Tag Archives: Afghanistan

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.

Central Banker on the fall of Afghanistan, 2021

Ajmal Ahmady, the Acting Governor of the Central Bank of Afghanistan, Da Afghanistan Bank (DAB) posted a series of tweets about events in the country and at the Kabul airport.

Extracts:

1/The collapse of the Government in Afghanistan this past week was so swift and complete – it was disorienting and difficult to comprehend.

2/Although much of the rural areas fell to the Taliban over the past few months, the first provincial capital to fall was just 1 week and two days ago!

  • This is how the events seemed to proceed from my perspective as Central Bank Governor.
  • On Friday August 6th, Ziranj fell. Over the next 6 days, a number of other provinces fell – particularly in the north.

3/There were multiple rumors that directions to not fight were somehow coming from above.

  • Seems difficult to believe, but there remains a suspicion as to why ANSF left posts so quickly. There is something left unexplained

4/Currency volatility and other indicators had worsened, but DAB were able to stabilize the macroeconomic environment relatively well during the last week – given the deteriorating security environment.

5/I attended my normal (Thursday) meetings. Ghazni fell in the morning.

  • I left work, and by the time I went home – Herat, Kandahar, and Baghdis also fell. Helmand was also under serious attack

6/Friday – we received a call that given the deteriorating environment, we wouldn’t get any more dollar shipments.

  • People spread rumors that I had fled on Friday.
  • On Saturday, DAB had to supply less currency to the markets on Saturday, which further increased panic.

7/Currency spiked from a stable 81 to almost 100 then back to 86. I held meetings on Saturday to reassure banks and money exchangers to calm them down. I can’t believe that was one day before Kabul fell

8/On Saturday night, my family called to say that most government had already left. I was dumbfounded.

  • A security assessment accurately forecast Taliban arrival to Kabul within 36 hours and its fall within 56 hours
  • I got worried & purchased tickets for Monday as a precaution

9/On Sunday I began work. Reports throughout morning were increasingly worrisome. I left the bank and left deputies in charge. Felt terrible about leaving staff.

  • But arrived at airport & saw that Mohaqeq, Rahmani, Massoud, etc were already there! Head of parliament seems content

10/Saw VP Danish leaving – reportedly for Qatar. By then it was rumored that VP Saleh had left.

  • Ministers + others were waiting for a Fly Dubai & Emirates flights. Both were cancelled
  • I secured a Kam Air flight Sunday 7pm. Then the floor fell: the President had already left.

11/I knew right then my flight would be cancelled and there would be chaos.

  • As expected employees & military left posts. Everyone ran through gates to on Kam Air flight. 300+ passengers boarded for a 100-seat plane.
  • The plane had no fuel or pilot. We all hoped it would depart

12/However, I decided to disembark and spotted another military plane. It was surrounded by people trying to board, while the guard forces held people back and boarded their embassy staff.

  • There was a rush. Some shots were fired. Somehow, my close colleagues pushed me on board.

13/It did not have to end this way. I am disgusted by the lack of any planning by Afghan leadership. Saw at airport them leave without informing others.

  • I asked the palace if there was an evacuation plan/charter flights. After 7 years of service, I was met with silence

14/During last days, I feared not only risks related to Taliban, but fear of transition period once there is no chain of command.

  • Once president’s departure was announced, I knew within minutes chaos would follow. I cannot forgive him for creating that without a transition plan.

Finally: Did I have a reason to worry? This is the text someone sent me:

“Taliban come to and were looking for you. They were asking about Ajmal Ahmady DAB Governor.”

Whatever their personal views, I also had many personal enemies. Or maybe they just wanted to greet me.

Follow Ajmal Ahmady at @aahmady.