The Taliban’s rule in Afghanistan is in jeopardy: the country’s banking system is on the verge of collapsing.
Afghanistan’s banks are still closed nearly two weeks after the Taliban took power. As a result, many people in the country are cash-strapped.
One current employee of Afghanistan’s central bank told CNN, “No one has money.” Many families don’t have enough money for their daily expenses, according to the employee, who requested anonymity due to concerns for their safety.
All of this raises the possibility of a severe economic and humanitarian crisis in Afghanistan just weeks after the Taliban took control.
All of this raises the possibility of a severe economic and humanitarian crisis in Afghanistan just weeks after the Taliban took control.
The main issue is that Afghanistan’s economy is heavily reliant on foreign currency and international aid, both of which have been largely blocked since Kabul’s fall. According to the World Bank, grants account for 75% of Afghanistan’s government spending.
Afghanistan’s banks are still closed, despite the Taliban’s order for them and other services to reopen, due to a lack of cash, according to a central bank source.
“You’ve got a stack of cards that is about to come down,” a person familiar with the situation of the Afghan economy told CNN. “As soon as you open the banks, it will expose how fragile the system is.”
Similarly, the Afghan banking industry is predicting a complete meltdown.
“Afghanistan and its banking sector are at a ‘existential flash point,’ with the banking sector on the verge of collapse,” according to a memo sent by the Afghan-American Chamber of Commerce on August 23. A banking and finance working group comprised of major Afghan commercial banks, customers, and investors drafted the memo.
The central bank of Afghanistan, which is the backbone of the country’s financial system, appears to be in disarray.
Since the Taliban took power, many current Afghan central bank employees have been barred from returning to work, according to an Afghan central bank source.
“My coworkers are worried for their unclear destiny,” the source said.
According to the Afghan-American Chamber of Commerce memo, central bank leadership “refused to answer any communications” from the banking industry as of August 23. The memo stated that requests for cash from the central bank were not honored.
Due to a fear of a “run” by customers for deposits, the Afghan banking group decided to close all banks across the country on August 15 and has not reopened.
Another factor mentioned in that August 23 memo was the Taliban’s failure to appoint a new governor of the central bank. According to media reports, the Taliban appointed Haiji Mohammad Idris as acting governor of the central bank later that day.
Little is known about the new head of the central bank. He appears to be a loyalist with no experience or training that would give the Afghan banking system confidence.
Part of the issue is that Afghanistan, which is ruled by the Taliban, has become a pariah state almost overnight.
The Biden administration moved quickly to prevent the Taliban from gaining access to billions of dollars held by the US central bank.
