The US can allow some money of the Afghan national reserves to be used for economic stabilisation under strict control.
As an Afghan American, I have worked for the last 20 years to try to help the people of my home country overcome economic woes and build a more prosperous economy for all.
Right now, those hopes are in jeopardy. Afghanistan faces one of the most acute crises I have seen in my career – and the antidote remains locked in New York.
In August, the United States froze $9.1bn of Afghanistan’s national reserves held at the Federal Reserve Bank of New York. As a result, the economic situation in the country has deteriorated rapidly. The people of Afghanistan are increasingly unable to afford basic goods, its currency is facing hyper depreciation, and its already fragile economy is on the brink of collapse.
Make no mistake, a catastrophe is imminent. The Central Bank of Afghanistan is supposed to conduct monetary policy operations to control the US dollar to the afghani exchange rate and keep inflation at bay. It has historically leveraged this auction process to produce remarkably stable exchange rates and inflation for a developing economy, in the single digit percentages. But with no access to its dollar-denominated reserves, the Central Bank is not able to perform this critical market stabilising function.
Due to a heavy reliance on imports, the Afghan economy is dependent on the US dollar to function even in normal times. With rising demand for foreign currency and reports of 30 percent depreciation of the afghani against the dollar, the effective price of imported goods has increased by at least 20-30 percent over the last few months.
In a country already devastated by the twin crises of war and COVID-19, the desperate lack of dollars in the market is leaving importers unable to pay for their shipments. Food is becoming scarce and grocery stores are unable to fully restock. As prices rise, people are rushing to withdraw and spend their savings before the banking sector collapses. Private businesses are not able to fund operations, shutting down and laying off the privileged few who still have jobs. A growing number of Afghans are suffering from hunger, poverty, and a lack of access to basic goods and services. In short, the country is in a total humanitarian crisis.
While this will devastate every Afghan, the Taliban government in Kabul will avoid the worst of it. They will blame the US for the country’s economic woes – and so long as they can point to the assets held frozen under US control, the people will believe them.
The choice for the US government is simple: continue down the path that would lead to total economic devastation for millions of people or do what is needed to help the Afghan people.
I propose that the US allow the Central Bank of Afghanistan limited, monitored, and conditional access to $150m per month from Afghanistan’s foreign reserves – roughly half of what the Central Bank would auction off monthly in the past. This common-sense policy would unfetter the bank to fulfill its role of maintaining price stability and prevent this imminent crisis.
The US would have the ability to verify how these funds are used via one of the independent international auditing firms that are still operating in Afghanistan. The transactions between the Central Bank and commercial banks take place on an electronic exchange where each transaction and its value are automatically recorded. If the US finds any misappropriation, it can cut off the funds at any moment. After all, the vast majority would still be deposited at the New York Federal Reserve. This type of leverage is a win-win for the US.
The Central Bank is an entity independent from the Afghan government. For decades, it has helped to achieve and maintain price stability and advance the economy, all the while remaining a beacon of hope and prosperity for Afghanistan. But if it is not allowed access to its reserves, that could all be lost.
As the recent US engagement with the Taliban on the peace deal has shown, Washington has the power to negotiate many issues of national interest without hurting the economic future of the people of Afghanistan.
Afghans deserve to be safe and prosper in their land. But right now, US policy is holding them back. The US must allow the Afghan people access to their own reserves in a monitored, common-sense way, or the country will collapse. We have the power to lift the Afghan people out of this crisis. For the sake of both my home and my adopted country, I hope we act on it.
The views expressed in this article are the author’s own and do not necessarily reflect Al Jazeera’s editorial stance.