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UN warns of ‘colossal’ collapse of Afghan banking system

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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 leader urges Kabul University graduates to uphold Islamic values

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Islamic Emirate leader Sheikh Hibatullah Akhundzada has urged Kabul University graduates to uphold Islamic values and Sharia laws under all circumstances and not abandon their religion.

A Ministry of Higher Education official read out Akhundzada’s message on Wednesday at a graduation ceremony for around 2,500 students from Kabul University.

In his message, Akhundzada called on graduates to respect their parents and teachers and to uphold piety, sincerity, honesty and trustworthiness in their daily lives.

He also urged university teachers to provide students with proper religious, intellectual, moral, academic and professional education, promote unity and focus on their moral development.

According to the Ministry of Higher Education, around 2,500 students graduated in 2026 from 80 departments across 22 faculties of Kabul University.

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US State Department: Afghanistan fails to meet minimum fiscal transparency standards

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The U.S. Department of State says Afghanistan’s ministries and other public-sector institutions failed to meet any of the minimum requirements for fiscal transparency during the review period.

In its 2026 Fiscal Transparency Report, released Tuesday, the State Department said no Afghan entity had published an executive budget proposal or an end-of-year report within a reasonable timeframe.

The report said that in the absence of a publicly available budget, there was no confirmation of government expenditures made to support public services. It also said Afghan institutions had not published timely information on public-sector debt obligations.

According to the report, publicly available revenue and expenditure figures did not correspond to actual revenues and expenditures, based on information gathered through contacts and the government’s inability to service public-sector debts.

However, some state-owned enterprises independently published information on their revenues and expenditures.

The State Department also said an entity calling itself the Supreme Audit Office, which announced that it would begin operating in 2022, had not clarified the legal basis for its activities and did not publish any audits or audit findings during the review period.

The report further noted that the IEA did not make public the budgets of their “military” and intelligence services.

The U.S. State Department recommended that Afghan ministries and public institutions improve fiscal transparency by publishing reliable budget documents on time, following internationally accepted budgeting principles, strengthening oversight of off-budget accounts, and making information on public-sector debt publicly available.

It also called for clearer laws governing natural-resource extraction and public procurement, as well as ensuring that any supreme audit institution operates independently and meets international standards.

Meanwhile, the Islamic Emirate’s spokesperson, Zabihullah Mujahid, said Afghanistan’s budget does not belong to any other country, and therefore there is no obligation to provide information to others about how it is spent.

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FAO warns water shortages and heat put Afghanistan’s agriculture under pressure

FAO assessed current conditions and prospects using climate forecasts, remote-sensing data and consultations with farming communities across all 34 provinces.

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The Food and Agriculture Organization of the United Nations (FAO) has warned that water shortages and above-average temperatures are placing increasing pressure on summer crops and grazing across Afghanistan.

In its August 2026 outlook for Afghanistan’s 2026/27 agricultural season, FAO assessed current conditions and prospects using climate forecasts, remote-sensing data and consultations with farming communities across all 34 provinces.

The agency said persistent water shortages, combined with high temperatures, are affecting agricultural conditions during the summer season and increasing pressure on crops and livestock.

FAO also warned that persistently high fertilizer prices could limit farmers’ ability to invest in the upcoming winter wheat season, potentially affecting production prospects.

Looking ahead, the report says a strengthening El Niño and the possible development of a positive Indian Ocean Dipole could bring above-average precipitation during winter and spring.

Such conditions could improve water availability and boost prospects for agricultural production, but FAO cautioned that heavier rainfall could also increase the risk of floods, landslides, crop damage and livestock losses.

The agency said the latest outlook highlights the need for continued monitoring, anticipatory action and timely, practical climate and agricultural advisories to help farmers and livestock owners prepare for changing conditions.

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