According to a Bloomberg report, the Afghan afghani has become the best-performing currency this quarter, climbing by 9%. This rise in value is attributed to billions of dollars in humanitarian aid and increased trade with Asian neighbors. To maintain control over the currency, the Taliban, who seized power two years ago, has implemented measures such as banning the use of dollars and Pakistani rupees in local transactions and imposing restrictions on bringing US dollars out of the country. The Afghan authorities have also prohibited online trading and have threatened punitive measures for violators.
Despite Afghanistan’s economic, social, and political instability, the afghani’s surge in value is expected to be a short-term phenomenon. Experts suggest that while the hard currency controls are currently effective, these factors will eventually limit the currency’s long-term stability. The country’s neighbor, Pakistan, has experienced the opposite trend, with the rupee losing nearly 22% of its value this year alone. Kabul’s Sarai Shahzada market serves as the country’s financial hub, where millions of dollars are exchanged daily, facilitated largely by money changers. Remittances to Afghanistan are primarily carried out through the Hawala system.
Anwita Basu, the head of Europe country risk at BMI in London, predicts that the Afghan afghani will stabilize at its current levels until the end of the year. As pressure on the currency eases, Afghanistan’s central bank has raised the limits for dollar withdrawals for businesses and individuals. Despite the surprising rise of the afghani, the country still faces significant challenges, including high unemployment and inflation turning into deflation, as reported by the World Bank.