US calls for infusing liquidity into Afghan banking system without benefiting Taliban

Published November 24, 2021
A photo of US State Department spokesperson Ned Price. — AFP/File
A photo of US State Department spokesperson Ned Price. — AFP/File

WASHINGTON: Hours after the United Nations sought international intervention to prevent a possible collapse of Afghanistan’s banks, the United States promised on Tuesday to look for options to ‘infuse liquidity’ into the system without enriching the Taliban.

On Monday, the United Nations Development Programme (UNDP) released a new situation report on Afghanistan, saying that the country’s financial and bank payment systems were ‘in disarray.’

The report details the state of the banking and financial system prior to the political transition on 15 August 2021, as well as the current situation in the three months since.

“Prompt and decisive action is urgently needed, with delays in decision-making expected to increase the cost of a banking system collapse – a grim predicament,” the report warns.

“We are working very closely with the UN … to find ways to offer liquidity to infuse,” said US State Department Spokesperson Ned Price when asked at a news briefing if the US was willing to help prevent the predicted collapse.

The United States, he said, was also working with other countries, “and bilaterally and multilaterally as well, to see to it that the people of Afghanistan can take advantage of international support in ways that don’t flow into the coffers of the Taliban.”

Mr Price pointed out that the US has pledged $474 million of humanitarian assistance to the people of Afghanistan this year alone, adding: “We know that the Afghan economy, even before the fall of the previous government, was in dire need of international support.”

Underlining the need to continue providing humanitarian assistance to Afghanistan, Mr. Price said: “We believe that we can … support the humanitarian needs of the people of Afghanistan even as we continue to make clear to the Taliban the expectations that we have of them when it comes to the priority issues that we’ve laid out.”

The United States, he said, wanted Afghanistan’s Taliban rulers to ensure free passage for all, fulfill their counterterrorism commitments, protect human rights and form an inclusive government before establishing any ties with them.

The UNDP report on Afghanistan describes a banking system at a near-standstill, with humanitarian interventions thwarted by the country’s liquidity crisis, deepened by a lack of confidence on the part of depositors and international markets. IMF projections cited in the report predict a contraction of up to 30 per cent in the Afghan economy for 2021-2022.

Total banking system deposits fell from 268 billion AFN (US$2.9 billion) at the end of 2020 to 194 billion (US$2 billion) in September of this year. Those may fall to 165 billion AFN (US$1.8 billion) by the end of 2021, a loss of approximately 40 percent.

Published in Dawn, November 24th, 2021

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