Tag: Afghanistan

UNDP warns Afghanistan banking system on brink of collapse, BFSI News, ET BFSI

Banking & Finance

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A new UN report on Monday said Afghanistan‘s banking and financial systems are on the verge of collapse following the country’s takeover by the Taliban.

“Afghanistan’s financial and bank payment systems are in disarray,” the report by UN Development Program (UNDP) said. “The bank-run problem must be resolved quickly to improve Afghanistan’s limited production capacity and prevent the banking system from collapsing.”

Soon after the Taliban assumed power in Kabul, the United States froze Afghanistan’s international reserves. This has led to a dramatic shock in the country’s financial and payment systems.

Currently, the country’s central bank could not meet deposit demands, prompting the Taliban to impose withdrawal caps of a maximum of USD 200 per week. The amount was recently increased to USD 400, Sputnik reported.

The report said that Afghanistan’s total banking system deposits fell to USD 2 billion in September from USD 2.8 billion at the end of 2020.

With the current pace and withdrawal restrictions, deposits are projected to fall to USD 1.7 billion by the end of 2021, likely leading to the collapse of Afghanistan’s banking sector, the report said.

“Without the banking sector, there’s no humanitarian solution for Afghanistan,” UNDP Resident Representative Abdallah Al Dardari said. “Do we really want to see Afghans completely isolated?”

In addition, the country’s credit market is also in decline. Total credits fell to USD 307 million in September from USD 33 billion at the end of last year.

To prevent the collapse of the country’s banking system, UNDP urged for prompt and decisive action, which includes deposit insurance for depositors, adequate liquidity for the banking system and credit guarantees and loan repayment delay options. (ANI)



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Afghans protest against closure of banks in Kabul, BFSI News, ET BFSI

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Hundreds of Afghans in Kabul protested against the closure of banks on Saturday as people have been facing serious financial difficulties due to the shutdown, a media report said.

Men and women took to the streets of Kabul on Saturday to protest against the closure of the central bank, private banks, and money-changing markets across the country, Khaama Press reported on Saturday.

People gathered at the gate of government and private banks in Kabul but they did not get their money, Khaama Press added.

The Taliban had directed all government and private banks to resume operations from Saturday.

However, bank officials have not resumed operation as they said the central bank of Afghanistan, Da Afghanistan Bank, is still closed, Khaama Press added.

Since the Taliban’s takeover of the country, banks have been closed leaving millions of people out of cash.

Employers have not paid their staff and even those who have money in their accounts cannot withdraw it.

Afghanistan’s situation is deteriorating as the Taliban took control of the country on August 15 after the fall of the government.



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Afghanistan central banker flees as currency drops to record low

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Afghanistan’s central bank governor departed the country as Taliban fighters took control of the capital, with the rising political turmoil pushing the nation’s currency to a record low.

The Afghani fell 1.7 per cent Tuesday to 83.5013 per dollar, a fourth day of decline, according to data compiled by Bloomberg. The central bank was told there would be no more dollar shipments on Friday, which curtailed its ability to supply currency and led to more panic, Governor Ajmal Ahmady wrote in a Twitter thread.

The governor got on a military plane at the airport where thousands sought to leave as the Taliban’s rapid territorial advance led to the collapse of the government. There was no evacuation plan, and President Ashraf Ghani’s departure without creating a transitional government contributed to the chaos, Ahmady wrote.

Also read: MEA sets up Afghanistan cell to coordinate repatriation

“Currency spiked from a stable 81 to almost 100 then back to 86,” the central banker wrote. “I held meetings on Saturday to reassure banks and money exchangers to calm them down.”

On Sunday, the governor left the central bank and went to the airport where he saw other government leaders. More than 300 passengers were packed into his flight, though it had no fuel or pilot, he wrote. “It did not have to end this way. I am disgusted by the lack of any planning by Afghan leadership,” he wrote.

The turmoil in Afghanistan spilled over into markets in Pakistan. Sovereign dollar bonds due 2031 for Pakistan dropped 1.8 cents on Monday, the biggest decline since the government priced the notes in March. Pakistani dollar bonds were the biggest losers in Asia on Monday, according to a Bloomberg Barclays index. The notes rose 0.2 cents on the dollar on Tuesday to 100.5 cents.

Also read: US President says he stands ‘squarely behind his decision’ to withdraw troops from Afghanistan

Investors are concerned over any impact on law and order in Pakistan, and whether “global forces will try to isolate Pakistan” due to its alleged support of the Taliban, said Abdul Kadir Hussain, the head of fixed-income asset management at Dubai-based Arqaam Capital.

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