The administration’s move will further cripple Afghanistan’s already paralyzed central bank; draining most of the bank’s capital — it also has about $2 billion scattered across Germany, Switzerland, the United Arab Emirates and Qatar — makes it even less likely that the bank will be able to resume its efforts to stabilize the value of Afghan currency and prices in that country, including by regularly auctioning millions of U.S. dollars for Afghan cash.
In recent weeks, a longtime member of the bank’s board, Dr. Shah Mohammad Mehrabi, had argued that the U.S. government should instead let Da Afghanistan Bank try to restart some of that work and carefully watch to make sure the funds did not reach the Taliban.
In an interview, Dr. Mehrabi — who is also an economics professor at Montgomery College in Maryland — contended that the central bank should be seen as independent of the now Taliban-led Afghan government. He said that many civil servants there knew how to run the bank, and that depriving the bank of the funds it needed to maintain price stability would lead to runs on commercial banks, mass defaulting on loans and ultimately broader disaster.
“You’re talking about moving toward a total collapse of the banking system,” he said. “I think it’s a shortsighted view.”
But an administration official familiar with the government deliberations argued that the “sad reality” was that even if the central bank regained access to the assets in New York and moved them all into Afghanistan for one last injection of capital, it would not solve the deeper structural problems that have sent the country’s economy spiraling into ruin.
For two decades, Afghanistan’s economy was drastically and artificially bolstered by enormous influxes of foreign aid and security assistance from the West, as the United States and its NATO allies pumped money into a nation-building effort.
But that spigot abruptly closed after the Taliban takeover in August, with devastating economic consequences. Among others, hundreds of thousands of Afghans whose salaries were paid by the former government are now unemployed, their incomes vanished.