IMF suspends Afghanistan's access to funds

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IMF suspends Afghanistan's access to funds

Beth Timmins - Business reporter, BBC News

Thu, August 19, 2021, 11:08 AM·4 min read

 

 

The International Monetary Fund (IMF) has said Afghanistan will no longer be able to access the lender's resources.

The move follows the Taliban's takeover of the country last weekend.

An IMF spokesperson said it was due to "lack of clarity within the international community" over recognising a government in Afghanistan.

 

Resources of over $370m (£268m) from the IMF had been set to arrive on 23 August.

These funds were part of a global IMF response to the economic crisis.

Access to the IMF's reserves in Special Drawing Rights (SDR) assets, which can be converted to government-backed money, have also been blocked. SDRs are the IMF's unit of exchange based on sterling, dollars, euros, yen and yuan.

"As is always the case, the IMF is guided by the views of the international community," the spokesperson added.

It comes after an official from the Biden administration told the BBC that any central bank assets the Afghan government has in the US will not be made available to the Taliban.

In a letter to the US Treasury Secretary Janet Yellen, Congress members called for assurances that the Taliban would receive no US-backed aid.

"The potential of the SDR allocation to provide nearly half a billion dollars in unconditional liquidity to a regime with a history of supporting terrorist actions against the United States and her allies is extremely concerning," 17 signatories wrote.

 

Earlier, the head of Afghanistan's central bank said the US had cut off access to its assets - around $7bn of which are held at the U.S. Federal Reserve.

Ajmal Ahmady, who fled the country at the weekend, tweeted that Da Afghanistan Bank's total reserves were approximately $9bn as of last week.

But he said as per international standards, most of this was held in safe, liquid assets such as US Treasury bonds and gold offshore.

"Given that the Taliban are still on international sanction lists, it is expected (confirmed?) that such assets will be frozen and not accessible to Taliban," Mr Ahmady tweeted.

"We can say the accessible funds to the Taliban are perhaps 0.1-0.2% of Afghanistan's total international reserves. Not much."

Mr Ahmady added that Washington's suspended shipments of physical dollars were causing Afghanistan's currency to depreciate. The Afghan currency, the Afghani, has fallen to record lows.

"I believe local banks have told customers that they cannot return their dollars — because [Da Afghanistan Bank] has not supplied banks with dollars," he tweeted.

"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."

 

In June, the IMF gave Afghanistan its latest loan instalment which was approved in November. In the same month, the UN published a report which stated that the "primary sources of Taliban financing remain criminal activities," including "drug trafficking and opium poppy production, extortion, kidnapping for ransom, mineral exploitation and revenues from tax collection in areas under Taliban control or influence."

The World Bank also funds many development projects in the country and has provided Afghanistan with $5.3bn since 2002. It has not yet responded to the BBC's request for comment on the current status of this funding.

Independent money transfer giant Western Union has also suspended money transfer services to Afghanistan "until further notice".

The IMF has taken similar steps against other regimes not recognised by a majority of its members. This happened in April 2019 when SDR access was blocked after more than 50 member countries refused to recognise President Nicolas Maduro as the legitimate leader of Venezuela. The IMF also halted payments to Myanmar after the military junta seized control.

On Monday, the IMF will complete a $650bn allocation of SDRs to its 190 member countries.

The sudden advances made by the Taliban left the IMF with an urgent decision. It is about to hand out to almost all its members a reserve asset called special drawing rights. It's an exercise that is not about Afghanistan. It's about reinforcing the global economic recovery from the pandemic related crisis. And it's happening on Monday.

So if the new regime in Kabul were to be excluded at this stage the IMF had to move quickly. And it has done so, reflecting what a spokesperson called a lack of clarity about the recognition of the government. That is what lies behind the IMF decision at this stage.

It does also raise the possibility that financial assistance might come to be used as leverage to encourage the Taliban not to allow the abuses that many fear - and that some reports say are already taking place.

 

link  :  https://news.yahoo.com/imf-suspends-afghanistans-access-funds-225003402.html?fr=sycsrp_catchall

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What next for Afghanistan's economy?

By Andrew Walker
BBC World Service economics correspondent

Published 2 days ago

 

The Taliban have foreign aid donors worried

 

Afghanistan's economy is "shaped by fragility and aid dependence".

That is the troubling overview set out by the World Bank several months before the Taliban takeover.

Economic prospects look even more precarious now, as future financial assistance is under a cloud of uncertainty.

Afghanistan does have substantial mineral resources, but the political situation has impeded their exploitation.

The aid dependency is striking. In 2019, World Bank figures show development aid was equivalent to 22% of gross national income (which is not the same as GDP, but close to it).

That is a high figure, but it is down a long way from the 49% the World Bank reported 10 years earlier.

 

Now those aid flows are under a cloud of profound uncertainty. German Foreign Minister Heike Maas told the broadcaster ZDF last week: "We will not give another cent if the Taliban takes over the country and introduces Sharia law."

Other aid donors are sure to be watching developments closely.

Corruption woes

The fragility the World Bank refers to is illustrated by the very high levels of spending on security before the Taliban takeover: 29% of GDP, compared with an average of 3% for low-income countries.

Security and severe problems with corruption are behind another persistent problem in Afghanistan: very weak foreign business investment.

According to United Nations data, there were no announcements in the last two years of new "greenfield" investments, which involve a foreign business setting up an operation from scratch. Since 2014, there have been a total of four.

To take two other countries from the South Asia region, both with somewhat smaller populations, Nepal has managed 10 times as many and Sri Lanka 50 times more over the same period.

The World Bank describes Afghanistan's private sector as narrow. Employment is concentrated in low-productivity agriculture: 60% of households get some income from farming.

The country also has a large illicit economy. There is illegal mining and, of course, opium production and related activities such as smuggling. The drugs trade has been an important source of revenue for the Taliban.

Mineral wealth

All that said, the Afghan economy has grown since the US invasion in 2001.

The figures for Afghanistan are not reliable, but what they show, according to the World Bank, is average annual growth of more than 9% in the 10 years from 2003.

After that, it slowed (which may well reflect the lower levels of aid) to an average rate of 2.5% between 2015 and 2020.

 

The drugs trade has been an important source of revenue for the Taliban

 

The country does have significant natural resources, which would, in the context of better security and less corruption, be attractive to international business.

 

There are several types of mineral available in substantial quantities, including copper, cobalt, coal and iron ore. There is also oil and gas and precious stones.

One with particularly striking potential is lithium, a metal that is used in batteries for mobile devices and electric cars. The latter application is going to be especially important as the motor industry makes the transition to zero-carbon forms of transport.

Back in 2010, a top US general told the New York Times that Afghanistan's mineral potential was "stunning" - with "a lot of ifs, of course".

The paper also reported that an internal US Defence Department memo had said the country could become "the Saudi Arabia of lithium".

Yet this undoubted potential is nowhere near being exploited - and the Afghan people have seen very little, if any, benefit from it.

Foreign powers

There have been many reports that China is keen to be involved. It seems to have better relations with the Taliban than Western powers do, so may have an advantage if the new regime does hold on to power.

However, Chinese firms did win contracts to develop operations in copper and oil. But little happened.

It is to be expected that China would be interested. The opportunities appear to be very substantial and the two countries do share a short border.

But any Chinese agency - official or a business - would want to be confident of succeeding. They will be reluctant to commit unless they feel the security and corruption problems will be well enough contained to enable them to extract worthwhile quantities of these industrial commodities.

A key question for any hard-nosed potential investors - from China or anywhere else - will be whether the Taliban is likely to be any more able than the previous Afghan government to create the kind of environment they need.

Another factor likely to affect the economy is women's employment. In the past decade the percentage of the female population over 15 years of age in employment has risen dramatically, though at 22% in 2019 it was still low by international standards. Under the Taliban the change is likely to be reversed, further damaging economic prospects.

In the immediate future, there is also a great deal of uncertainty about financial stability. Crowds of people have been trying to withdraw their money from the banks.

The Pakistan-based Afghan Islamic Press reported a Taliban spokesman as offering assurances to bank owners, money changers, traders and shopkeepers that their lives and property would be protected.

That there are even questions about the physical safety of financial operators is shocking. They do need to be confident if Afghanistan's financial system is to function. But it also needs customers to feel their money is safe. That won't happen quickly.

 

link  :  https://www.bbc.com/news/business-58235185?xtor=AL-72-[partner]-[yahoo.north.america]-[link]-[news]-[bizdev]-[isapi]

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Afghanistan crisis: 'Many here will be deeply fearful for their future'

 

Afghanistan crisis: 'Many here will be deeply fearful for their future'Close

 

After the Taliban swept to victory in Afghanistan, they pledged the country would not be used as a base for terror, and the rights of women would be respected "within the framework of Islamic law."

But as the city of Kabul gradually returns to a sense of normality, residents are still waiting to see what kind of government emerges and what their rule will mean for women, human rights and politics freedom.

The BBC's Secunder Kermani reports from the heart of Kabul.

Published

15 hours ago

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sorry forgot the link for the article above.

link  :  https://www.bbc.com/news/av/world-asia-58262874

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Hmmmmm…..SDR’s on Monday…..I’m thinking!