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Ajmal Ahmady, former Afghanistan central bank governor; Photo: Wikimedia Commons

Afghanistan's former central bank governor, Ajmal Ahmady, had a front-row seat to the country's recent economic development. So he knows as well as anyone the financial risks the new government — and the people of Afghanistan — now face.

Driving the news: In a talk with the Atlantic Council on Friday, Ahmady shared his inside perspective on the Afghan financial system and concerns for the future of the economy. Front and center: the lack of hard currency.

Why it matters: A money drain from the country is intensifying a humanitarian crisis.

  • Because of long-standing international sanctions against the Taliban, the new Taliban-controlled government doesn't have access to Afghanistan's central bank reserves held overseas, and the U.S. halted shipments of dollars into the country.

What he's saying: A shortage of Afghanistan's own currency, the Afghani, could be worsened by the fact that the country can't print money itself. There's no banknote printer within its borders.

  • Instead, Afghanistan had contracts with companies in Poland and France, to name a few, to print new Afghanis, Ahmady said.
  • But European companies are likely to also halt business with the government in light of the sanctions.

The Taliban will be in the market for another printer. Private companies residing in nations with a friendlier stance toward the new Afghan government may still not want to run afoul of the sanctions, Ahmady said.

  • One possibility: Neighboring Pakistan has a banknote printer.

State of play: Amid the cash shortage, the government has placed limits on how many Afghanis individuals can withdraw from banks. Often, banks aren't even able to provide that minimum to customers, Ahmady noted.

  • In that void, the Pakistani rupee may become an increasingly common medium of exchange, now that it's accepted for trade in Afghanistan, he explained.

What to watch: The shortage of cash and devaluation of the Afghani could lead to a growing rate of inflation.

  • This may hit the Afghan population most hard when it comes to food staples like wheat and flour, for which the country relies on imports, Ahmady said.

Go deeper

Sep 23, 2021 - World

WHO: Nearly 1 in 4 Afghan COVID hospitals shut after Taliban takeover

A family member stands beside a COVID-19 patient at the Muhammed Ali Jinnah hospital in Kabul, Afghanistan, in June. Photo: Wakil Kohsar/AFP via Getty Images

Afghanistan's health system is "on the brink of collapse" due to international funding cuts since the Taliban took over the country, World Health Organization officials said Wednesday.

The big picture: Nine of Afghanistan's 37 COVID-19 hospitals have closed and "all aspects" of the country's pandemic response have declined, including testing and vaccination, per a statement from WHO chief Tedros Adhanom Ghebreyesus following his visit to the capital, Kabul, where he met with Taliban leaders.

Felix Salmon, author of Capital
1 hour ago - Economy & Business

Maybe we can ignore inflation expectations

Illustration: Sarah Grillo/Axios

Just because we expect inflation to show up, doesn't mean it will. That's the message from an important new paper throwing cold water on a central tenet of monetary economics.

Why it matters: The Fed hikes interest rates when — and only when — it thinks inflation is otherwise going to be too high. That means it needs a formula to determine where it thinks inflation is going to be. But now a senior Fed economist is saying that the key ingredient in that formula "rests on extremely shaky foundations."

3 hours ago - Technology

Facebook: Metaverse won't "move fast and break things"

Illustration: Aïda Amer/Axios

Facebook on Monday said it will invest $50 million over two years in global research and program partners to ensure its metaverse products "are developed responsibly."

Why it matters: "It's almost the opposite of that now long-abandoned slogan of 'move fast and break things,'" Facebook's VP of global affairs Nick Clegg told Axios in an interview at The Atlantic Festival Monday.