Exclusive Afghan central bank ran out of dollar stocks before Kabul fell – document
FRANKFURT / MUMBAI (Reuters) – The Afghan central bank depleted most of its U.S. dollar liquidity reserves in the weeks leading up to the Taliban takeover of the country, according to an assessment prepared for Afghanistan’s international donors, exacerbating the current economic crisis.
The confidential two-page brief, written earlier this month by senior international economic officials for institutions such as the World Bank and the International Monetary Fund, said the country’s severe liquidity shortage began before the Taliban took over. control of Kabul.
He criticized the way former central bank leaders handled the crisis in the months leading up to the Taliban’s conquest, including decisions to auction unusually large amounts of US dollars and transfer money from Kabul. to provincial branches.
“Foreign exchange (foreign exchange) reserves in the coffers of the CB (central bank) in Kabul are exhausted, the CB cannot meet (…) demands for liquidity,” said the report, viewed by Reuters.
“The biggest source of the problem is the mismanagement of the central bank before the Taliban takeover,” he added.
Shah Mehrabi, chairman of the central bank’s audit committee that helped oversee the bank before the Taliban took power and is still in office, defended the central bank’s actions, saying it was trying to ‘prevent a rush on the local Afghan currency.
The extent of the cash shortage can be seen on the streets of Afghan cities, where people have been lining up for hours to withdraw their dollar savings within strict limits on how much they can withdraw.
Even before the shock of the collapse of the Western-backed government, the economy was struggling, but the return of the Taliban and the abrupt end of billions of dollars in foreign aid left it in deep crisis.
The prices of basic commodities like flour have skyrocketed as work has dried up, leaving millions of people hungry as winter approaches.
THE AID DRIES UP
Under the previous government, the central bank relied on $ 249 million in cash shipments, delivered roughly every three months in boxes of bound $ 100 bills and stored in the vaults of the central bank and the presidential palace, according to the report. three people with direct knowledge of the matter. .
That money has dried up as foreign powers hesitate to deal directly with the Taliban, who have fought against foreign troops and the ousted government. Thousands of people – many of them civilians – have died.
The central bank, which plays a key role in Afghanistan as it distributes aid from countries like the United States, said on Wednesday it had finalized a plan to meet the country’s foreign exchange needs. He gave no details.
The tightening of currencies makes it difficult for the Taliban to meet basic needs, including paying for electricity or dispersing the salaries of government workers, many of whom have not been paid for months.
Afghanistan’s roughly $ 9 billion offshore reserves were frozen as soon as the Taliban captured Kabul, leaving the central bank only with money in its coffers.
According to the report, the central bank auctioned $ 1.5 billion between June 1 and August 15 to local forex traders, which it said was “surprisingly high.”
“As of August 15, the Central Bank had an outstanding liability of $ 700 million and Afghans 50 billion ($ 569 million) with commercial banks,” he said, adding that this had been a major factor. to empty his chests.
Afghan central bank official Mehrabi, however, said that although nearly $ 1.5 billion in auctions were announced, the actual amount sold was $ 714 million.
He said the central bank had “continued its currency auctions to reduce depreciation and inflation.”
LACK OF MONEY?
The report also questioned a decision by the central bank to shift some of its reserves to provincial branches, putting it at risk as Taliban militants made strides across the country from late 2020 in the prospect of their victory.
He said about $ 202 million was kept in those branches at the end of 2020, up from $ 12.9 million in 2019, and that the money had not been moved as the provinces began to fall into the provinces. hands of the insurgents.
“Money was reportedly lost (stolen) from ‘some’ provincial branches,” the report said, without specifying how much.
Mehrabi said the central bank was investigating money “stolen” from three of its branches, but not by the Taliban. He gave no further details.
Former central bank governor Ajmal Ahmady, who left the country the day after Kabul fell, did not respond to emails and other messages seeking comment on his actions and those of the bank in the months leading up to the return to power of the Taliban.
Ahmady has said on Twitter in recent weeks that he has been doing his best to handle the situation and blamed any lack of liquidity on the freezing of central bank assets abroad.
In his statements, he also said that the central bank had managed the economy long before the fall of Kabul and that he felt bad to leave staff behind but feared for his safety. He said no money was stolen from any reserve account.
($ 1 = 87,8,700 Afghans)
Additional reports by James Mackenzie; written by John O’Donnell; Editing by Mike Collett-White