Law students and lawyers in Afghanistan file reports with JURIST on the situation there after the Taliban took power. Here, a correspondent for JURIST staff in Kabul comments on reports of an impending bank failure which would be the first since the Taliban came to power in August. For reasons of confidentiality and security, we retain the name of our correspondent. The text has only been slightly retouched to respect the author’s voice.
According to unofficial reports from the Afghan central bank, based in Kabul Maiwand Bank will be closed in a few days if immediate and necessary cash / cash is not injected into it. One of my sources at the central bank says this should have happened last week.
Recently, UNDP released a report assessing the state of the Afghan banking and financial system before August 15, 2021 and over the past three months. The report says that after the Taliban took power, the country’s financial and banking system is on the verge of collapse. This follows international sanctions under which Afghanistan’s reserves, including foreign currency deposits from the banking sector to the central bank, were frozen; the SWIFT system and international money transfer have been suspended; and the printing of AFN liquidity has been halted, causing a dramatic adverse shock in the financial and payment systems, especially for weak local commercial banks like Maiwand Bank.
The central bank was expected to provide the required AFN liquidity to commercial banks, especially weak banks, but it failed to do so. Therefore, these banks did not make the requested deposits in the country.
Lack of liquidity in AFN and US dollars forced Maiwand Bank to close all its branches in the country except the main branch in Kabul and a limited number of branches. Maiwand Bank subsequently closed other branches in Kabul and only operates from its head office in Kabul. Maiwand Bank has even been operating for half a day at headquarters since the Taliban takeover. They were unable to make full deposits for their clients.
Maiwand Bank is also failing to collect debts from businesses and projects due to current international sanctions against the Afghan banking system. My contacts with the central bank also confirm that other public banks as well as commercial banks are currently in the same situation as Maiwand Bank. For example, AIB, one of the best banks, closed 16 branches out of 36 branches in the country. In addition, according to my sources, Pashanty Bank, Afghan United Bank and Ghazanfar Bank are other banks which are closing or will close their branches in Kabul and in most of the provinces of the country.