The United States Institute of Peace (USIP) has said in a new report that Afghanistan’s banking system remains largely dysfunctional.

This report evaluated the Afghan banking system as inefficient. It said that the lack of access to Afghanistan’s foreign exchange reserves and the obstacles in the way of printing banknotes add to these problems.

USIP has warned that the decrease in cash and humanitarian aid will have a destructive effect on the economy and financial system of Afghanistan.

The report highlights systemic challenges within Afghanistan’s banking sector, including a backlog of bad loans and limited depositor access to funds due to withdrawal restrictions imposed by Da Afghanistan Bank (DAB).

“Afghanistan’s precarious economy is facing a new set of multidimensional risks as humanitarian aid — delivered in massive shipments of U.S. cash dollars — shrinks rapidly amid competing demands from other crises around the world. The dollar inflows, moved under U.N. auspices, have helped stabilize the Afghan economy, cover its mammoth trade deficit, and inject monetary liquidity into commerce,” the report said.

“With much smaller cash infusions, in line with a general reduction in aid, the suffering of Afghanistan’s poverty-stricken population is likely to increase,” USIP has warned.

The author of this report has suggested that, contrary to the confrontation between the countries of the world and the Islamic Emirate on the issue of women’s rights, other countries and international organizations can play a supporting role in facilitating the printing of more Afghan banknotes and allow the use of investment income from the Afghanistan Fund in Switzerland to stabilize the macroeconomics.

Da Afghanistan Bank (DAB) has not yet reacted to this report, but it has already emphasized that it will continue its efforts by implementing reasonable monetary policies that lead to maintaining the value of the afghani against other currencies.

DAB also stressed it will pay special attention to the strength of the banking sector and bring reforms and improvements as much as possible in this sector.