The United Nations: The United Nations on Monday encouraged an urgent action to support the Afghan Bank, warned that the surge in people who could not pay loans, lower deposits and cash liquidity crises could cause the financial system to collapse in a few months.
In a three-page report on the Afghan banking and financial systems seen by Reuters, UN Development Program. (UNDP) said the economic costs of the banking system that collapsed – and the consequent of negative social impacts – “will be colossal.”
Suddenly withdrawals from most of the foreign development support after the Taliban seized power on August 15 from the Western Afghan government had sent the economy into freefall, placing severe pressure on the banking system that set a weekly withdrawal limit to stop deposits.
“The financial payment system and Afghan bank are in chaos. Bank managed problems must be completed quickly to increase the limited production capacity of Afghanistan and prevent the banking system from collapsing,” UNDP report said.
Finding ways to avoid complexity is intelligence by international sanctions and unilateral against Taliban leaders.
“We need to find a way to ensure that if we support the banking sector, we do not support the Taliban,” Abdallah Al Dardari, Head of the UNDP in Afghanistan, told Reuters.
“We are in a very bad situation so we need to think of all possible options and we have to think outside the box,” he said. “What was once three months ago who was unthinkable, he had to think about now.”
Afghan’s banking system is vulnerable before the Taliban is in power. But since then development assistance has dried up, billions of dollars in Afghan assets have been frozen abroad, and the United Nations and aid groups are now struggling to get enough cash to the country.
The United States works with the United Nations, UNDP and institutions and other international countries “to find ways to offer liquidity, to seep, to ensure that Afghans can use international support in a way that does not flow. In the Taliban cash,” a spokesman said Ned Price Department.
‘Under the mattress’
UNDP proposals to save the banking system include deposit insurance schemes, steps to ensure adequate liquidity for short and medium-term needs, as well as credit guarantees and loan payment delays options.
“Coordination with international financial institutions, with extensive experience of their Afghan financial systems, will be very important for this process,” UNDP said in its report, referring to the World Bank and the International Monetary Fund.
The United Nations has repeatedly warned because the Taliban took over the Afghan economy was on the verge of collapse which would likely trigger the refugee crisis. UNDP said that if the banking system failed, it could take decades to rebuild.
The UNDP report said that with current trends and withdrawal restrictions, around 40% of the Afghan deposit base will disappear at the end of the year. It was said that the Bank had stopped expanding new loans, and that loans that did not perform almost doubled to 57% in September since the end of 2020.
“If this level continues from bad credit, the bank may not have the opportunity to survive in the next six months. And I am optimistic,” said Al Dardari.
Liquidity is also a problem. Afghan banks are very dependent on the physical delivery of the US dollar, which has stopped. When it came to the local Afghani currency, Al Dardari said that while there were around $ 4 billion from Afghanistan in the economy, only around $ 500 million was worth circulation.
“The rest sit under the mattress or under the pillow because people are afraid,” he said.
When the United Nations tried to prevent hunger in Afghanistan, Al Dardari also warned about the consequences of banking collapse for trade finance.