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![handle is hein.crs/govefhu0001 and id is 1 raw text is: Congressional Research Servce
Afghanistan Central Bank Reserves
0
February 23, 2022
According to the United Nations, Afghanistan has been
descending into the worst humanitarian crisis in the world
since the Taliban's August 2021 return to power. A U.S.
hold on assets of the Afghan central bank (Da Afghanistan
Bank, or DAB) deposited in the United States has attracted
particular scrutiny from some observers who describe this
as one of the most important factors impacting the
humanitarian and economic situations in Afghanistan.
Members of Congress have expressed a range of views on
how to proceed with the assets, including whether to
continue holding or utilizing them for economic assistance
or other purposes. In February 2022, the House considered,
but rejected, a measure that would have required the
Administration to submit an assessment to Congress on the
humanitarian impact in Afghanistan of both sanctions and
the U.S. hold on DAB assets.
According to the International Monetary Fund (IMF), total
international DAB reserves are $9.76 billion, as of the end
of 2020, the most recent data available. Of this amount, $2
billion is deposited in financial institutions in the United
Kingdom, Germany, Switzerland, and the United Arab
Emirates. The remaining funds are deposited at the Federal
Reserve Bank of New York.
On February 11, 2022, President Biden signed Executive
Order 14064 to block U.S.-held Afghanistan central bank
reserves, and stated his intention to disburse $3.5 billion of
the $7 billion currently held in the U.S. Federal Reserve
Bank for the benefit of the Afghan people. The Biden
Administration is currently exploring possible avenues,
including humanitarian relief efforts, possibly through a
separate trust fund or by providing support through the
United Nations or some other enabling organization.
Alternatively, the $3.5 billion could contribute toward the
potential recapitalization of a future central bank [in
Afghanistan] that is recognized and the recapitalization of a
financial system, according to Tom West, the State
Department's Special Representative for Afghanistan.
E.O. 14064 comes in the context of ongoing litigation
brought by some victims of the September 11, 2001 (9/11)
terrorist attacks to use the Afghan assets to satisfy their
judgments against the Taliban. Many of the Afghan assets
held in the Fed are subject to writs of attachment by the
plaintiffs in these cases, who would be able to seize the
assets, if a U.S. court grants permission. After setting aside
half of the Afghan assets for humanitarian or economic
assistance, E.O. 14064 would leave the remaining $3.5
billion unavailable until these legal challenges are resolved.
Economic Impact in Afghanistan
Afghanistan's economy has been hamstrung by a number of
factors, including a lack of natural resources, rampant
corruption, and decades of conflict. The country's economy
has contracted sharply since the Taliban's August 2021
takeover, exacerbating the humanitarian situation. Along
with other factors, including the cessation of international
development assistance and U.S. and international sanctions
on the Taliban, the U.S. hold on Afghanistan's central bank
assets has arguably contributed to the economic breakdown.
The former U.S.-backed government relied heavily on
international development assistance. Foreign donors
financed more than half of the government's $6 billion
annual budget and as much as 80% of total public
expenditures. Between 2002 and 2021, the United States
provided over $17 billion to the Afghan government in on-
budget assistance-funds that went directly, or indirectly
through multilateral trust funds, to Afghan government
entities. That aid and other support for Afghanistan helped
raise the country's per capita gross domestic product (GDP)
from $179 in 2002 to $508 in 2020. Afghanistan's central
bank reserves grew from just under $7 billion in 2013 to
$9.8 billion at the end of 2020 (Figure 1).
Figure 1. Afghanistan Central Bank Reserves (Billions
of current USD)
9
8.5
8
7.5
65
2012 2013 2014 2015 201 2017 2018 2019 2020
Source: International Monetary Fund.
The United States held the DAB assets days after the
Taliban entered Kabul, to prevent the group from accessing
the bank's resources. That decision has contributed to
instability in Afghanistan's currency, the afghani (which
has lost considerable value since August 2021), and a
severe liquidity crisis. Afghanistan is a highly cash-
dependent society; according to the World Bank, 85% of
Afghans did not have a bank account as of 2020. Moreover,
Afghanistan does not have the technical capability to print
its own currency. In at least some parts of the country, food
is available, but many Afghans can't pay for it, illustrating
the impact of the country's financial crisis on the broader
humanitarian and economic conditions.
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