The $3.5 bn send into “Afghan Fund” a first step in putting Afghanistan's frozen assets back to work

New Delhi: The United States, through the Department of the Treasury and the Department of State, and in coordination with international partners including the government of Switzerland and Afghan economic experts, announced the establishment of a fund to benefit the people of Afghanistan or the “Afghan Fund.”

Interestingly Taliban are not a part of the Afghan Fund. Also, Da Afghanistan Bank (DAB) is crippled and there is no world guarantee or accountability if money is transferred to the Afghan Bank and is not confiscated.

“The United States remains committed to supporting the people of Afghanistan amidst ongoing economic and humanitarian crises. Pursuant to Executive Order (E.O.) 14064, President Biden set a policy of enabling $3.5 billion of Afghan central bank reserves to be used for the benefit of the people of Afghanistan while keeping them out of the hands of the Taliban and other malign actors. The Afghan Fund will protect, preserve, and make targeted disbursements of that $3.5 billion to help provide greater stability to the Afghan economy, “ the press release issued jointly by the State and treasury department of the US read.

The press release further read that “The Taliban are not a part of the Afghan Fund, and robust safeguards have been put in place to prevent the funds from being used for illicit activity.”

Afghan Fund account in Swiss BIS Bank

The Afghan Fund will maintain its account with the Bank for International Settlements (BIS) based in Switzerland. The BIS is an international financial organization that provides a range of financial services, including banking services to central banks. An external auditor will monitor and audit the Afghan Fund as required by Swiss law.

The international board of experts is tasked to ensure that strict compliance with anti-money laundering and terrorist financing protocols is maintained in all circumstances including third-party supervision of the funds once handed over to the Taliban government.

Humanitarian Crisis

“The people of Afghanistan face humanitarian and economic crises born of decades of conflict, severe drought, COVID-19, and endemic corruption,” said Wendy Sherman, United States Deputy Secretary of State.

“Today, the United States and its partners take an important, concrete step forward in ensuring that additional resources can be brought to bear to reduce suffering and improve economic stability for the people of Afghanistan while continuing to hold the Taliban accountable.”

“In response to the critical challenges facing the people of Afghanistan, the United States is already the largest donor of humanitarian assistance,” Sherman also noted. “We have worked with the World Bank and Asian Development Bank to make available more than $1 billion in assistance for basic services and other urgent needs, in addition to providing over $814 million in U.S. humanitarian aid directly to implementing partners to support the Afghan people while preventing funds from benefiting the Taliban. Now, the Afghan Fund will be part of our ongoing diplomatic and humanitarian efforts on behalf of the people of Afghanistan.”

Use of the Funds

The Board of Trustees of the Afghan Fund will have the ability to authorize targeted disbursements to promote monetary and macroeconomic stability and benefit the Afghan people. This could include paying for critical imports like electricity, paying Afghanistan’s arrears at international financial institutions to preserve their eligibility for financial support, paying for essential central banking services like SWIFT payments, and others. In the long-term, the goal is for funds not used for these limited purposes to be preserved to return to DAB.

Around $9 billion of Afghanistan’s central bank and foreign currency assets held with the US and other foreign banks were frozen after the Taliban took over Kabul on August 15 and drove out the US-backed government of President Ashraf Ghani.

The US has been under pressure from human rights activists and the Afghan diaspora to release funds to alleviate the humanitarian disaster unfolding in the war-ravaged country.

The US government has faced criticism for holding back Afghan funds at a time when ordinary Afghans are reeling under hunger and poverty. Many have slammed the US for politicising the funds against the Taliban, even though it was Al Qaeda which was responsible for the 9/11 attacks.

According to the World Bank, income and economic output in Afghanistan have fallen 20-30 per cent, imports have declined by approximately 40 per cent, and about 70 per cent of Afghan households report they are unable to fully meet basic food or non-food needs. Disbursements from the Afghan Fund could include keeping Afghanistan current on its debt payments to international financial institutions, which would preserve their eligibility for development assistance, and paying for critical imports, such as electricity.