Aug 23, 2021 - Economy & Business

Afghanistan economy on the brink

A crowd of Afghans lined up waiting their turn at an ATM outside a building

Afghan people wait to collect money from an ATM in Kabul on Friday. Photo: AFP via Getty Images

A developing economic crisis in Afghanistan is adding a fresh layer of turmoil in the country.

Why it matters: “[T]he value of the Afghan currency could collapse, inflation could accelerate and the mix of violence and chaos could be prolonged,” the AP writes.

What’s new: Wire-transfer services Western Union and MoneyGram stopped facilitating payments into Afghanistan, a flow of money that’s “a key source of support for many Afghan families,” the Wall Street Journal reports.

  • The backdrop: ATMs are running out of cash. Prices for a range of essentials like flour and oil are rising sharply.

The big picture: The country’s economy has relied on foreign aid that’s at risk of shriveling up with the Taliban takeover.

What to watch: The Taliban appointed Mohammad Idris — “an obscure official” — as acting head of Afghanistan’s central bank, charged with steering monetary policy, Bloomberg reports.

The afghani, the country’s currency, is in freefall. For a place that facilitates trade in U.S. dollars, any imports will get more expensive.

  • What they're saying: “If the Taliban don’t get cash infusions soon to defend the afghani, I think there’s a real risk of a currency devaluation that makes it hard to buy bread on the streets of Kabul for ordinary people," the Overseas Development Institute’s Graeme Smith tells the AP.

The bottom line: “Afghanistan, unfortunately, was already facing multiple crises. … What you have on top of that is going to be economic hardships,” Ajmal Ahmady, who served as Afghanistan's central bank chief until the government fell and he fled the country, told CNN.

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