Afghanistan’s cash problem

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Ajmal Ahmadi, the former governor of Afghanistan’s central bank, had a front-line seat in the country’s recent economic development. So he knows the financial risk the new government – and the people of Afghanistan – is facing to anyone.

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running news: one in Conversation With the Atlantic Council on Friday, Ahmadi shared his internal perspective on concerns for the future of the Afghan financial system and economy. Front and center: Lack of hard posture.

why it matters: Withdrawal of money from the country is accelerating a humanitarian crisis.

  • Due to long-standing international sanctions against the Taliban, the new Taliban-controlled government does not have access to Afghanistan’s central bank reserves held abroad, and the US has halted shipments of dollars to the country.
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what is he saying: Afghanistan’s lack of its own currency, the afghani, may be made worse by the fact that the country itself cannot print money. There is no banknote printer within its borders.

  • Instead, Afghanistan had contracted with companies in Poland and France, to name a few, to print new Afghanis, Ahmadi said.
  • But European companies are also likely to close business with the government in light of the sanctions.

Taliban will Be in the market for another printer. Ahmadi said private companies living in countries with a friendly attitude towards the new Afghan government still do not want to escape the sanctions.

  • One possibility: neighboring Pakistan Is A banknote printer.
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state of play: Amid the cash crunch, the government has set a limit on how many Afghan individuals can withdraw from banks. Ahmadi said that often, banks are not able to give even that minimum amount to the customers.

  • In that void, the Pakistani rupee could become a common medium of exchange, now that it has been accepted for trade in Afghanistan, he explained.

what to watch: The cash crunch and the devaluation of the Afghani could push up the inflation rate.

  • Ahmadi said it could affect the Afghan population the most when it comes to foods such as wheat and flour, for which the country is dependent on imports.

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