Birds of a Feather Flock Together – Pariah of Global Finance, Afghanistan Turns to Russia.
Not sure if Russia has enough to help the Taliban though.
Politically illegitimate and not recognized by the international community, the Taliban in Afghanistan is cut off from the global banking and debt markets. Very few private banks and institutions are willing to lend money again to a regime whose members have been under sanctions for years for membership in a terrorist group.
A Ministry of Finance official told TOLO News, Afghanistan's leading news channel, that Afghanistan owes $1.4 billion to foreign countries and financial institutions such as the World Bank and the International Monetary Fund. This is a very long-term debt (30 to 40 years).
However, barely 6 million dollars have been repaid to the IMF and the World Bank.
Empty coffers
In Afghanistan, the coffers are empty and the needs are immense given the economic and humanitarian crisis. The country is not immune to inflation, with an annual rate of price increases of 17.5%, including 43.4% for basic products (gasoline, flour, rice, sugar, bread), according to World Bank data in July 2022.
In the first nine months of the year, the country managed to collect more than 100 billion afghanis or 1.1 billion dollars, more than half of which came from customs duties at the borders. Since the Taliban came to power, Afghanistan has had only a small trade surplus of $79M with its main trading partner, Pakistan.
Taliban exports coal and cotton to Pakistan and imports foodstuffs. On the import side, the government says it has an agreement with Russia to import gas and oil.
Increase in ruble flows
The Taliban hopes to attract Russian capital to help finance investments in the country. Trade between the two countries is worth $200 million. The increase in bilateral trade could increase ruble flows into Afghanistan.
In the country's exchange offices, which are under close Taliban surveillance, the main foreign currencies available are those of Pakistan, India, and the United Arab Emirates. The dollar is also present, although the regime tries to discourage its use, arguing that it is a way to support its currency, the Afghani.
Afghanistan continues to negotiate with the United States to recover the $7 billion in central bank assets frozen in the United States. Half of it could be transferred to a trust fund in Switzerland. The disbursements would be made by a board independent of the Taliban, Reuters reported.
Talks are reportedly stalled on several U.S. demands: the departure of Bank of Afghanistan members targeted by previous sanctions and the establishment of independent anti-money laundering monitors within the central bank. The other 3.5 billion dollars blocked in the United States are coveted by the families of the victims of September 11, 2001, around 150 people whose relatives died in the terrorist attacks. But a U.S. judge has just recommended rejecting their claims. He believes that to respond favorably would be to recognize the Taliban as “the legitimate government of Afghanistan,” according to the New York Times.
Finally, in an attempt to combat the people's distrust of the local currency, the Taliban have also just banned Bitcoin and cryptocurrencies, even though the Afghan people use them as an essential means of payment in their daily lives. Again, a bad signal.
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