Afghan central bank set to halt currency decline as crisis deepens


A bureau de change holds a stack of Afghan currency on a street in central Kabul, April 2, 2014. REUTERS / Tim Wimborne / File Photo

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KABUL, December 14 (Reuters) – The Afghan central bank said on Tuesday it was working to ensure the stability of the Afghani, a day after the currency lost nearly 12% of its value against the dollar in a few hours in a context of worsening economic crisis and galloping inflation.

Abrupt withdrawal of foreign aid following Taliban victory in August has left Afghanistan’s fragile economy on the brink of collapse, prices of food, fuel and other commodities rapidly increasing out of reach for many.

The central bank issued a statement saying it had held a number of meetings with currency traders, representatives of commercial banks and the business sector to halt the fall of the afghani.

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“On the basis of its strategic planning policies, Da Afghanistan Bank has always tried to avoid volatility which could harm the purchasing power of the population,” he said.

A cabinet meeting also instructed the government’s economic commission to “take urgent measures to ensure stability in Afghanistan,” Taliban spokesman Zabihullah Mujahid said in a statement.

The crisis has accelerated sharply in recent days. On Monday, the afghani, which was trading at around 77 per dollar before the fall of Kabul and at 97 a week ago, fell from 112 per dollar in the morning in the Sarai Shazada money market in Kabul to 125 in the afternoon.

On Tuesday, it had recovered slightly and was listed at around 114-115 following the move by the central bank.

“The Islamic Emirate has said it will lower the dollar and issue dollars to the market and that is changing now,” said a trader from Sarai Shahzada, using the name of the new Taliban government.

INCREASING PRICE

However, the pressure on afghani has already had a huge impact on the prices of basic necessities in an economy where unemployment is rampant and where even many workers have not been paid for months.

Within a week, wholesalers said the price of a 50 kg (110 lb) bag of flour had risen 20 to 40 percent to 2,800 to 3,200 afghanis, from 2,300 there a week ago, the price of sugar increased by a third and rice increased by more than 15%.

Surveys by the World Food Program have shown that about 98% of Afghans are not eating enough, with seven in ten families resorting to borrowed food, read more

Deprived of dollars that were once physically shipped to Afghanistan and cut off from the global financial system by fear of US sanctions, the banking system is only partially functional and some $ 9 billion in central bank reserves remain stranded outside the United States. country.

Last week, the U.S. Treasury Department formalized guidelines allowing personal remittances to Afghanistan and protecting senders and financial institutions from U.S. sanctions, offering some hope for those with relatives to the outside the country.

But efforts to bring in the cash have been hampered by international reluctance to provide funds to the Taliban government, which is still not officially recognized by any other country.

Longer-term, businessmen said the outlook was hampered by the structural weakness of an economy whose main exports – aside from illegal narcotics – were dried fruits and handmade rugs, and the lack of a clear economic plan from the new government.

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Reporting by James Mackenzie and Mohammad Yunus Yawaz; Editing by Raissa Kasolowsky and Alex Richardson

Our standards: Thomson Reuters Trust Principles.

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