Billions of dollars from humanitarian aid and rising trade with Asian neighbors has propelled Afghanistan’s currency to the top of global rankings this quarter — an unusual spot for a poverty-stricken country with one of the world’s worst human rights records.
The ruling Taliban, which seized power two years ago, has also unleashed a series of measures to keep the afghani in a stronghold, including banning the use of dollars and Pakistani rupees in local transactions and tightening restrictions on bringing greenbacks outside the country. It has made online trading illegal and threatened those who violate the rules with imprisonment.
The currency controls, cash inflows and other remittances have helped the afghani climb around 9 percent this quarter, outpacing the likes of the Colombian peso’s 3 percent gain, data compiled by Bloomberg show. The 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 paring 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.
Unemployment is rampant, two thirds of households struggle to afford basic items and inflation has turned into deflation, according to a World Bank report. 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.
Meanwhile, dollars being smuggled into Afghanistan from Pakistan have also 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 afghani traded around 78.50 per dollar on Monday.
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