The currency of Taliban-controlled Afghanistan has been the best-performing currency in the world this quarter according to Bloomberg data. The Afghani has gained in value by 9% over this time, owing mostly to the influx of billions of dollars in humanitarian relief and increased trade with Asian neighboring nations, according to the publication. Since assuming power two years ago, the Taliban have taken many steps to keep a solid grip on its currency.
These steps include restricting the usage of dollars and Pakistani rupees in local transactions and tightening restrictions on the export of US cash. They have even criminalized online trading, threatening individuals who break the laws with incarceration, according to Bloomberg.
Despite this progress, Afghanistan remains a poor country with one of the worst human rights records in the world. Despite a 14 percent increase in value over the year, the Afghani ranks third on the global list, trailing only the currencies of Colombia and Sri Lanka.
Due to international sanctions, Afghanistan is largely cut off from the global financial system. According to a World Bank analysis, the situation is terrible, with high unemployment, two-thirds of households unable to buy basic needs, and inflation giving way to deflation. To alleviate some of the economic challenges, the UN has been delivering regular planeloads of US money, reaching up to $40 million, to support the needy for at least 18 months, beginning at the end of 2021.
Currency exchange in Afghanistan amid financial challenges
Money changers known as “sarraf,” who set up stalls in markets or operate out of establishments in cities and villages, are currently the major means of converting foreign currency in Afghanistan. Tens of millions of dollars are exchanged daily in Kabul’s bustling open-air market, Sarai Shahzada, which serves as the country’s de facto financial hub. There are no trading restrictions, as announced by the central bank.
As a result of financial sanctions, almost all remittances to Afghanistan now use the Hawala money transfer channel. This system is critical to Sarraf’s business.
The United Nations estimates that Afghanistan requires approximately $3.2 billion in assistance this year, but only $1.1 billion has been supplied, according to the international organization’s financial tracking agency. The organization spent about $4 billion last year, as 41 million people in Afghanistan faced the threat of hunger.
