Afghanistan Bank Governor on Economic Prospects

Ajmal Ahmady, the acting Governor of the Central Bank of Afghanistan, Da Afghanistan Bank (DAB) in the ousted government has continued to post a series of tweets about events in the country. He answered questions about the country’s reserves, future relations with the IMF, relations with the US, management of the budget and deficit and the local banking sector.

1. Ajmal Ahmady @aahmady This thread is to clarify the location of DAB (Central Bank of Afghanistan) international reserves.

I am writing this because I have been told Taliban are asking DAB staff about location of assets. If this is true – it is clear they urgently need to add an economist on their team.

2. First, total DAB reserves were approximately $9.0 billion as of last week.

But this does not mean that DAB held $9.0 billion physically in our vault. As per international standards, most assets are held in safe, liquid assets such as Treasuries and gold.

3. The major investment categories include the following assets (all figures in billions):

(1) Federal Reserve = $7.0

  • U.S. bills/bonds: $3.1
  • WB RAMP assets: $2.4
  • Gold: $1.2
  • Cash accounts: $0.3

(2) International accounts = 1.3

(3) BIS = $0.7

4. Interesting note was that the IMF had approved a SDR650 billion allocation recently.

DAB was set to receive approximately $340 million on August 23rd. Not sure if that allocation will now proceed with respect to Afghanistan.

5. Given Afghanistan’s large current account deficit, DAB was reliant on obtaining physical shipments of cash every few weeks.

The amount of such cash remaining is close to zero due a stoppage of shipments as the security situation deteriorated, especially during the last few days.

6. On Friday morning, I received a call notifying me that there would be no further USD shipments (we were expecting one on Sunday, the day Kabul fell).

On Saturday, banks placed very large USD bids as customer withdrawals accelerated.

7. For the first time, I therefore had to limit USD access to both banks and dollar auctions to conserve remaining DAB dollars.

We also put out a circular placing maximum withdrawal limits per customer. During the day, afghani depreciated from 81 to almost 100 and then back to 86.

8. On Saturday at noon, I met with President Ghani to explain that the expected Sunday dollar shipment would not arrive.

On Saturday evening, President Ghani spoke with Secretary Blinken to request dollar shipments to resume. In principle it was approved.

9. Again, seems ridiculous in retrospect, but did not expect Kabul to fall by Sunday evening.

In any case, the next shipment never arrived. Seems like our partners had good intelligence as to what was going to happen.

10. Please note that in no way were Afghanistan’s international reserves ever compromised.

Assets are all held at Fed, BIS, RAMP, or other bank accounts. Easily audited. We had a program with both IMF and Treasury that monitored assets. No money was stolen from any reserve account.

11. Given that the Taliban are still on international sanction lists, it is expected (confirmed?) that such assets will be frozen and not accessible to Taliban.

I can’t imagine a scenario where Treasury/OFAC would given Taliban access to such funds.

12. Therefore, we can say the accessible funds to the Taliban are perhaps 0.1-0.2% of Afghanistan’s total international reserves. Not much.

Without Treasury approval, it is also unlikely that any donors would support the Taliban Government.

13. I believe local banks have told customers that they cannot return their dollars – because DAB has not supplied banks with dollars.

This is true. Not because funds have been stolen or being held in vault, but because all dollars are in international accounts that have been frozen.

14. Taliban should note this was in no way the decision of DAB or its professional staff.

It is a direct result of US sanctions policy implemented by OFAC. Taliban and their backers should have foreseen this result. Taliban won militarily – but now have to govern. It is not easy.

15. Therefore, my base case would be the following:

  • Treasury freezes assets
  • Taliban have to implement capital controls and limit dollar access
  • Currency will depreciate
  • Inflation will rise as currency pass through is very high
  • This will hurt the poor as food prices increase.

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