Afghan liquidity crisis
October 13, 2021 - Plans to avert a crisis in Afghanistan could see boxes of cash flown into Kabul by the United Nations for distribution to the poor, following the freezing of offshore reserves and an abrupt end to foreign aid.
The price of food staples, such as rice, cooking oil and flour, have increased by 30-60 per cent since the Taliban took over, according to the United Nations Development Programme.
A UNDP report published in September says GDP could decline 13.2 per cent by June 2022 -- a worst-case scenario. A fall of some $2.6 billion would send almost the entire population (97 per cent) of 38 million into poverty, a further 10.6 million since 2020.
Officials reportedly plan to send $200 in direct cash for distribution through banks to individual Afghans without involving the Taliban.
Most of the country’s central bank assets, Da Afghanistan Bank (DAB), are held abroad, putting most of them beyond the Taliban’s reach, according to Ajmal Ahmady, the former head of DAB.
The most recent financial statement posted on June 21 shows DAB holds total assets of about US$8.64 billion, including gold bars held by the Federal Reserve Bank of New York, worth 102,744,712 Afghanis or $1.13 billion.
DAB’s June statement also states the bank-owned investments worth $5.37 billion, mostly U.S. Treasury bonds and bills, and $316.83 million in foreign currency cash reserves.
Afghanistan is also eligible for an allocation of about $455 million from the International Monetary Fund’s Special Drawing Rights currency reserve.
“As per international standards, most assets are held in safe, liquid assets such as Treasuries and gold,” Ahmady said on Twitter. Ahmady confirmed the U.S. Fed, Swiss Bank for International Settlement, World Bank, or other bank accounts held the assets.
($1 = 90.85 Afghanis)