Under Taliban rule, Afghanistan’s banking system is imploding

by Zaid Aleem

The Taliban’s control in Afghanistan is in jeopardy: the country’s banking system is on the danger of collapsing, according to CNN reports. 

Afghanistan’s banks are still closed over two weeks after the Taliban took power. As a result, many individuals in the country are cash-strapped. One current employee of Afghanistan’s national bank told CNN, “No one has money.” Many families don’t have enough money for their everyday expenses, according to the employee, who requested anonymity due to concerns for their safety.

All of this increases the possibility of a major economic and humanitarian disaster in Afghanistan just weeks after the Taliban took control. The main issue is that Afghanistan’s economy is heavily reliant on foreign money and international help, both of which have been mostly banned since Kabul’s fall. According to the World Bank, grants account for 75% of Afghanistan’s government spending.

Afghanistan’s banks are still closed, despite the Taliban’s order for them and other services to reopen, due to a lack of cash, according to a central bank source.

“You’ve got a stack of cards that is about to come down,” a person familiar with the situation of the Afghan economy told CNN. “As soon as you open the banks, it will expose how fragile the system is.”

“Afghanistan and its financial sector are at a ‘existential flash point,’ with the banking industry on the verge of collapse,” according to a document released by the Afghan-American Chamber of Commerce on August 23. A banking and finance working committee comprised of major Afghan commercial banks, consumers, and investors drafted the letter.

The Biden administration moved quickly to prevent the Taliban from gaining access to billions of dollars stored by the US central bank.

The International Monetary Fund (IMF) has put a hold on $450 million in funding that were set to arrive in Afghanistan this week. The World Bank then put a stop to financial aid to Afghanistan.