Surprising Twist: Afghanistan's Currency Surges 9%, Crowned Best Performer Worldwide!
In a surprising turn of events, Afghanistan's currency, the Afghani, has claimed a top spot in global rankings this quarter. This achievement is remarkable for a country plagued by poverty and one of the world's worst human rights records. Since seizing power two years ago, the Taliban has taken a series of measures to bolster the Afghani's position. These actions include banning the use of US dollars and Pakistani rupees in local transactions, imposing tighter restrictions on taking foreign currency out of the country, and even outlawing online trading, with severe penalties for violators. Challenges Persist Despite Afghani's Currency Resurgence
Beneath the surface of this currency resurgence lies the ongoing turmoil in Afghanistan. The country remains cut off from the global financial system due to sanctions. Widespread unemployment, the financial struggles of two-thirds of households, and the emergence of deflationary pressures present a bleak economic landscape. The United Nations has stepped in with regular shipments of US dollars, some as large as $40 million, to support the impoverished population for over 18 months since the end of 2021.
Experts Warn of Short-Lived Nature of Currency Boost
Kamran Bokhari, an expert in Middle Eastern, Central, and South Asian affairs at the New Lines Institute for Strategy & Policy in Washington, offers a cautionary perspective. While the currency controls may be effective in the short term, the persistent economic, social, and political instability in Afghanistan could overshadow this temporary currency surge.
Money Changers Transform Foreign Exchange Landscape in Afghanistan
The foreign exchange landscape in Afghanistan has undergone a significant shift, with money changers, known as "sarrafs," now playing a central role. These individuals set up stalls in markets and operate from shops in cities and villages. Kabul's bustling Sarai Shahzada market has become the de facto financial hub of the country, where millions of dollars change hands daily, without any trading limits imposed by the central bank.
Hawala System Becomes Key Player in Remittances
Due to financial sanctions, nearly all remittances into Afghanistan now flow through the centuries-old Hawala money transfer system, a practice also common in the Middle East. This system has become an integral part of the sarrafs' operations.
Dollar Smuggling Provides Lifeline to Taliban
In addition to these dynamics, the smuggling of dollars from Pakistan has provided crucial support to the Taliban in recent months. The country's central bank, Da Afghanistan Bank, conducts weekly auctions, offering up to $16 million to stabilize the Afghani, according to spokesman Hassibullah Noori. 💰Join our WhatsApp Group for Trading/Investment ideas & Market Updates👇
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