The Taliban-led Afghan government is cut off from using fund reserve assets days before the nation was set to receive almost US$500 million, depriving the group of key resources, the IMF said yesterday.
The country has been in line to on Monday next week receive new reserves, known as special drawing rights (SDRs), as part of a recently approved IMF plan to inject US$650 billion of liquidity into the troubled global economy.
While Afghanistan would still receive the assets, it would not be able to use them because the new regime lacks international recognition, the IMF said.
“As is always the case, the IMF is guided by the views of the international community,” an IMF spokesperson said by e-mail on Wednesday. “There is currently a lack of clarity within the international community regarding recognition of a government in Afghanistan, as a consequence of which the country cannot access SDRs or other IMF resources.”
According to IMF rules, all 190 members get the assets allocated on their balance sheets, with the total divided roughly proportionately based on their share of global economic output.
For Afghanistan, that is 0.07 percent of the total, or US$455 million.
The vast majority of nations would be allowed to exchange the reserves for cash to pay debt or provide fund COVID-19-related health spending.
However, Afghanistan is suspended from doing so, joining a small set of countries, including Venezuela and Myanmar, who would receive the assets at the IMF, but be unable to control them due to a lack of international recognition.
That is a blow to the new Afghan government in a nation that despite US efforts over 20 years to boost the economy and banking sector remains largely in a primitive state.
Almost three-quarters of the country’s nearly 40 million residents live in rural areas, while a majority of banks are in the three major cities, World Bank data showed.
The Afghan currency is not accepted for cross-border trade, leaving the nation dependent on US dollars and an informal transfer system used frequently in the Muslim world known as hawala.
The centuries-old trust-based method of moving cash underpinned international trade throughout the Middle East and South Asia before the advent of modern banking. It continues to be a central part of the financial system in many of those countries, particularly in Afghanistan.
The administration of US President Joe Biden had been taking steps to prevent the Taliban from being able to use the IMF-allocated reserves, a US Treasury official said.
A group of 18 US lawmakers also wrote to US Secretary of the Treasury Janet Yellen and asked her to intervene at the IMF to prevent the Taliban government from using the reserves.
The US has frozen nearly US$9.5 billion in assets belonging to the Afghan central bank and stopped shipments of cash to the nation, a White House official said on Tuesday.
Any central bank assets that the Afghan government has in the US would not be available to the Taliban, which remains on the Department of the Treasury’s sanctions designation list, the official said.
Among the issues that Afghanistan needs to resolve is leadership of the central bank.
Da Afghanistan Bank Governor Ajmal Ahmady fled the country earlier this week.
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