Banks In Afghanistan Likely To Face Mayhem Following Taliban Takeover

Afghanistan banks have been pushed into a possible crisis and a very uncertain future as they face the threat of over a range of issues – from liquidity to employment of female staff, since the takeover of the country by Taliban, even though the country’s banking system is considered ot be critical for any possible recovery of the country’s already broken economy.  are co

The Taliban has said they expect banks to reopen imminently following their forced closure for about ten days while the financial system of the country grinded to a halt because of the collapse of the Western-backed government and the pull out of Western forces from the country.

However so far, there has been little evidence of reopening of banks or the banking system of the country returning to normalcy even as huge crowds of account holders accumulate every day outside the banks in Kabul. 

“The banks continue to be closed – with no clear signs of reopening, they have run out of money,” said Gazal Gailani, trade and economic adviser at the Afghan embassy in London.

“Afghanistan’s banking system is now in a state of collapse, and people are running out of money,” Gailani added.

People in many of the rural areas of the country are not as much dependent on banks as people in the cities. However, for people whose monthly salaries are remitted into their bank accounts – such as government employees, the closure has turned out to be very painful.

And growing questions about the ability of the Taliban to manage finance and in rebuilding the economy that has hardly been able to stand on its feet because of 40 years of war, are being raised, resulting in doomed outlook for the country’s banking system.   

According to former central bank chief Ajmal Ahmady, Afghanistan does not have any export ability worth mentioning except for the illegal trading of narcotics which bring in cash and currently the major crisis is that of liquidity in an economy that has become heavily dollarised and is critically dependent on regular physical dollar-shipments, which has been halted.

Syed Moosa Kaleem Al-Falahi, chief executive and president of Islamic Bank of Afghanistan (IBA), one of the three largest banks of the country, said that the central bank of the country was approached by the Afghanistan Banks Association (ABA) for a redress via its coordination to take measures for a return to normalcy.

He said that collective decision to stop offering their services till such time that the central bank ensures liquidity and security arrangements was taken by the country’s commercial banks.

“It would be rather difficult to control the rush if banks reopen immediately,” he added.

But with people scrambling to withdraw cash when the Taliban were at the fates of Kabul, banks were already suffering from a liquidity crunch even before they decided to close down.

Financial support to banks during last week’s cash squeeze was provided by Da Afghanistan Bank (DAB), the central bank of Afghanistan, according to a banker at one of Afghanistan’s largest lenders.

However there is uncertainty about whether the central bank will be able ot ocntinue doing this as about $9 billion in foreign reserves of the DAB now seems to be largely out of te grasp of the Taliban.

“Banks will face major liquidity challenges as central bank officials have not had access to reserves yet,” the banker said.

“They will face foreign currency liquidity issues which will cause huge fluctuations in the exchange rates.”

(Adapted from PakistanToday.com)

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