International officials have expressed concern about the risks if Afghanistan’s financial systems continue on their path to collapse.
The United Nations Development Programme released a report on Monday urging action to help Afghanistan’s banks, according to Reuters. If the banks are not stabilized, it may become difficult for Afghan banks to pay off debts, lower deposits, and perform other necessary financial actions, leading to an economic collapse.
“Afghanistan’s financial and bank payment systems are in disarray. The bank-run problem must be resolved quickly to improve Afghanistan’s limited production capacity and prevent the banking system from collapsing,” said the UNDP report.
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With the Taliban taking control of Afghanistan in Europe, most nations have withdrawn support due to international and unilateral sanctions against the terrorist regime. This has pushed the country into an economic freefall. The UNDP estimates that if things do not change soon, about 40% of the nation’s deposit base will be lost by the end of the year.
“We need to find a way to make sure that if we support the banking sector, we are not supporting Taliban,” Abdallah al Dardari, head of UNDP in Afghanistan, told Reuters.
There are also liquidity concerns. Most Afghani currency is not being spent but stored “under the mattress or under the pillow because people are afraid,” claims al Dardari.
The UNDP report offers a few recommendations for solving this problem, including deposit insurance, ensuring liquidity for short and medium-term needs, credit guarantees, and repayment delay options.
“Coordination with the [World Bank and International Monetary Fund], with their extensive experience of the Afghan financial system, would be critical to this process,” says the UNDP in its report.
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A U.N. envoy reported on Nov. 18 that the Islamic State has expanded across Afghanistan in recent months and has a presence in “nearly all” provinces of the country.
The UNDP did not immediately respond to the Washington Examiner’s request for comment.
