The U.S. froze Afghanistan’s reserves and is halting shipments of dollars to the country, an official from the Biden administration said, which will hinder the country’s ability to utilize assets and manage the economy.
© Provided by National Post This handout photo released by the Arabic Twitter account of the
All central bank assets that the Afghanistan government has in the U.S. will not be made accessible to the Taliban, the official told CNBC on Wednesday. This freeze will extend to all accounts overseen by the Federal Reserve or any other U.S. bank.
“To make matters worse from an Afghan perspective, the former government, having a strong strategic tie to the USA, had billions of USDs in their US Accounts, and with the blocking order they lose access to this money,” wrote Tom Block Wednesday, a policy strategist at Fundstrat.
Independently an official from the Treasury Department said the organization is working to prevent the Taliban from accessing Special Drawing Rights (SDRs), from the International Monetary Fund (IMF). SDRs function as a line of credit that a nation can exchange for cash. SDRs are printed at the IMF to be distributed to member countries and can be exchanged for U.S. dollars that the U.S. is required to make available. Afghanistan is set to receive about $450 million USD worth of SDR reserves next week.
Officials spoke on conditions of anonymity to discuss the changing situation in Afghanistan, as the administration has the potential to change course.
Sanctions from the Treasury Department and the Federal Reserve have the ability to hinder a foreign economy by restricting access to dollars. Many types of imports, including oil and food, are often financed with the U.S. dollar.
“The new Afghan government has a real challenge in getting goods and services delivered to the country with the US imposed blocking order preventing US banks from making payments on their behalf, clearing settlements,” wrote Block. “Today, with the uncertainty overhanging the Taliban government, any seller is going to want to be paid in some widely held currency and USD is almost always the preferred currency.”
Ajmal Ahmady, Afghanistan’s acting head of Da Afghanistan Bank (DAB), fled the country Sunday when the Taliban seized control of Kabul. On Wednesday he wrote on Twitter that he believes the U.S. Treasury Department will lock the country’s assets and coerce the Taliban to impose capital controls. That would cause inflation and devalue Afghanistan’s currency, Ahmady added
“I believe local banks have told customers that they cannot return their dollars — because DAB has not supplied banks with dollars,” Ahmady wrote. “This is true. Not because funds have been stolen or being held in vault, but because all dollars are in international accounts that have been frozen.”
According to Ahmady, as of last week, the country had around $9 billion USD in reserves and the Federal Reserve was holding $7 billion of Afghanistan’s assets.
Ahmady added Friday that there would not be any further USD shipments, saying that one was expected Sunday the day Kabul fell into Taliban control.
