Throughout the third quarter of the year, the Afghan Afghani experienced a noteworthy 9 percent increase in its value, outperforming various major currencies. This surge can be attributed to two key contributing factors:
1. Humanitarian Aid Influx: Afghanistan received a substantial influx of humanitarian aid during this period, which injected a much-needed boost into its economy.
2. Increased Trade Activities: Enhanced trade interactions with neighboring Asian nations also played a pivotal role in bolstering the Afghani's overall value.
To exert control over their nation's economic and monetary systems, the Taliban regime implemented a series of measures:
- Prohibition of Foreign Currencies: The Taliban enforced a ban on the use of US dollars and Pakistani rupees in local transactions, with the aim of establishing Afghani as the primary currency for domestic transactions.
- Stringent Capital Outflow Restrictions: To prevent capital flight, strict limitations were imposed on the outflow of US dollars from Afghanistan.
- Criminalization of Online Currency Trading: The Taliban went to great lengths to criminalize online currency trading, imposing severe penalties, including imprisonment, for those found in violation of this directive.
Despite the impressive performance of the Afghani, it is essential to acknowledge that Afghanistan continues to grapple with persistent poverty and a deeply troubling human rights situation.
As per the United Nations Development Programme, the economic outlook for 2023 remains exceptionally challenging. Recent restrictions on women's access to education and employment could potentially lead to a reduction in international aid, intensifying the economic hardships faced by the population.
The report forecasts a real GDP growth rate of 1.3 percent in 2023 and 0.4 percent in 2024, with a decline in GDP per capita from US$359 in 2022 to US$345 in 2024, exacerbating the challenges confronted by Afghans. Any reduction in international aid during this period has the potential to extend extreme poverty for many years.
Afghanistan's isolation from the global financial system, driven by international sanctions, is underscored by a recent World Bank report, revealing several critical aspects:
- High Unemployment: The nation is grappling with soaring unemployment rates, intensifying economic difficulties.
- Household Struggles: Approximately two-thirds of households are struggling to meet their basic needs, highlighting the economic plight faced by the population.
- Transition from Inflation to Deflation: Afghanistan has shifted from a period of inflation to deflation, further complicating economic stability.
To alleviate the economic hardships faced by the Afghan population, the United Nations has initiated regular shipments of US dollars, with a total value of up to $40 million. This financial assistance is aimed at supporting impoverished Afghans over an extended period, beginning at the end of 2021.
In the current financial landscape, local money changers, known as "Sarraf," play a pivotal role in facilitating foreign currency exchanges within Afghanistan. These individuals operate market stalls and businesses throughout the country. Sarai Shahzada, an open-air market in Kabul, serves as Afghanistan's de facto financial center, facilitating daily currency exchanges worth tens of millions of dollars. Presently, there are no trading restrictions in place.
Due to financial sanctions, almost all remittances to Afghanistan rely on the Hawala money transfer system, upon which Sarrafs heavily depend.
The United Nations estimates that Afghanistan requires approximately $3.2 billion in assistance this year, yet only $1.1 billion has been provided, highlighting a significant funding gap.
Last year, the United Nations allocated approximately $4 billion to address the critical issue of hunger faced by 41 million people in Afghanistan.
The unexpected rise of Afghanistan's currency is a testament to resilience in the face of adversity. While Afghani shines on the global stage with its remarkable performance, the nation contends with a multitude of daunting challenges on its path toward stability and prosperity.
