Afghanistan: DollarisationProcess where the US dollar is de facto adopted as the currency of a country. More of Bank Deposits and U.S. Dollars in CashMoney in physical form such as banknotes and coins. More Shipped by Air from the United States

The financial system of Afghanistan has been operating on an entirely foreign cash basis since the U.S.-led invasion in the fall of 2001 (see Graph 1). As of December 2020, foreign currencyThe money used in a particular country at a particular time, like dollar, yen, euro, etc., consisting of banknotes and coins, that does not require endorsement as a medium of exchange. More deposits accounted for 60% of all deposits in Afghan banks (World Bank 2021: 10). The national currency (the afghani, AFN) is not accepted to settle international transactions and is mainly used on daily transactions.

Graph 1. Afghanistan: Bank Deposit Growth Decomposition by Currencies, February 2015-December 2020

Source: World Bank 2021: 10.

To purchase information and build loyalty, the CIA, the U.S. military, and other U.S. agencies “gave cash to warlords, governors, parliamentarians, even religious leaders” since the start of the war, according to Washington Post journalist Craig Whitlock.

Afghanistan’s reliance on physical cash shipments (primarily from the United States) is yet another aspect of the country’s high dependence on funds from international institutions and donors.

DAB: Central Banker and Leading Cash Manager

In the years after the fall of the first Taliban regime through the summer of 2021, Da Afghanistan Bank (DAB), the country’s central bank, was the leading cash managementManagement and control of cash in circulation. More organization in the country, distributing cash to commercial banks and government agencies, “bringing cash in from a province or sending it out, […] based on the risks seen in that province,” according to Ajmal Ahmady, governor of the DAB until the fall of Kabul on August 15.

As the Taliban increased their hold over Afghan territory, the DAB “would try to bring in all the cash to the center. We were worried about dollars because we get supplied internationally. And so, that was a key concern of our international partners. So any place where the Taliban came close to it, we made sure that we withdrew dollars and tried to repatriate most of the Afghanis as well,” said Ahmady.

U.S. Cash Shipments Suspended

Until the Taliban took over Kabul, the U.S. Treasury dispatched “physical shipments of cash every few weeks” to Afghanistan to finance its “large current account deficit” and honour cash redemptions from bank depositors, per Ahmady.

On Friday, August 13, after several provincial capitals fell to the Taliban, Ahmady learned that the United States would halt cash shipments to Afghanistan “given the deteriorating environment.” The DAB was forced to reduce the amount of U.S. dollars it supplied to banks and hawala dealers to keep up with customers’ withdrawals and currency auctions and placed maximum withdrawal limits on Saturday, August 14.

After a call between president Ghani and U.S. State Secretary Anthony Blinken, the DAB expected a cash shipment the day after. However, that “shipment never arrived. Seems like our partners had good intelligence as to what was going to happen,” tweeted Ahmady. “The amount of such cash remaining is close to zero,” according to Ahmady.

Banks “Are the New Airport:” Bank Runs and Cash Scarcity

On Sunday, I wanted to go to the bank and get cash. I made my coffee and prepared myself: I put on lipstick and a very short dress. I took a taxi. Traffic was bad. At the bank I saw maybe five hundred people. Around fifty were women. You could understand that there was something happening: the bank was full of fear. The teller said, “There is no money—we are waiting for the central bank to send us moneyFrom the Latin word moneta, nickname that was given by Romans to the goddess Juno because there was a minting workshop next to her temple. Money is any item that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular region, country or socio-economic context. Its onset dates back to the origins of humanity and its physical representation has taken on very varied forms until the appearance of metal coins. The banknote, a typical representati... More.” Suddenly, the gunshots started. And the manager of the bank told me, “The Taliban is inside the city. They’ve surrounded us. You should go home.” – Sahraa Karimi, filmmaker.

As more Afghan territories fell under Taliban rule in the past months, hundreds of Afghans lined up attempting to withdraw their money from ATMs and bank branches. Mere hours before Taliban fighters entered the capital, the Afghanistan Banks Association (ABA) announced that the country’s banks had “enough cash and can pay deposits” and urged its “dear countrymen to use patience.”

However, local banks later “told customers that they cannot return their dollars – because […] all dollars are in international accounts that have been frozen” per international sanctions, said Ahmady.

• Nasrin Nawa, a Fulbright Scholar at the University of Nebraska-Lincoln, said that her sister, “also a journalist, gathered her official documents to find a way out of Afghanistan. But when she stopped by the bank to withdraw cash, there was none to be had.”
• Zuhra Bahman, Afghanistan country director at Search for Common Ground, said that some of the banks’ security personnel fired at the “literally hundreds and hundreds of people even at the minor branches of minor banks” attempting to withdraw money from their accounts.
• Halema Wali, founder of Afghans for a Better Tomorrow, said that wealthier Afghans hoarded cash and food, and ATMs ran out of cash rapidly.
• Ali Latifi, a journalist, said, “There’s no bank I can go to right now, no ATM. I live above two banks and three ATM machines, but they’ve been off since Thursday [August 12].”
• A bank customer in Kabul said, “The cash I had is finished and now I have totally no money to buy even food ingredients and solve my daily problems. [The] Islamic Emirate of Afghanistan should open all the banks and ATMs.”
• Emin Juyar, a student, said, “We want to withdraw money to support ourselves. Unfortunately, several branches are closed, and those that are open are quite overcrowded.”
• Sher Shah Rahim, CEO of WasalPay, an online paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More system for utility bills, said, “As a company, I have no cash on me because I didn’t think this day would come. I had all my money in the banks, and the banks are closed.”
• Massoud, a former Afghan military soldier, said, “We came under siege so many times. We had to fight without food and water. And yet, because the government decides to give up and leave, we are left without access to the money we fought for.”

Restarting the Cash Supply

Per Bloomberg and The Guardian, after the Taliban arrived in Kabul, most banks remained closed and ATMs run out of cash. The main branches of Kabul Bank and Azizi Bank reopened on August 25. Several protests ensued. A customer in line said, “The banks are the new airport,” referring to the thousands of people flooding Hamid Karzai International airport to leave Afghanistan.

The Taliban have appointed a new DAB governor, Haji Mohammad Idris, attempted to reassure banks about their commitment to a functioning financial system, and finally ordered state-owned and commercial banks to reopen by Sunday, September 5. Individuals’ withdrawals have been temporarily limited to AFN20,000 (USD200), and businesses are not allowed to withdraw cash, forcing them to pay via account transfers. Few ATMs are working, and customers have crowded bank branches.

• Ahmir Hamza Bawar, general manager of the main branch of Naway Kabul Bank, said the bank was dealing with roughly 3,000 customers a day, most of them for cash withdrawals.
• Ahmad Javed Wafa, chief executive of Pashtany Bank, said the bank would accommodate its customers’ cash withdrawals as long as the DAB supplied it with cash.
• Ruchi Kumar, a journalist and contributor to MIT Technology Review, said, “Friends [who work in banks] said where they normally did hundreds of transactions per day, they were doing thousands.”

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