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Exiled Afghan Central Bank Chief Says Taliban-Led Government Faces Major Economic Shocks

Ajmal Ahmadi (file photo)

Afghanistan's exiled central-bank governor expects the impoverished country to face a series of economic shocks under the Taliban.

Ajmal Ahmady, who headed the Da Afghanistan Bank, said in an interview on Bloomberg's Odd Lots podcast on August 22 that a weaker currency, rising inflation and higher import costs, and capital controls were likely on the horizon.

With the United States freezing most of the central bank's estimated $9.4 billion in assets, Afghanistan's already battered economy is vulnerable, Ahmady said.

In addition to a U.S. freeze on central-bank assets, the International Monetary Fund has cut off the new Taliban government from the international lender's resources, including $500 million that was to be distributed on August 23.

The country is already dealing with COVID-19, a regional drought, and displaced people.

"It's a really challenging situation," Ahmady said. "We were trying to manage three shocks, and now I think they're going to have to deal with a fourth."

The national currency, the afghani, has lost 10 percent of its value since the beginning of the year and reached a record low after the Taliban seized Kabul on August 15. The currency is not accepted for cross-border trade, leaving the country reliant on U.S. dollars and an informal transfer system known as hawala.

Afghanistan is one of the poorest countries in the world and highly dependent on foreign aid, which has covered about three-quarters of the government budget, according to the World Bank. Millions of Afghans are in need of humanitarian assistance.

In a sign of how acute the problem is, the Taliban on August 23 named Haji Mohammad Idris as acting central bank chief to help bring order to a war-crippled economy, which has been adrift for more than a week with banks closed and many government offices empty.

Still, with the Taliban in control, the vast majority of foreign aid is expected to dry up.

The Taliban will "probably try to go out to other countries to replace the U.S., and maybe China, Pakistan, or other regional countries to find some sources of finance," Ahmady said. "But it's a tough situation."

Ahmady is currently living in an undisclosed location outside of Afghanistan, after fleeing Kabul when the government fell to the Taliban.

With reporting by Bloomberg and Reuters
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