Afghanistan’s financial system is about to collapse, lender warns, as the US keeps nearly $10 billion in reserves frozen from the Taliban

Taliban CIA base

Members of the Taliban stand near the destroyed Central Intelligence Agency (CIA) base northeast of Kabul on September 6, 2021 after the US pulled all its troops out of the country. AAMIR QURESHI/AFP via Getty Images

  • The Afghan financial system is in an “existential crisis,” the head of one of its top lenders said.

  • He told the BBC people were only withdrawing money and “most of the banks are not functioning.”

  • The US froze nearly $10 billion in reserves belonging to the Afghan central bank after the Taliban takeover.

  • See more stories on Insider’s business page.

Afghanistan’s banking system is close to collapsing, the head of one of the country’s biggest lenders has warned.

Syed Moosa Kaleem Al-Falahi, the chief executive of the Islamic Bank of Afghanistan, told the BBC that Afghanistan’s financial industry was dealing with an “existential crisis” as customers panic after the Taliban took over the country last month, and Western nations and agencies freeze the country’s funds in response.

“There’s huge withdrawals happening at the moment,” he said.

“Only withdrawals are happening, most of the banks are not functioning, and not providing full services.”

The US froze nearly $9.5 billion in assets that belong to Afghanistan’s central bank last month. Most of that money is held by the Federal Reserve Bank in New York.

And the IMF said last month that Afghanistan could no longer access its resources. The World Bank also announced it was pausing funding to projects in Afghanistan.

The UN said earlier this month that Afghanistan’s frozen assets should be released to avoid “a severe economic downturn.”

Al-Falahi warned that Western nations and agencies freezing funds means Afghanistan is turning to China and Russia for help.

“It seems that sooner or later, they will be successful in dialogue,” he said. China has already sent aid to Taliban-run Afghanistan and pledged tens of millions of dollars.

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