Afghan Afghani, Taliban-ruled Afghanistan’s currency has become the world’s best-performing currency this quarter as reported by data released by Bloomberg.
Afghan Afghani’s Performance: Taliban-ruled Afghanistan’s currency has become the world’s best-performing currency this quarter, according to data compiled by Bloomberg. The Afghan Afghani has climbed around 9% this quarter led by billions of dollars from humanitarian aid and rising trade with Asian neighbours. Taliban’s move to ban the use of dollars and Pakistani rupees in local transactions has also helped boost the currency.
Main Factors Behind Afghan Afghani’s Rise
This is indeed amazing and dare say unbelievable for a country that is one of the poorest countries in the world combined with dismal human rights records, said to be the worst globally. The main factors behind this optimistic, positive development are the billions of dollars from humanitarian aid and rising trade with Asian neighbors as the Bloomberg data suggests, propelling Afghanistan’s currency to the top of global rankings this quarter.
The Afghan Afghani received a boost also with the currency controls, cash inflows, and other remittances that helped it climb around 9 percent this quarter, outpacing the likes of the Colombian peso’s 3 percent gain, the data compiled by Bloomberg shows. The Afghan Afghani is up about 14 percent for the year, putting it third on the global list, behind the currencies of Colombia and Sri Lanka.
Yet the cutting down of the currency’s losses seen after regime change also belies the dramatic upheaval that persists on the ground with Afghanistan largely cut off from the global financial system because of sanctions.
Smuggling Of Dollars Into Afghanistan From Pakistan
Another major factor has been the smuggling of dollars into Afghanistan from Pakistan which has given a lifeline to the Taliban in previous months. Da Afghanistan Bank, the country’s central bank, is auctioning up to $16 million almost every week to support the currency, said spokesman Hassibullah Noori.
As pressure on the currency eased, the central bank has increased the limit for dollar withdrawals to $40,000 per month for businesses from $25,000 and $600 a week for individuals from $200 two years ago. The Afghan Afghani traded around 78.50 per dollar on Monday.
Afghanistan’s Troubled Past
The previous stint of Taliban in power from 1996 to 2001 was marred by controversies, violence, interstate fighting, purported support to the global terrorist organisation al-Qaeda, and providing a safe haven to its top leadership including Osama bin Laden and Ayman al-Zawahiri, the top accused in the 9/11 terror attacks in the USA following which the Taliban were overthrown by the American forces.
US Withdraws In 2021
In the second stint following the retreat and subsequent withdrawal of NATO forces led by the USA, the Taliban took control of the country and unleashed a series of measures to keep the Afghan Afghani, the Afghanistan currency, in a stronghold, including banning the use of dollars and Pakistani rupees in local transactions and tightening restrictions on bringing greenbacks (US paper dollars) outside the country. It has made online trading illegal and threatened those who violate the rules with imprisonment.
World Bank Report On Afghanistan
A World Bank report states that unemployment is rampant, two-thirds of households struggle to afford basic items, and inflation has turned into deflation. Planeloads of US dollars arrived almost weekly from the United Nations to support the poor, some of up to $40 million, for at least 18 months since the end of 2021.
“The hard currency controls are working, but the economic, social, and political instability will render this rise in the currency as a short-term phenomenon,” said Kamran Bokhari, an expert in Middle Eastern, Central and South Asian affairs at the Washington-based New Lines Institute for Strategy & Policy.
(With agency inputs)