The Taliban may run Kabul but the US still controls the cash reserves

By Eshe Nelson and Alan Rappeport August 19, 2021 â€" 4.16pm

London: Despite the chaotic end to its presence in Afghanistan, the United States still controls billions of dollars belonging to the Afghan central bank, money that Washington is making sure remains out of the reach of the Taliban.

About $US7 billion ($9.7 billion) of the central bank’s $US9 billion ($12.5 billion) in foreign reserves are held by the Federal Reserve Bank of New York, the former acting governor of the Afghan central bank said on Wednesday, and the Biden administration has already moved to block access to that money.

Afghans waited for hours to withdraw money as the Taliban advanced on Sunday. Credit:AP

The Taliban’s access to the rest of the money could also be restricted by the long reach of US sanctions and influence. The central bank has $US1.3 billion in international accounts, some of it euros and British pounds in European banks, the former official, Ajmal Ahmady, said. Remaining reserves are held by the Swiss-based Bank for International Settlements.

Ahmady said that the Taliban had already been asking central bank officials where the money was.

“We can say the accessible funds to the Taliban are perhaps 0.1% to 0.2% of Afghanistan’s total international reserves,” he wrote on Twitter. “Not much.”

Other funding has been undermined. The International Monetary Fund said Wednesday that it would block Afghanistan’s access to about $US460 million in emergency reserves. The decision followed pressure from the Biden administration to ensure that the reserves did not reach the Taliban.

Money from an agreement reached in November among more than 60 countries to send Afghanistan $US12 billion over the next four years is also in doubt. Last week, Germany said it would not provide grants to Afghanistan if the Taliban took over and introduced Islamic law, and on Tuesday, the European Union said no payments would go to Afghanistan until officials “clarify the situation”.

The central bank money and international aid, essential to a poor country where three-quarters of public spending is financed by grants, are powerful leverage for Washington as world leaders consider if and when to recognise the Taliban takeover.

Ahmady, who fled Afghanistan on Sunday, said he believed the Taliban could get access to the central bank reserves only by negotiating with the US government.

Other sources of funding would be difficult to obtain. The Taliban could seek financial support from China, with which it held high-profile talks last month. But so far, China hasn’t shown an eagerness to increase its role in Afghanistan. The Taliban could try to take advantage of the country’s vast mineral resources through mining or finance operations with money from the illegal opium trade. Afghanistan is the world’s largest grower of poppies used to produce heroin, according to data from the United Nations Office on Drugs and Crime.

But these alternatives are all “very tough,” Ahmady said. “Probably the only other way is to negotiate with the US government.”

On Wednesday, Ahmady wrote on Twitter that Afghanistan had relied on shipments of US dollars every few weeks because it had a large current account deficit, a reflection of the fact that the value of its imports are about five times greater than its exports.

Those purchases of imports, often paid in dollars, could soon be squeezed.

Ahmady recalled receiving a call Friday saying the country wouldn’t get further shipments of US dollars. The next day, Afghan banks requested large amounts of dollars to keep up with customer withdrawals, but Ahmady said he had to limit distributions to conserve the central bank’s supply. It was the first time he made such a move.

Ahmady said he had told President Ashraf Ghani about the cancellation of currency shipments and that Ghani had then spoken with Secretary of State Antony Blinken. Although further shipments were approved “in principle,” Ahmady said, the next scheduled shipment, on Sunday, never arrived.

Although Ahmady has left the country, he said he believed that most members of the central bank’s staff were still in Afghanistan.

If the Taliban can’t gain access to the central bank’s reserves, it will probably have to further limit access to dollars, Ahmady said. This would help start a cycle in which the national currency would depreciate and inflation would rise rapidly and worsen poverty.

“They’re going to have to significantly reduce the amount that people can take out,” Ahmady said. “That’s going to hurt people’s living standards.”

The New York Times

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