Afghan Central Bank Drained Dollar Stockpile before Kabul Fell, Says Document

Afghans line up outside a bank to take out their money after Taliban takeover in Kabul, Afghanistan September 1, 2021. (Reuters)
Afghans line up outside a bank to take out their money after Taliban takeover in Kabul, Afghanistan September 1, 2021. (Reuters)
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Afghan Central Bank Drained Dollar Stockpile before Kabul Fell, Says Document

Afghans line up outside a bank to take out their money after Taliban takeover in Kabul, Afghanistan September 1, 2021. (Reuters)
Afghans line up outside a bank to take out their money after Taliban takeover in Kabul, Afghanistan September 1, 2021. (Reuters)

The Afghan central bank ran down most of its US dollar cash reserves in the weeks before the Taliban took control of the country, according to an assessment prepared for Afghanistan’s international donors, exacerbating the current economic crisis.

The confidential, two-page brief, written in early September by senior international economic officials, said the country’s severe cash shortage began before the Taliban took control of Kabul.

It was written for the use of donors and lenders, including the World Bank and International Monetary Fund.

It criticized how the central bank’s former leadership handled the crisis in the months before the Taliban’s conquest, including decisions to auction unusually large amounts of US dollars and move money from Kabul to provincial branches.

“FX (foreign exchange) reserves in CB’s (central bank) vaults in Kabul have depleted, the CB cannot meet ... cash requests,” the report, seen by Reuters, said.

“The biggest source of the problem is the mismanagement at the central bank prior to the Taliban takeover,” it added.

Shah Mehrabi, chairman of the central bank’s audit committee who helped oversee the bank before the Taliban took over and is still in his post, defended the central bank’s actions, saying it was trying to prevent a run on the local Afghani currency.

The extent of the cash shortage can be seen on the streets of Afghan cities, where people have been queuing for hours to withdraw dollar savings amid strict limits on how much they can take out.

Even before the shock of the Western-backed government’s collapse, the economy was struggling, but the return of the Taliban and abrupt end of billions of dollars in foreign aid has left it in deep crisis.

Prices for staples like flour have spiraled while work has dried up, leaving millions facing hunger as winter approaches.

Aid dries up
Under the previous government, the central bank relied on cash shipments of $249 million, delivered roughly every three months in boxes of bound $100 notes and stored in the vaults of the central bank and presidential palace, according to three people with direct knowledge of the matter.

That money has dried up as foreign powers shy away from dealing directly with the Taliban, which fought against foreign troops and the ousted government. Thousands of people - many of them civilians - died.

The central bank, which plays a key role in Afghanistan because it distributes aid from countries like the United States, said on Wednesday it had finalized a plan to meet the country’s foreign currency needs. It gave no details.

The hard currency crunch is making it difficult for the Taliban to meet basic needs, including paying for power or dispersing salaries to government employees, many of whom have not been paid in months.

Afghanistan’s roughly $9 billion of offshore reserves were frozen as soon as the Taliban captured Kabul, leaving the central bank with just the cash in its vaults.

According to the report, the central bank auctioned off $1.5 billion between June 1 and Aug. 15 to local foreign exchange dealers, which it said was “strikingly high”.

“By August 15, the Central Bank had an outstanding liability of $700 million and 50 billion Afghanis ($569 million) towards the commercial banks,” it said, adding that this had been a major factor in emptying its coffers.

Afghan central bank official Mehrabi said, however, that although almost $1.5 billion of auctions had been announced, the actual amount sold was $714 million.

He said the central bank had “continued its foreign exchange auction to reduce the depreciation and inflation.”

Money missing?
The report also questioned a decision by the central bank to shift some of its reserves to provincial branches, putting it at risk as Taliban militants made advances across the country from late 2020 in the runup to their victory.

It said around $202 million was kept in these branches at the end of 2020, compared with $12.9 million in 2019, and that the cash was not moved as provinces started to fall to the insurgents.

“Some money is reportedly lost (stolen) from ‘some’ of the provincial branches,” the report said, without specifying how much.

Mehrabi said the central bank was investigating money “stolen” from three of its branches, although not by the Taliban. He gave no further details.

Former central bank governor Ajmal Ahmady, who left the country the day after Kabul fell, did not respond to emails and other messages requesting comment on his and the bank’s actions in the months before the Taliban returned to power.

Ahmady has said on Twitter in recent weeks that he did his best to manage the situation, and blamed any cash shortfall on the freezing of central bank assets abroad.

In his statements, he also said the central bank had managed the economy well prior to the fall of Kabul and that he felt bad about leaving staff behind but feared for his safety. He has said no money was stolen from any reserve account.



Iranian Nuclear Program Degraded by up to Two Years, Pentagon Says

Sean Parnell. (AFP/Getty Images)
Sean Parnell. (AFP/Getty Images)
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Iranian Nuclear Program Degraded by up to Two Years, Pentagon Says

Sean Parnell. (AFP/Getty Images)
Sean Parnell. (AFP/Getty Images)

The Pentagon said on Wednesday that US strikes 10 days ago had degraded Iran's nuclear program by up to two years, suggesting the US military operation likely achieved its goals despite a far more cautious initial assessment that leaked to the public.

Sean Parnell, a Pentagon spokesman, offered the figure at a briefing to reporters, adding that the official estimate was "probably closer to two years." Parnell did not provide evidence to back up his assessment.

"We have degraded their program by one to two years, at least intel assessments inside the Department (of Defense) assess that," Parnell told a news briefing.

US military bombers carried out strikes against three Iranian nuclear facilities on June 22 using more than a dozen 30,000-pound (13,600-kg) bunker-buster bombs and more than two dozen Tomahawk land attack cruise missiles.

The evolving US intelligence about the impact of the strikes is being closely watched, after President Donald Trump said almost immediately after they took place that Iran's program had been obliterated, language echoed by Parnell at Wednesday's briefing.

Such conclusions often take the US intelligence community weeks or more to determine.

"All of the intelligence that we've seen (has) led us to believe that Iran's -- those facilities especially, have been completely obliterated," Parnell said.

Over the weekend, the head of the UN nuclear watchdog, Rafael Grossi, said that Iran could be producing enriched uranium in a few months, raising doubts about how effective US strikes to destroy Tehran's nuclear program have been.

Several experts have also cautioned that Iran likely moved a stockpile of near weapons-grade highly enriched uranium out of the deeply buried Fordow site before the strikes and could be hiding it.

But US Defense Secretary Pete Hegseth said last week he was unaware of intelligence suggesting Iran had moved its highly enriched uranium to shield it from US strikes.

A preliminary assessment last week from the Defense Intelligence Agency suggested that the strikes may have only set back Iran's nuclear program by months. But Trump administration officials said that assessment was low confidence and had been overtaken by intelligence showing Iran's nuclear program was severely damaged.

According to Iranian Foreign Minister Abbas Araqchi, the strikes on the Fordow nuclear site caused severe damage.

"No one exactly knows what has transpired in Fordow. That being said, what we know so far is that the facilities have been seriously and heavily damaged," Araqchi said in the interview broadcast by CBS News on Tuesday.