Afghan currency reaches record low after president Ghani’s exit

Web DeskWeb Editor

18th Aug, 2021. 04:18 pm

ISLAMABAD: After a cowardly escape of Afghan President Ashraf Ghani, Afghanistan’s acting central bank governor also joined the bandwagon and departed from the country, as the Taliban fighters took control of the capital, with the political uncertainty pushing the nation’s currency to a record low, Bloomberg reported.

The Afghani fell as much as 1.7 per cent on Tuesday to 83.5013/dollar, a fourth day of decline, according to the data compiled by the international news agency.

The central bank was told there would be no more dollar shipments on Friday, which curtailed its ability to supply currency and led to more panic, acting Governor Ajmal Ahmady wrote in a Twitter thread.

Ahmady boarded a military plane at the Kabul Airport, where thousands sought to leave, as the Taliban’s rapid territorial advance led to the collapse of the government. There was no evacuation plan, and President Ashraf Ghani’s departure without creating a transitional government contributed to the chaos, Ahmady wrote.

“Currency spiked from a stable 81 to almost 100 then back to 86,” the central banker wrote. “I held meetings on Saturday to reassure banks and money exchangers to calm them down.”

On Sunday, the governor left the central bank and went to the airport where he saw other government leaders. More than 300 passengers were packed into his flight, though it had no fuel or pilot, he wrote.

“It did not have to end this way. I am disgusted by the lack of any planning by Afghan leadership,” he wrote.

The turmoil in Afghanistan spilled over into markets in Pakistan.

Sovereign dollar bonds due 2031 for Pakistan dropped 1.8 cents on Monday, the biggest decline since the government priced the notes in March. Pakistani dollar bonds were the biggest losers in Asia on Monday. The notes rose 0.4 cents on the dollar on Tuesday to 100.9 cents.

However, according to the Forex Association of Pakistan chairman Malik Bostan, the rate of Afgani currency after a panic selling on Friday regained 30 paisa on Tuesday.

“On Friday the Afghani currency closed at Rs1.50, which now reached Rs1.80. “The sense of maturity shown by the Taliban to calm down the investors and subside the environment of political uncertainty,” he observed.

Malik Bostan said trading of Afghan currency only in Peshawar and Quetta because on average 30,000 persons travelled between Pak-Afghan borders.

“Investors are concerned over any impact on law and order in Pakistan, and whether “global forces will try to isolate Pakistan” due to its alleged support of the Taliban, said Abdul Kadir Hussain, the head of fixed-income asset management at Dubai-based Arqaam Capital. Senior financial analyst Samiullah Tariq was of the view that the future of the Afghan currency would depend upon the future economic direction, monetary policy and fiscal policy. “One thing is clear that with a favorable regime in Afghanistan, Pakistan will benefit economically and diplomatically,” he said.

Piotr Matys, senior FX analyst said, “A broader contagion from the latest dramatic developments in Afghanistan should be relatively limited. “Afghan assets could prove attractive to opportunistic foreign investors who may assume that Afghanistan could potentially become a far more stable country going forward.

Nation may also benefit from China expressing interest to rebuild it and potentially include it in its “One Belt, One Road” initiative

“Democracy is not often the top priority for international investors who appreciate stability and predictability in politics, even if provided by authoritarian regimes,” he observed.

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