A Crisis Scarier Than Guns Approaches... IMF Suspends Financial Support to Afghanistan

No SDR Allocation on the 23rd... Afghanistan's 'Dollar Shortage' Likely to Deepen Economic Isolation

[Asia Economy Reporter Park Byung-hee] The International Monetary Fund (IMF) announced on the 18th (local time) that it will provide no financial support to Afghanistan, which is controlled by the Islamic militant group Taliban. The IMF emphasized that the upcoming allocation of new Special Drawing Rights (SDR) scheduled for the 23rd will not apply to Afghanistan. Following the United States' freezing of Afghan government assets within its territory, the IMF's decision to withhold support is expected to exacerbate Afghanistan's economic isolation due to a shortage of dollars. Ahmal Ahmadi, governor of the Central Bank of Afghanistan who fled Afghanistan on the 15th, said in an interview with a foreign media outlet that while the military crisis in Afghanistan has ended, the economic crisis is just beginning.

According to major foreign media on the 18th, the IMF stated that Afghanistan will not have access to any resources held by the IMF. The IMF expressed difficulty in recognizing the legitimacy of the Taliban regime.

An IMF spokesperson said in an email statement, "As always, the IMF will adhere to the views of the international community," and pointed out, "There is currently no clear international consensus on whether to recognize the Afghan government." The spokesperson emphasized, "Therefore, Afghanistan will not have access to any IMF resources, including SDR."

SDR is an international currency created by the IMF. Countries allocated SDR can exchange them for dollars, euros, yen, etc., to secure funds during crises.

On the 2nd, the IMF finally approved the issuance of new SDR worth $650 billion for COVID-19 response. SDR is allocated according to member countries' contribution shares, and accordingly, Afghanistan was scheduled to receive SDR worth $45.5 million, corresponding to 0.07%.

Afghan residents are crossing the border on the 18th (local time) in Chaman, central Pakistan, which borders Afghanistan.
Photo by AFP Yonhap News

Ahmadi, governor of the Central Bank of Afghanistan, said that due to the shortage of dollars, Afghan citizens will face significant financial difficulties.

The Afghan currency, Afghani, is not accepted overseas. Afghans conduct financial transactions using dollars and Hawala, a traditional personal remittance method in Islamic societies. According to the World Bank, although nearly three-quarters of the approximately 40 million Afghan population live in rural areas, most banks are concentrated in three major cities, indicating the fragility of Afghanistan's banking system.

Previously, the United States also froze Afghan assets within its territory. The U.S. announced that it froze nearly $9.5 billion in assets in accounts owned by the Central Bank of Afghanistan and suspended financial support worth about $3 billion annually. A U.S. government official stated that the Taliban remains subject to U.S. Treasury sanctions and that the Taliban will not be able to use Afghan government assets held in the United States.

Afghanistan has been heavily dependent on dollars sent by the United States. Governor Ahmadi predicted that the rapid shortage of dollars in Afghanistan will lead to soaring prices and increase the Taliban regime's potential for capital controls. He said that the living standards of Afghans will deteriorate sharply and that the shortage of dollars and rising prices will further stimulate Afghans to flee abroad.

Governor Ahmadi expressed concern that although Europe and other countries might think they can stop the influx of Afghan refugees, the situation will not be that simple, as the number of Afghan refugees in Europe and elsewhere is expected to surge.

This content was produced with the assistance of AI translation services.