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EXCLUSIVE Afghan central financial institution drained greenback stockpile earlier than Kabul fell – doc

  • Afghan central financial institution wanting money to fund economic system
  • Cash squeeze hurting peculiar Afghans
  • Assessment written for lenders criticises central financial institution
  • Official defends its actions, however says some cash ‘stolen’

FRANKFURT/MUMBAI, Oct 1 (Reuters) – The Afghan central financial institution ran down most of its U.S. greenback money reserves within the weeks earlier than the Taliban took management of the nation, in response to an evaluation ready for Afghanistan’s worldwide donors, exacerbating the present financial disaster.

The confidential, two-page temporary, written in early September by senior worldwide financial officers, stated the nation’s extreme money scarcity started earlier than the Taliban took management of Kabul.

It was written for using donors and lenders, together with the World Bank and International Monetary Fund.

It criticised how the central financial institution’s former management dealt with the disaster within the months earlier than the Taliban’s conquest, together with choices to public sale unusually massive quantities of U.S. {dollars} and transfer cash from Kabul to provincial branches.

“FX (foreign exchange) reserves in CB’s (central bank) vaults in Kabul have depleted, the CB cannot meet … cash requests,” the report, seen by Reuters, stated.

“The biggest source of the problem is the mismanagement at the central bank prior to the Taliban takeover,” it added.

Shah Mehrabi, chairman of the central financial institution’s audit committee who helped oversee the financial institution earlier than the Taliban took over and remains to be in his put up, defended the central financial institution’s actions, saying it was attempting to forestall a run on the native Afghani forex.

The extent of the money scarcity might be seen on the streets of Afghan cities, the place individuals have been queuing for hours to withdraw greenback financial savings amid strict limits on how a lot they’ll take out.

Even earlier than the shock of the Western-backed authorities’s collapse, the economic system was struggling, however the return of the Taliban and abrupt finish of billions of {dollars} in overseas support has left it in deep disaster.

Prices for staples like flour have spiralled whereas work has dried up, leaving tens of millions going through starvation as winter approaches.

AID DRIES UP

Under the earlier authorities, the central financial institution relied on money shipments of $249 million, delivered roughly each three months in containers of certain $100 notes and saved within the vaults of the central financial institution and presidential palace, in response to three individuals with direct data of the matter.

That cash has dried up as overseas powers shrink back from dealing immediately with the Taliban, which fought in opposition to overseas troops and the ousted authorities. Thousands of individuals – lots of them civilians – died.

The central financial institution, which performs a key position in Afghanistan as a result of it distributes support from nations just like the United States, stated on Wednesday it had finalised a plan to satisfy the nation’s overseas forex wants. It gave no particulars.

The arduous forex crunch is making it troublesome for the Taliban to satisfy primary wants, together with paying for energy or dispersing salaries to authorities workers, lots of whom haven’t been paid in months.

Afghanistan’s roughly $9 billion of offshore reserves had been frozen as quickly because the Taliban captured Kabul, leaving the central financial institution with simply the money in its vaults.

According to the report, the central financial institution auctioned off $1.5 billion between June 1 and Aug. 15 to native overseas change sellers, which it stated was “strikingly high”.

“By August 15, the Central Bank had an outstanding liability of $700 million and 50 billion Afghanis ($569 million) towards the commercial banks,” it stated, including that this had been a significant factor in emptying its coffers.

Afghan central financial institution official Mehrabi stated, nevertheless, that though nearly $1.5 billion of auctions had been introduced, the precise quantity bought was $714 million.

He stated the central financial institution had “continued its foreign exchange auction to reduce the depreciation and inflation.”

MONEY MISSING?

The report additionally questioned a choice by the central financial institution to shift a few of its reserves to provincial branches, placing it in danger as Taliban militants made advances throughout the nation from late 2020 within the runup to their victory.

It stated round $202 million was stored in these branches on the finish of 2020, in contrast with $12.9 million in 2019, and that the money was not moved as provinces began to fall to the insurgents.

“Some money is reportedly lost (stolen) from ‘some’ of the provincial branches,” the report stated, with out specifying how a lot.

Mehrabi stated the central financial institution was investigating cash “stolen” from three of its branches, though not by the Taliban. He gave no additional particulars.

Former central financial institution governor Ajmal Ahmady, who left the nation the day after Kabul fell, didn’t reply to emails and different messages requesting touch upon his and the financial institution’s actions within the months earlier than the Taliban returned to energy.

Ahmady has stated on Twitter in latest weeks that he did his greatest to handle the scenario, and blamed any money shortfall on the freezing of central financial institution belongings overseas.

In his statements, he additionally stated the central financial institution had managed the economic system properly previous to the autumn of Kabul and that he felt dangerous about leaving workers behind however feared for his security. He has stated no cash was stolen from any reserve account.

($1 = 87.8700 Afghanis)

Additional reporting by James Mackenzie; writing By John O’Donnell; Editing by Mike Collett-White

Men are pictured as Afghanistan's Taliban-controlled central bank seizes a large amount of money in cash and gold from former top government officials, including former vice president Amrullah Saleh, in Afghanistan, in this handout obtained by Reuters on September 15, 2021. Da Afghanistan Bank/Handout via REUTERS