Afghanistan’s looming liquidity crisis threatens to escalate humanitarian catastrophe


It was an important project: the Afghan economy operates with cash, and only 10-15% of citizens have a bank account. APS aimed to help Afghanistan become less dependent on cash, make economic transactions safer and more efficient, and provide real banking services to more people. And, says Khademi, it was moving fast before the United States withdrew its forces and the Taliban took over.

Now, however, as chaos continues to unfold in Afghanistan, the project has come to a halt and funds are running out before viable alternatives are put in place.

But a different outcome was at hand, says Khademi: Afghanistan was perhaps only a year or two away from having a 21st century digital banking infrastructure that could cope even if the money was gone. His team was “very committed and hardworking,” he says, regularly working up to 17 hours a day to support rapid growth. They were “so passionate about the economy that they were self-sufficient.”

“We hoped that our efforts would bear fruit,” he says, crying. “It seems everything was in vain, everything we did. It sounds like a dream, but now it will never come true. “

Frozen assets

The liquidity crisis is no accident. Most of the previous Afghan government’s assets were held in offshore accounts that have since been frozen to prevent the Taliban from accessing them, according to the former governor of the Central Bank Ajmal Ahmady. And the United States has chosen to prevent the Taliban, who is on the Treasury Department’s sanctions list, from getting their hands on other funds in freezing of the Afghan government’s liquidity reserves and stopping planned money shipments. Many Afghans had expected such a situation for weeks, with long queues at banks as citizens worried about the future drained their cash.

ATM activity has exploded. “Friends [who work in banks] said that where they normally do hundreds of transactions a day, they make thousands, ”says Ruchi Kumar, journalist and contributor to MIT Technology Review who worked in Kabul for eight years but recently fled the country.

The problems caused by the lack of liquidity are piling up. US dollars are becoming increasingly scarce, the value of Afghan money is plummeting and, according to Khademi, the price of commodities is skyrocketing. Cash remains in circulation — Afghanistan has a large informal banking system, run by local unlicensed currency traders. Sources say they are still working, but without banking activity the money supply will soon be tight.

Some foreigners try to fill the void by performing online fundraising campaigns, while others have even suggested that cryptocurrency could go into the void.

But getting money into the country from outside has become more difficult. Western Union, the world’s largest money transfer company, has suspended services in Afghanistan, and NBC reports that MoneyGram has also halted operations there. Meanwhile, some foreign crowdfunding sites, such as GoFundMe, have been accused of “dishonest” behavior after block some fundraising efforts for the country while let the others continue.

“I didn’t think that day would come”

While digital alternatives have largely failed to fill the void left by the collapsing cash flow, there have been windows of opportunity for alternative services to help.

Kumar, the reporter, says vulnerable Afghans use services like WasalPay – an online payment system for utility bills – to keep their phone credit recharged.

She uses it to send money that people in distress can use to stay connected. Its network includes journalists, activists and human rights defenders; they can use WasalPay to access funds from outside the country, be it individual donations and contributions, or larger sources such as the International Women’s Media Foundation.





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