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1 1 (March 13, 2023)

handle is hein.crs/govekwg0001 and id is 1 raw text is: AaCongressional Research Service lnforming the iegsIitive debate since 1914 Afghanistan Central Bank Reserves Updated March 13, 2023 Since the Taliban's August 2021 return to power, Afghanistan has faced an extreme recession and a humanitarian crisis. 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 the U.S. government should continue holding or utilizing the assets for economic assistance or other purposes. According to a June 2021 DAB financial statement, total international reserves were around $9.5 billion. Of this amount, $7 billion was deposited at the Federal Reserve Bank of New York, with the rest remaining in Afghanistan or deposited in foreign financial institutions. On February 11, 2022, President Biden signed Executive Order 14064 to block U.S.-held Afghanistan central bank reserves, and separately 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. In September 2022, the Biden Administration announced the establishment of the Afghan Fund to protect, preserve, and-on a targeted basis-disburse $3.5 billion for the benefit of the Afghan people. Based in Switzerland, the new Afghan Fund has a four-member board made up of a U.S. Treasury Department official (Counselor Andrew Baukol), a Swiss foreign ministry official (Ambassador Alexandra Elena Baumann), and two Afghans (former finance minister Anwar-ul-Haq Ahady and Shah Mehrabi, a U.S.-based economic expert who remains on the DAB governing board). The board met for the first time in November 2022 and again in February 2023 and, as of March 2023, has not made any disbursements. The U.S. Agency for International Development reports that DAB must undergo a third-party assessment of its performance in three areas prior to any disbursement from the Afghan Fund: (1) overseeing anti-money laundering measures, (2) combatting the financing of terrorism, and (3) maintaining its independence from outside interference. Against the backdrop of establishing the Afghan fund for the benefit of the Afghan people, there is 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. The Afghan assets held in the Federal Reserve were subject to writs of execution in these cases, but a court found that the assets are immune from attachment. The decision is on appeal at the U.S. Court of Appeals for the Second Circuit. After setting aside half of the Afghan assets for humanitarian or economic assistance, E.O. 14064 leaves 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 country's economic breakdown. The U.S.-backed former 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 more than $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 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) Source: International Monetary Fund. The United States held the DAB assets days after the Taliban entered Kabul to prevent the group from accessing them. That decision has contributed to instability in Afghanistan's currency, the afghani (which lost considerable value against the U.S. dollar after August 2021 but has been relatively stable since March 2022), and a severe liquidity crisis. Afghanistan is a highly cash- dependent society: According to the World Bank, 85% of 31O214 2015 2016 2017 2 01S 20½9 2020

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