U.N. warns of ‘colossal’ collapse of Afghan banking system

In a three-page report on Afghanistan’s banking and monetary system seen by Reuters, the U.N. Development Programme (UNDP) stated the financial value of a banking system collapse – and consequent unfavorable social impression – “would be colossal.” An abrupt withdrawal of most overseas improvement assist after the Taliban seized energy on Aug. 15 from Afghanistan’s Western-backed authorities has despatched the financial system into freefall, placing a extreme pressure on the banking system which set weekly withdrawal limits to cease a run on deposits. “Afghanistan’s financial and bank payment systems are in disarray. The bank-run problem must be resolved quickly to improve Afghanistan’s limited production capacity and prevent the banking system from collapsing,” the UNDP report stated. Finding a approach to avert a collapse is sophisticated by worldwide and unilateral sanctions on Taliban leaders.

“We need to find a way to make sure that if we support the banking sector, we are not supporting Taliban,” Abdallah al Dardari, head of UNDP in Afghanistan, instructed Reuters. “We are in such a dire situation that we need to think of all possible options and we have to think outside the box,” he stated. “What used to be three months ago unthinkable has to become thinkable now.”

- Advertisement-
The Taliban face bleak economic times ahead, former Afghan central banker predicts
Afghanistan’s banking system was already weak earlier than the Taliban got here to energy. But since then improvement support has dried up, billions of {dollars} in Afghan property have been frozen overseas, and the United Nations and support teams at the moment are struggling to get sufficient money into the nation.

‘Under the mattress’

The UNDP’s proposals to avoid wasting the banking system embody a deposit insurance coverage scheme, measures to make sure satisfactory liquidity for short- and medium-term wants, in addition to credit score ensures and mortgage compensation delay choices. “Coordination with the International Financial Institutions, with their extensive experience of the Afghan financial system, would be critical to this process,” UNDP stated in its report, referring to the World Bank and International Monetary Fund. The United Nations has repeatedly warned because the Taliban took over that Afghanistan’s financial system is on the brink of a collapse that may seemingly additional gasoline a refugee disaster. UNDP stated that if the banking system fails, it might take many years to rebuild. The UNDP report stated that with present developments and withdrawal restrictions, about 40% of Afghanistan’s deposit base might be misplaced by the tip of the yr. It stated banks have stopped extending new credit score, and that non-performing loans had virtually doubled to 57% in September from the tip of 2020. “If this rate continues of non-performing loans, the banks may not have a chance to survive in the next six months. And I am being optimistic,” al Dardari stated.

The Taliban are sitting on $1 trillion worth of minerals the world desperately needs

Liquidity has additionally been an issue. Afghan banks closely relied on bodily shipments of U.S. {dollars}, which have stopped. When it involves the native afghani forex, al Dardari stated that whereas there may be about $4 billion price of afghanis within the financial system, solely about $500 million price is in circulation. “The rest is sitting under the mattress or under the pillow because people are afraid,” he stated. As the United Nations seeks to avert famine in Afghanistan, al Dardari additionally warned in regards to the penalties of a banking collapse for commerce finance. “Afghanistan last year imported about $7 billion worth of goods and products and services, mostly foodstuff … If there is no trade finance the interruption is huge,” he stated. “Without the banking system, none of this can happen.”

- Advertisement-

Download Now
Stay Tuned with for more Entertainment information.

Socially Keeda

Socially Keeda, the pioneer of news sources in India operates under the philosophy of keeping its readers informed. tells the story of India and it offers fresh, compelling content that’s useful and informative for its readers.
Back to top button

Adblock Detected

Please consider supporting us by disabling your ad blocker