According to a report by Bloomberg, the Afghan afghani has emerged as the best performing currency this quarter, climbing by 9%. This significant increase is attributed to the billions of dollars in humanitarian aid and growing trade with neighboring Asian countries. The ruling Taliban, who took power two years ago, has implemented various measures to maintain control over the currency, including 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 barred online trading and threatened to impose penalties, including imprisonment, for those who violate these rules.
Despite the positive performance of the afghani, experts believe that the economic, social, and political instability in Afghanistan will limit the sustainability of this rise in the currency. Kamran Bokhari, an expert in Middle Eastern, Central, and South Asian affairs, highlighted that while the hard currency controls may be effective in the short term, the overall instability in the country will likely hinder long-term stability.
In contrast to the Afghan afghani’s performance, Pakistan’s rupee has lost nearly 22% of its value this year alone. The report mentioned that foreign exchange in Afghanistan is primarily conducted through money changers in the bustling market of Sarai Shahzada in Kabul. Remittances are also being brought into the country through the Hawala system. Despite the challenges faced by Afghanistan, experts predict that the afghani will stabilize at its current levels until the end of the year. As a sign of some easing pressure on the currency, the country’s central bank has increased the limit for dollar withdrawals.
This unexpected rise in the currency comes amid widespread unemployment, with two-thirds of households struggling to afford basic necessities, and inflation turning into deflation, according to a World Bank report.