Hasibullah Noori: The Central Bank of Afghanistan Has Sufficient Financial Resources to Meet Market Currency Needs

Weezha Roz– On Saturday, February 6, the value of the US dollar reached 80 Afghanis, while just a week ago, the exchange rate was 75 Afghanis.

This unprecedented decline started after former President Donald Trump’s order to halt US aid and review related foreign policies.

To maintain the value of the Afghan currency, the Central Bank of Afghanistan today auctioned 20 million US dollars in the market, but as seen in the final hours of the day, this did not have any significant impact.

Hasibullah Noori, spokesperson for the Central Bank of Afghanistan, told *Special Report* that this action was taken to control currency fluctuations, stabilize the Afghan currency, and meet market demands.

Mr. Noori assured that the central bank is committed to preventing fluctuations and stabilizing the value of the Afghan currency.
“Our policies for controlling currency fluctuations are based on sound monetary policies.”

He stated, “As experienced globally, short-term currency fluctuations are a natural part of the economy, and with the use of strong monetary policies, these fluctuations can largely be controlled.”

According to Mr. Noori, the central bank is focused on its efforts in this regard and will not allow severe fluctuations in this area.

The Central Bank of Afghanistan has sufficient financial resources and will meet the market’s currency needs if necessary.

Background:

The reduction or cessation of foreign aid, especially economic aid from major countries like the United States, can have significant impacts on the national currency of a country, including Afghanistan.

In Afghanistan’s case, following the announcement of aid cuts by the Trump administration, this decision has had considerable effects on the country’s economy and the value of the Afghan currency (AFN) against the US dollar.

Here, we examine several key aspects of this issue:

1. Decrease in Foreign Currency Reserves and Increased Demand for Dollars:
– Foreign aid, particularly from the United States, forms a large portion of Afghanistan’s economy.

When this aid is cut or reduced, the country’s foreign currency reserves directly decrease.

This can lead to increased demand for dollars as the preferred international currency.

– In such situations, people and businesses tend to convert their assets into dollars to protect themselves from economic instability and fluctuations. This can lead to a depreciation of the Afghan currency against the dollar.

2. Increased Pressure on the Balance of Payments:
– Cuts in aid typically create challenges in the balance of payments (the difference between imports and exports).

If the country is unable to generate sufficient resources through exports or foreign investment, it will likely need more dollars to cover its import needs.

As a result, the demand for dollars increases, causing the value of the Afghan currency to decrease.

3. Government and Central Bank Face Greater Challenges:
– The cessation of foreign aid can severely limit government financial resources, meaning that the Central Bank of Afghanistan might not be able to take the necessary actions to stabilize the value of the Afghan currency against the dollar.

In these circumstances, the Central Bank may struggle to maintain sufficient foreign currency reserves to mitigate the pressures.

4. Lack of Confidence in the Economic Future:
– The reduction of foreign aid causes disillusionment and a lack of trust in the country’s economic future among both the public and investors.

In such circumstances, foreign investors are likely to withdraw their capital, and local people will seek to store foreign currencies (especially dollars) to protect the value of their assets.
– This situation can lead to severe currency fluctuations and economic instability in Afghanistan.

5. Social and Economic Impacts:
– The reduction in aid may also lead to a decline in social and infrastructure programs that were previously financed through foreign assistance.

This could negatively affect the social and economic well-being of the people and exacerbate the internal problems of the country.

Conclusion:

The cessation of aid, particularly in a situation where Afghanistan’s economy is heavily dependent on this aid, can have significant negative impacts on the value of the Afghan currency and the country’s overall economic situation.

Given that the US and other countries play a crucial role in financing various projects and programs in Afghanistan, the reduction in this aid will undoubtedly affect the country’s currency stability and economic growth.

To address these challenges, there is a need for domestic efforts to boost exports, reduce reliance on foreign aid, and strengthen the domestic economy.

Additionally, strategies should be developed to attract foreign investment and create a stable and attractive environment for businesses.

Weezha Roz