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Running out of dollars, Afghan banks ask Taliban for more cash

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An Afghan man counts his cash after the Afghan foreign money confronted devaluation in Kabul, Afghanistan, September 4, 2021. WANA (West Asia Information Company) by way of REUTERS

  • Greenback money crunch deepens in Afghanistan – sources
  • Banks face closure as reserves are sapped – sources
  • Hobbled monetary system might worsen destiny of Afghans

FRANKFURT/MUMBAI, Sept 15 (Reuters) – Afghanistan’s banks are operating out of {dollars}, and will have to shut their doorways to prospects except the Taliban authorities releases funds quickly, three individuals with direct information of the matter mentioned.

The money squeeze threatens to upend the nation’s already battered financial system, largely depending on tons of of tens of millions of {dollars} shipped by the USA to the central financial institution in Kabul that make their option to Afghans via banks.

One month for the reason that Taliban captured the capital of Kabul, bankers concern fewer {dollars} might inflate the price of meals or electrical energy and make it tougher to afford imports, spelling additional distress for Afghans.

Though the money crunch has lasted weeks, the nation’s banks have in current days repeatedly underlined their considerations to the brand new authorities and central financial institution, two of the individuals mentioned.

Banks have already pared again companies and imposed weekly $200 payout limits amid a run on financial savings, with lengthy queues outdoors branches as individuals attempt to pay money for {dollars}.

The hobbling of the central financial institution, whose international reserves have been frozen after the Taliban took cost, might additionally hamper efforts of the worldwide group to assist Afghans.

Industrial banks have appealed to the central financial institution in current days to liberate the provision of U.S. {dollars}.

However they’ve but to get a solution to their requests and are involved that the federal government’s vaults, within the presidential palace and headquarters of the central financial institution, are so empty that it might be in little place to assist.

“We’re left with liquidity of some days’ funds solely,” mentioned one of many individuals with direct information of the matter. “If the federal government doesn’t react to the scenario instantly, there will likely be demonstrations and violence.”

In an announcement on its web site on Wednesday, the central financial institution’s performing governor mentioned banks have been steady.

“The banks are utterly safe,” he mentioned, including that business banks normally saved 10% of their capital as money and that these in Afghanistan, on common, held 50% as money.

The central financial institution did, nevertheless, urge Afghans to make use of the native foreign money. It additionally posted {a photograph} of money it mentioned was a part of a haul of tens of millions of {dollars} and gold bars retrieved from former authorities officers.

BLEAK PICTURE

Senior worldwide officers who have been overseeing the Afghan financial system painted a bleaker image in a confidential report written in current days and despatched to help companies.

“The liquidity disaster … has disrupted provide chains and halted circulate of cash and items,” mentioned the officers within the report seen by Reuters, warning that the financial system might shrink by a 3rd if the banking disaster was mishandled.

“A number of companies … are unable to pay … suppliers, and a whole lot of merchants are unable to make worldwide funds … to import meals. NGOs … are unable to pay their workers salaries.”

It’s, nevertheless, unclear how a lot money the federal government has to launch. “The Taliban inherited a central financial institution with depleted USD and AFN money reserves,” the report mentioned.

Some banks have been stunned when the central financial institution seemed to be wanting {dollars} across the time of the autumn of Kabul, as a result of they’d understood it had substantial greenback reserves in its vaults, three of the sources Reuters spoke to mentioned.

The pace of the Taliban’s victory, hastened by the ultimate withdrawal of international troops from the nation, took even them unexpectedly and compromised the possibilities of a easy transition.

Ajmal Ahmadi, the earlier central financial institution governor who fled the nation, mentioned earlier that the majority of central financial institution’s roughly $10 billion have been held overseas. He didn’t reply to requests for remark.

Russia’s embassy in Kabul mentioned ousted Afghan President Ashraf Ghani fled the nation with 4 vehicles and a helicopter full of money and needed to go away some cash behind as it will not all slot in, the RIA information company reported.

Ghani denies taking the cash.

Donors have pledged greater than $1.1 billion to assist Afghanistan, the place poverty and starvation have spiralled for the reason that Taliban took energy, and international support has dried up.

Further reporting by Tom Arnold in London and James Mackenzie in Milan; writing By John O’Donnell; Modifying by Mike Collett-White

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