Afghanistan: Banking chief warns of ‘existential crisis’

Afghanistan’s banking system is on the verge of collapse.

Syed Moosa Kaleem Al-Falahi, the Chief Executive of the Islamic Bank of Afghanistan in an interview to the BBC said the country’s financial industry is in the grip of an “existential crisis” as customers panic.

“There’s huge withdrawals happening at the moment”, he said, speaking from Dubai, where he is temporarily based because of the chaos in Kabul.

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

Afghanistan’s economy was already on shaky ground even before the Taliban took control in August.

It is hugely dependent on foreign aid, about 40% of its gross domestic product (GDP) comes from international aid, according to the World Bank.

But since the Taliban takeover, the West has frozen international funds, including assets Afghanistan could have accessed with the World Bank and International Monetary Fund (IMF).

Mr Al Falahi says this is encouraging the Taliban to look for other sources of financial support.

“They are looking forward to China and Russia, and some other countries as well.

“…it seems that sooner or later, they will be successful in dialogue,” he said.

China has already talked about its desire to help rebuild Afghanistan, and work with the Taliban.

A recent editorial in the Chinese state-controlled Global Times said there is “huge potential for cooperation in rebuilding Afghanistan”, adding that China is “definitely a leading player”.

China has already pledged 200 million Chinese yuan ($31 million) worth of aid including food supplies and coronavirus vaccines.

Still, the Taliban is under pressure to fix Afghanistan’s economic problems now.

Inflation is soaring, the Afghani, the country’s currency, is plummeting and people are desperate as many have lost their jobs and are short of cash.

The United Nations World Food Programme has warned that only 5% of households in Afghanistan have enough to eat every day.

Half of those surveyed said they have run out of food altogether at least once in the last two weeks.

So accessing international funds and foreign assistance is key to Afghanistan’s survival.