Afghanistan's Afghani has surprisingly emerged as the top-performing global currency for the September quarter, according to Bloomberg's data analysis. During this period, the Afghani's value has soared by 9%, a surge attributed to increased humanitarian aid and heightened trade with neighbouring Asian nations.
In an effort to assert control over their currency, the Taliban regime has introduced various measures, such as banning the use of US dollars and Pakistani rupees in local transactions. They have also imposed strict restrictions on the outflow of US dollars and have criminalised online currency trading, threatening offenders with imprisonment.
However, despite this currency success, Afghanistan continues to grapple with widespread poverty and a troubling human rights record. While the Afghani has gained 14% in value over the past year, it currently ranks third in global currency performance, trailing behind the currencies of Colombia and Sri Lanka.
A recent World Bank report underscores Afghanistan's isolation from the global financial system due to international sanctions. The report paints a grim picture, citing high unemployment rates, two-thirds of households struggling to meet basic needs, and a shift from inflation to deflation in the country.
In an effort to alleviate economic hardships, the United Nations has been dispatching regular shipments of US dollars, totalling up to $40 million, to support impoverished Afghans since the end of 2021. Currently, money changers, locally known as "sarraf," play a crucial role in facilitating foreign currency exchanges. They operate stalls in markets and establish businesses across the nation.
The open-air market of Sarai Shahzada in Kabul serves as the de facto financial centre of Afghanistan, where tens of millions of dollars are exchanged daily. According to the central bank, there are currently no trading restrictions in place. Due to financial sanctions, nearly all remittances to Afghanistan now rely on the Hawala money transfer system, upon which sarrafs heavily depend.
The United Nations estimates that Afghanistan requires approximately $3.2 billion in assistance for this year, but only $1.1 billion has been provided, as reported by the international organisation's financial tracking agency. Last year, the United Nations allocated roughly $4 billion to address the critical hunger threat faced by 41 million people in Afghanistan.