considers such attacks—which violate the sanctity of religious rites and mosques and target worshippers and civilians—to be contrary to Islamic and human values.
The Islamic Emirate also expressed sympathy with the families of the victims and wished a speedy recovery to the wounded.
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Suicide bomber kills 31 in Shi’ite mosque in Pakistan’s capital
A suicide bomber killed at least 31 people and wounded nearly 170 others during Friday prayers at a Shi’ite Muslim mosque in Pakistan’s capital, Islamabad, Reuters reported, citing police and government officials.
Images from the site showed bloodied bodies lying on the carpeted mosque floor surrounded by shards of glass, debris and panicked worshippers.
Dozens more wounded were lying in the gardens of the Khadija Tul Kubra Imambargah, in a semi-urban area on the outskirts of Islamabad, as people called for help.
Bombings are rare in the heavily guarded capital, although Pakistan has been hit by a rising wave of militancy in the past few years.
“The death toll in the blast has risen. A total of 31 people have lost their lives. The number of wounded brought to hospitals has risen to 169,” Deputy Commissioner Islamabad Irfan Memon said in a statement.
Two police officials said the attacker was stopped at the gate of the mosque before detonating the bomb. They asked not to be identified as they were not authorized to speak to the media.
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Central Asian leaders are urging Pakistan to improve Afghanistan policies, says Khalilzad
Former U.S. envoy Zalmay Khalilzad has highlighted the strategic importance of Pakistan’s relationship with Afghanistan, noting that visiting Central Asian leaders are likely encouraging Islamabad to strengthen its policies toward Kabul.
In a post on X, Khalilzad emphasized that Central Asian nations have a strategic interest in access to Pakistan and beyond, including the sea, to support their trade and connectivity projects. He pointed out that these countries are particularly focused on developing railways, pipelines, telecommunications, and electricity networks linking Central Asia and Pakistan—a move he said would also serve Pakistan’s interests.
“Of course, Afghanistan’s role is vital to the goal of regional connectivity and development,” Khalilzad said. “Stability in Afghanistan and good Pakistan/Afghanistan relations are the absolute prerequisite.”
He suggested that the Central Asian leaders visiting Islamabad are urging improvements in Pakistan’s Afghanistan policies and expressed hope that Pakistani authorities would listen to these recommendations.
Pakistani officials have repeatedly claimed that Afghanistan-based militants have carried out recent attacks in Pakistan. Kabul denied the charge, saying it could not be held responsible for security inside Pakistan.
Trade between the two countries remains suspended following a deadly clash near the Durand Line in October.
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