August 29, 2022
August 15, 2022 marked one year since the Taliban takeover of Afghanistan, and the Biden administration’s subsequent decision to block the Afghan central bank from accessing roughly $7 billion of its international reserves held in the United States. In that year, Afghanistan has become home to the world’s largest humanitarian crisis, with more than half the population facing acute food insecurity, and near-universal poverty.
In advance of that anniversary, Unfreeze Afghanistan convened leading economists, humanitarian experts, and foreign policy analysts to discuss the humanitarian situation in Afghanistan, how US policy has helped to create this crisis, and why lifting sanctions and allowing the central bank to reclaim its reserves are key steps to restarting the Afghan economy and preventing the suffering of millions.
Event participants included:
- Hadiya Afzal and Masuda Sultan, Unfreeze Afghanistan (Moderators)
- Dr. Shah Mehrabi, Da Afghanistan Bank
- John Sifton, Human Rights Watch
- Adam Weinstein, The Quincy Institute for Responsible Statecraft
- Negina Yari, Afghanistan Aid Coordinator
- Dr. Barney Rubin, New York University
The event can be viewed here. Highlights, and a full event transcript released by Unfreeze Afghanistan, are below.
Highlights
John Sifton: “The real catastrophe that is making Afghanistan a human rights and humanitarian crisis is an economic crisis … As a result of [the decision to stop recognizing the leadership of the Central Bank of Afghanistan], the Central Bank of Afghanistan now cannot do many of the things that central banks all over the world do. As a result of that, the economy of Afghanistan, which was already suffering from this enormous hold because of the drop-off in outside international assistance for salaries and other things, simply was strangled … Ultimately, unless the economy itself is restored, there’s no amount of humanitarian assistance that can fix Afghanistan’s crisis.”
Adam Weinstein: “We had sanctions that were on the Taliban and the Haqqani Network … and then in some sense overnight, they became the de facto government. And so you essentially had sanctions on the government of Afghanistan, which had a chilling effect across the country, and that’s an unprecedented situation. And so you might ask: are these sanctions still serving their purpose? Well, for one I’d argue, they weren’t serving their purpose even before the Taliban takeover, because they didn’t really influence the Taliban’s behavior as an insurgency. Number two, they’re certainly not serving their purpose now.”
Dr. Barney Rubin: “No matter how much humanitarian aid you put in, humanitarian aid has to work with the market. It cannot work despite a market … [By] withholding the bank’s ability to use the reserves, by withholding the ability of Afghanistan to import the billions of afghanis of currency that have already been printed for Afghanistan and are sitting, waiting, in European countries, we are actually undermining the economy of Afghanistan.”
Dr. Shah Mehrabi: “[The proposal for] a parallel institution to DAB; it is tantamount to dismantling the central bank that we spent 20 years to establish … To be able to come up with a parallel institution, it does not make any sense whatsoever. Look, you cannot construct an independent entity or central bank overnight. Commercial banks, their functions are to make profit. A central bank is not there to make profit. At the top of it, the functions in responsibility that are delegated to any central bank, and not only the Afghanistan bank, those clearly cannot be carried out by a private entity, by a private commercial bank. So, unless you want to destroy the central bank, then you need to go ahead and invest. That is, the United States needs to invest in that institution.”
Negina Yari: “On the ground, we see that the situation of the people is getting worse day by day. And it reminds us what will happen to the people of Afghanistan as we are getting near to the next season of the winter. So I hope that the international community, and the big donors of Afghanistan, should take care of this.”
Full Event Transcript
Hadiya Afzal: My name is Hadiya Afzal. I’m the program coordinator for Unfreeze Afghanistan. We are very excited today to have this discussion on one year of Taliban rule in Afghanistan as August 15th approaches. Co-moderating with me is Masuda Sultan. So I’ll let her jump in.
Masuda Sultan: Thank you, Hadiya. Hello everyone. And welcome to our program today. “Afghanistan: One Year Under Taliban Rule.” How [00:00:30] is the country faring? Not well. It’s defined by mass starvation, with 90% of the population don’t have enough food. Half of people are surviving on one meal a day. And while a famine was largely averted last winter in large credit to the United States and other donors funding the World Food Program, winter is approaching again, and it does not look good. The WFP says donations are down, food prices are up and only 8% [00:01:00] of the country will soon receive food rations. This is a humanitarian disaster and it’s underpinned by an economic crisis where the US is playing a significant role.
While the US is the largest donor to Afghanistan, it has also frozen Afghanistan’s central bank reserves. Banking is crippled, people can’t access their savings or even their salaries. Yesterday, there was a letter to president Biden signed [00:01:30] by 70 economists, including Nobel laureate Joseph Stiglitz urging a return of Afghanistan’s assets. Human Rights Watch reports there’s also a human rights crisis. The Taliban have broken multiple pledges to respect women’s rights and human rights since taking over Afghanistan. Schools are open, but secondary girls’ schools remain closed for most of the country except for five or six provinces. And so we’re going to have a conversation today [00:02:00] with some of the leading people working on Afghanistan, both from a political perspective, an economic perspective, a historical perspective. And we’re also going to talk to Negina Yari, who is an Afghan woman on the ground doing the most important work of feeding people and women’s economic empowerment. So I want to first go through a round of introductions before I turn it over to Negina.
Negina Yari is an Afghan aid coordinator based in the country, [00:02:30] working on humanitarian aid and women’s empowerment. John Sifton serves as Asia Advocacy director for Human Rights Watch and has previously worked as a researcher focused on Afghanistan and Pakistan. Adam Weinstein is a research fellow at the Quincy Institute for Responsible State Craft and a former US Marine. He has worked in and written extensively on Afghanistan, Pakistan, and the Middle East. And we’ll be asking him about the Al-Zawahiri drone strike, Al-Qaeda, and ISIS. Dr. Shah Mehrabi serves as the [00:03:00] chair of Da Afghanistan Bank, DAB as it’s known, audit committee, and is also an economics professor at Montgomery College. And Dr. Barney Rubin is a distinguished fellow and senior advisor to the China program of the Stimson Center. He has previously served as an advisor on Afghanistan for both the US State Department and the United Nations. So with that, I’m going to turn it over to Negina to start.
Negina Yari: Hello everyone. Good morning and [00:03:30] good evening. Thank you Masuda jan for my introduction, and also for conducting this important event for today’s. Based on the current situation, which is going inside the country and also the report, which is already shared through different channels, we can say that the economic crisis of today’s in Afghanistan, it is not different from the political part of Afghanistan. Today, the condition of the people [00:04:00] inside the country, especially the grassroots level, and also those people that they’re living in rural area, their condition is too much bad. It’s not only about the political change, but it’s also about their access and also their engagement in different parts. During last six months as the analysis which we have been done, we found that the unemployment rate is unfortunately increased in all provinces of Afghanistan. And during last six months, the percentage [00:04:30] of the needy people is also increased, especially for the development situation was on humanitarian and their access and engagement was very low.
And the, another problems and challenge for people of Afghanistan, it was about the funds, which is transferred to Afghanistan for humanitarian activities for Afghanistan. It’s not transparent as well, also affected the engagement and also [00:05:00] the division of these funds to all provinces of Afghanistan. And still none of these donors is founded in which province, the exact percentage of the media and poor people is bad because the increasement is different in all provinces. Another big problem is about… Because of Afghanistan is dependent on the fund, especially when we are talking about economic condition and humanitarian crisis in the country. It’s not also localized. [00:05:30] Still most of the donors is only working at the central level of Afghanistan. So that’s why this also affected that most of the people should leave their home and also leave their own cities. And they have to come to the central level to receive their food packages and assistance.
Another hand, due to political condition of Afghanistan. So most of the project and activities, which was relevant to agriculture in all provinces, it’s also affected. [00:06:00] And none of these donors is still working for economic and agriculture activities for Afghanistan. That’s why most of the agriculture project was also stopped. And those people that they were engaged in agriculture activities in Afghanistan, they are not willing anymore to continue their part and engagement for the economic engagement through their agriculture activities. And whenever we are talking about the economic crisis [00:06:30] of Afghanistan, we have to know that what’s going on in women’s economic perspective as well. We see that today, most of the donors from the donor side, most of the economic engagement project for women has also stopped. And women at rural area do not have access and engagement on economic perspective because most of the women was also dependent on the funds from the donors.
On another hand that we see that the behavior [00:07:00] of the different authorities in different provinces is different. And some of the provinces, they’re flexible with the work of the economic activities of the woman, but in some of the provinces, they are not agree with that. That’s why it’s also affected the condition of the woman engagement in economic perspective. And those, a huge number of women is jobless. And we can say that the unemployment rate between the woman is also increased and [00:07:30] the recent analysis show that 19% of the funds and also access for men is easier rather than woman. So all of these challenges is affected conditions in perspective with the women and also access of the people Afghanistan. Due to limitation of the time, I want to handover to back and if there’s any questions, I’ll get back to you. Thank you very much.
Hadiya Afzal: Thank you very much, Negina. John.
John Sifton:[00:08:00] Hello everybody. This is John Sifton with Human Rights Watch. I don’t think I need to review the human rights situation. I think it’s been made very clear by Masuda and others. And the Taliban have obviously imposed incredibly severe restrictions on women and girls that are impacting not just them, but the entire country, which is what I really want to talk about. The restrictions on women, the detention and torture and execution of critics and opponents, [00:08:30] that’s the human rights background. But the real catastrophe that is making Afghanistan a real human rights and humanitarian crisis is an economic crisis that is underpinning the humanitarian crisis. And the problem for a lot of observers and policy makers is that the causes of that economic crisis are incredibly complex. They’re not simple. They are not boiled down to one cause. They are not because simply humanitarian assistance [00:09:00] dried up, wage support stopped.
It’s not that simple. It is a multifaceted set of causes that intertwine together. They connect together. One of the causes, the biggest one probably is that, simply put, huge amounts of wage support, economic assistance that was used to pay salaries for millions of Afghans stopped in August. But that was just the beginning [00:09:30] of the nightmare. The second thing that happened was the Afghan banking sector itself was cut off from the international financial systems that allow money to be moved in and out of the country. Not just for humanitarian aid, development aid, but for ordinary economic activities, the purchase of imports, the paying for imports from other countries, remittances by Afghans and others who seek to send money to relatives [00:10:00] or friends within Afghanistan. All kinds of ordinary commercial, legitimate banking transactions were severely impacted by a set of decisions that were not taken pursuant to sanctions or anything like that.
But rather simply a political decision by the United States and the bank, the World Bank board, to stop recognizing the leadership of the Central Bank of [00:10:30] Afghanistan. As a result of that decision, the Central Bank of Afghanistan now cannot do many of the things that central banks all over the world do. As a result of that, the economy of Afghanistan, which was already suffering from this enormous hold because of the drop off in outside international assistance for salaries and other things simply was strangled. The little amount of activity that still could take place [00:11:00] was strangled because of these restrictions. And so today, that’s why our recommendations focus so much on the need to restore the Central Bank of Afghanistan’s credentials, which means recognizing it as the central bank. Which requires negotiations with the Taliban, which then gets you back to the issue of human rights. And so this is all intertwined because the Taliban for their sake, they need to recognize that their record is imperiling efforts to reach an understanding.
They need to recognize that they need to [00:11:30] also give a little bit in terms of oversight of the central bank, but it’s really in the end about the United States and the Taliban reaching understandings to the benefit of the Afghan people. Which is why we address all of our statements to both of them, the United States, and to the Taliban. Everybody needs to do better here in terms of reaching an agreement to avert this catastrophe. Does there need to be more money? Yes. More development money, more humanitarian money, but that’s not going to solve this problem. Ultimately, unless [00:12:00] the economy itself is restored there’s no amount of humanitarian assistance that can fix Afghanistan’s crisis right there. So I’ll stop there.
Masuda Sultan: No amount of humanitarian assistance can fix Afghanistan’s crisis right now, unless the economic part of it is addressed. So as we think about that question, Adam, I’m going to turn to you, but I’m going to ask you more: if you could talk about the… Or if you could at least address the issue of Al-Qaeda and what’s going on from a security [00:12:30] perspective and political perspective when it comes to these economic considerations.
Adam Weinstein: Well, the economic considerations are in some sense, held hostage to the political considerations. And we have to remember Afghanistan is an unprecedented situation from a sanctions perspective in some sense. We had sanctions that were on the Taliban and the Haqqani Network, and it distinguished between the two. And those sanctions were on those entities as terrorist organizations [00:13:00] and they were on those entities while they were fighting an insurgency. And then in some sense overnight, they became the de facto government. And so you essentially had sanctions on the government of Afghanistan, which had a chilling effect across the country, and that’s an unprecedented situation. And so you might ask, are these sanctions still serving their purpose? Well, for one I’d argue, they weren’t serving their purpose even before the Taliban takeover, because they didn’t really influence the Taliban’s behavior [00:13:30] as an insurgency. Number two, they’re certainly not serving their purpose now.
The problem is, to rescind those sanctions, the domestic political audience in the United States, and even the average voter might ask, “Okay, well, what have the Taliban done to deserve being de-listed?” And that’s a really difficult question to answer if the leader of Al Qaeda is being killed in the Interior Minister’s house and to say it out loud, it sounds ridiculous [00:14:00] and there we are. Now, what I would say from an analytical perspective is the Al-Qaeda risk existed before the Zawahiri strike. It will exist past the Zawahiri strike, and we need to be more focused on things that actually work versus things that make us feel like we’re doing something. But the political reality is how could president Biden possibly justify lifting sanctions when this just happened? How could president Biden justify returning the foreign exchange reserves when this just happened? Analytically, I think you could [00:14:30] justify it, but from a domestic political perspective, probably not.
And of course we have to recognize there’s genuine concerns about terrorist financing and money laundering and so forth that I don’t think we can simply dismiss. That takes us to: what is the step forward? Well, neither side has rejected the Doha agreement and I think that’s significant. And if I was a betting person, I would say that they’re probably not going to reject it because it’s the only framework [00:15:00] we have to talk to the Taliban, nothing else exists. And both sides have violated that agreement. I’d make the argument the Taliban have violated a whole lot more, but look, we ultimately withdrew late from the country. Both sides have made concessions, whether we acknowledge it or not. The Taliban didn’t attack the US on the way out. That’s a major concession for them as an insurgency that fought the US for 20 years. But they also didn’t break with Al-Qaeda.
And that’s, if it wasn’t obvious before it’s obvious now. So [00:15:30] we have an agreement that is vague and ambiguous at best. I’d make the case that the Taliban violated the spirit of the agreement by not sending a message to Al-Qaeda figures that they’re not free to attack the United States because after all Zawahiri was in Kabul and also making videos where he was threatening the US. But in some sense, that’s a little bit besides the point. It’s a political agreement. If we look at it like a corporate contract, [00:16:00] then of course everyone’s violated it so much that, especially the Taliban, that it’s not worth the paper that’s written on, but I don’t think we should view it that way. I think we should view it as an aspirational framework that allows us to talk to the Taliban and potentially work things out over time. Nobody trusted the Taliban the day before Zawahiri was killed. I don’t think anyone trusts the Taliban now, but this isn’t about trust. This is about quid pro quo diplomacy.
Masuda Sultan:[00:16:30] Thank you, Adam. And about trusting the Taliban, I think that’s spot on. Some may say, “Well, this just proves that we can’t trust the Taliban,” but advocates of releasing Afghanistan’s central bank reserves have certainly not been arguing for the Taliban to just get the money. And in fact, it’s very important for [00:17:00] advocates to point out that it’s not the Taliban’s money, nor should they have full control of it. So I want to get into some of the issues of what the central bank’s money means and what it does for the economy, and what kinds of discussions have been happening by someone who is thick in the middle of it, Dr. Shah Mehrabi, who is head of the audit committee of the central bank and has been working on these issues and is an economist as well. Dr. Mehrabi, I’m handing it over [00:17:30] to you now.
Dr. Shah Mehrabi: Thank you very much Masuda. And thanks Unfreeze for sponsoring this panel discussion. Sorry, my voice might not carry as well, but I’ll try this. But anyway, I think it was John Maynard Keynes who once said that all issues are economic issues. And for people to understand how world is functioning, they need to understand how economy functions. And I think that it [00:18:00] is very important to keep that in mind that before… I’m going to give you some chronology of what I have done with regard to release of the funds, so that you’ll get an idea of where we stand right now and then to… We give you an idea of what might lie ahead as far as the reserves are concerned. Most of my discussion will be on this, on the economy part of it. But I think before doing that, I think it’s important also to keep in mind that before Taliban [00:18:30] came into power in Kabul, the economy of Afghanistan was deteriorating quite a bit.
And I think the data backs it up. I don’t want to go over those data for you, but what was happening at that time before August 14, we had requested that… DAB had requested that the 300 million of the reserve that belong to DAB, be released by the Federal Reserve Bank of New York. They were not releasing that. This is before Taliban came in into be. Now we use [00:19:00] these particular reserve. Now these reserves —what a lot of people need to understand — reserves are assets. These are assets that are held on reserve by a monetary authority and the monetary authority of Afghanistan is DAB. So those 300 million were not released. And that prompted an emergency meeting by the board on August 14th. In that meeting, we requested from the former president [00:19:30] to contact the Secretary of State, and the Treasury, to release the $300 million so that we could use it for auctioning off, to bring about price stability.
And this was a time that many people wanted to leave and there was significant demand for USD. So when that meeting on August 14, that resulted in a call from former president to Blinken [00:20:00] was a positive call. And Blinken agreed to release the $300 million to be delivered to DAB. What happened on August 15th, on August 15th, what Taliban came in and took over, that money was not delivered. So then at the same time, former president vacated [inaudible 00:20:23]. In the same time acting governor vacated the central bank. As a chair of the audit committee, [00:20:30] I was asked what to do because the fear was at that time in my mind that indeed the vault could be attacked. Now, the vault, at the central bank, consisted of gold, USD, Euro, and also our neighboring currency. So our Comptroller General, who reports functionally to me, I asked them to go ahead and get a committee. And I formed the committee and also to take pictures as they count as well as they send me the Excel sheet of [00:21:00] how much in each of these, what I said to you, in bank notes that we had, as well as the gold, and then to seal the vault so that will be no one will have access to that particular fund. So what was going on at that time, then we closed the central bank till Taliban came in and the Taliban secured the premise of the bank. And for a few days there were no functions taking place. Then DAB, and [00:21:30] once they appointed their particular acting governor and then the activities of the bank resumed. Now, but what’s going on at that time also, I think is very important, that not only drought, pandemic had significantly reduced economic growth in the economy overall. Now at the top of it, the hardship came into being, think of the 300 million.
And so what I started on September 1st, as a first person who actually called on President [00:22:00] Biden, and it wasn’t the writer. I said, “President Biden, you are not hurting Taliban. You’re hurting the ordinary Afghans because the Taliban will have resources, tthey will secure resources, as they have done the last 20 years. They will be poor Afghans who are not going to have access to basic necessities of life. And more specifically, they will not be able to afford and pay for higher prices of food. And the way that we were able to go ahead and bring stability [00:22:30] in the prices was to auction it.” So I asked for this fund to be released, and I said the best way to establish trust and confidence between the regime of interim Taliban administration and the Treasury and State Department was to release only $150 million per month.
This is limited amount, and then to be monitored by an independent entity. And if it’s used for any other purposes, except [00:23:00] price stability, then I would call that misused. Then it could be stopped at that time. And State Department was very receptive to this particular idea. And in turn, the idea of really using these particular reserves has been proven, we have plenty of data and that it has brought about… as a matter of fact, Afghanistan was enjoying a lower level of inflation than our neighboring countries of Pakistan, India, and also the [inaudible]. [00:23:30] So we knew what works and also to bring to the point, to highlight the point of the fact that the interim Taliban administration have been auctioning off not a significant amount, small amount, about 12 million auctioning off. And whenever those, the money 12 million USD is auctioned off, it has resulted in price stability, and even for a few months, appreciation of afghani vis-a-vis USD [00:24:00] and Europ. So there’s a record that this could be done, and we want this release to be released as we have argued. Now it’s only about, I think-
Masuda Sultan: Thank you.
Dr. Shah Mehrab…: I’m running out of time. I guess I will stop, but we’ll address it in question and answer-
Masuda Sultan: Well-
Dr. Shah Mehrab…:… situation because-
Masuda Sultan: Yeah, we definitely want to get into the weeds in the Q&A because there’s people who think that these reserves, [00:24:30] it will be difficult to monitor them and maybe the Taliban will just run away with the money or they’ll spend it on something they weren’t supposed to spend it on. And I think some of those questions we should get into in terms of the software systems that are there, maybe some of the more technical aspects of what monitoring is like. But for now I’ll turn it over to Dr. Barnett Rubin for his remarks. [00:25:00] Barnett, you’re muted.
Dr. Barnett Rub…: You muted me, so I thought you would unmute me. I started the timer on my phone. Look in a discussion like this, the risk is that whichever party you criticize first, the other party accuses you of supporting the other party. So I would just make it as a first statement [00:25:30] that all the parties involved in this bear shared responsibility for the crisis. I think the Taliban responsibility is pretty clear. You can read the Human Rights Watch report. I would also add one thing that’s not in there is that the Taliban decision-making and policymaking process is completely broken. We have seen that the ruler can and does overrule even a kind of consensus among the people [00:26:00] running the government. And there is no accountability to anyone for that. But let’s go on to the United States. President Biden famously said, when asked, do you feel any responsibility for what happens to the women of Afghanistan?
And he said, “Absolutely none.” And the impression of most people in the United States is that we gave Afghanistan all this money and there was corruption and they wasted a lot of it. And so why we should do more? Well, I’d like to just take a few minutes to explain [00:26:30] what is the real effect of foreign aid in a country like Afghanistan. Afghanistan is one of the poorest countries in the world. We were spending more money there, and I’m not talking about aid, our military operations were spending huge amounts of money and that inflated the value of the afghani, which meant that prices went up, which meant that Afghan agricultural products were actually more expensive than the import of food, so people became dependent on imported food. [00:27:00] It meant that you needed much more cash. People migrated en masse from the villages where their livelihoods had been to the cities.
The entire educated population was in jobs where their salary was paid for by foreign assistance. So this means when we… It’s not just that we pulled out the troops. When we pulled out the money, it meant that people lost their livelihoods, and the economy could not restart because we had restructured [00:27:30] it unconsciously and unintentionally to be something different than what it was. The main thing that hit what we call civil society in Afghanistan is not repression by the Taliban, the main thing that hit civil society in Afghanistan is that nobody’s salary is paid anymore because they were all being paid by foreign aid. Now, as far as the bank is concerned, Afghanistan still has an economy. And no matter how much humanitarian aid we put in, humanitarian aid has to work with the market. It cannot [00:28:00] work despite a market. There has to be a market as well, and the market includes money.
So by actually withholding the bank’s ability to use the reserves, by withholding the ability of Afghanistan to import the billions of afghanis of currency that have already been printed for Afghanistan and are sitting, waiting in European countries, we are actually undermining the economy of Afghanistan. Now, would the Taliban benefit if [00:28:30] the economy revived? Well, undoubtedly, they would benefit to some extent because… But it’s not clear to me at all what is the risk of terrorism that would increase if people got enough to eat.
So I think it is a very disproportionate weighing of gains and risks that is going on. And what is the US national interest? Let’s just say that we have misjudged our national interest very badly by focusing [00:29:00] solely on terrorism. So the question on any policy is: does it kill terrorists? I think that Russia, Iran, China, Pakistan, and India are all interested in Afghanistan. There’s an economic dynamism in central Asia. The United States cannot afford to ignore a country in a dynamic region that is where all the great powers are also interested. Just abandoned it after we actually went in and in the guise are saving it, wrecked its economy.
Masuda Sultan:[00:29:30] Thank you, Barnett. That reminds me of this lingering thought I had of, if we are treating Afghanistan the same way we did in the 90s, albeit somewhat more aid, but a crippled economy, a country with no hope and essentially walking away from it, what that would mean for our national interest in the future. And [00:30:00] with that, I want to bring it back to the people of Afghanistan, which is why we’re all here. It’s a country of 40 million people. And we have some videos from on the ground In Afghanistan, messages that… Interviews that they wanted us to share with you. So perhaps we could go to that next and then we’ll get right to the Q&A.
Hadiya Afzal: Yeah.
Speaker 1: The situation of my life is so much tense. I don’t have anything. And I eat dry food with water and [00:30:30] I collect the grass from out in the land, and boil that and we both eat and give to other family members. Today our life is in so bad situation, and I work for other people, and wash their clothes. And we don’t have anything in our land. And we don’t have the money to go to doctor and days so much tense. And we cannot kill ourself. And we cannot sell our children. So what to do?
Masuda Sultan: That was [00:31:00] a video of… Actually [00:31:30] taken from Eastern Afghanistan. The woman was speaking Farsi. That was an error on our part, but the message is clear. People are boiling grass. This is something we had heard about towards the end of the Ghani administration was the first time I heard about Afghan’s boiling grass, and now it’s something that we hear about over and over again, and when we went to Afghanistan, this past March, we met people in Kabul that were doing the same thing, boiling grass, boiling leaks, [00:32:00] and that counts as their one meal a day, or it’s a piece of stale bread. And this is really a big part of this population. So with that, I know our conversations on policy can tend to be very, very much about institutions and sometimes feel a bit removed from the people. And that’s why for us at Unfreeze, where we started working on teacher salaries and as women [00:32:30] who care about education, that was our first worry about when the Taliban came back, what would happen to education and what would happen to women employed.
So for us, it always is important to remember how our policies affect the people of Afghanistan and why we should center our policies on their lives and how to improve their lives. And that is ultimately in the US national interest. But of course there are other concerns for the US. [00:33:00] And I want to talk about one of the Unfreeze founding members, advisory board members, Medea Benjamin wrote an op-ed recently in The Hill talking about Afghanistan, Taliban, or a failed state. So General Petraeus has said that ISIS is a greater threat to Afghanistan and to the world than Al Qaeda. And in that sense, we’re aligned with the Taliban, and Medea’s op-ed has just been [00:33:30] pasted into the chat. Is it from a US perspective, and this I’m going to direct to Adam, perhaps Barney can chime in. From a US perspective, is there still alignment? Does that mean that talks can still continue? And is it possible that if we let this country continue on this path, that it will become a complete failed state?
Adam Weinstein: Well, I think it’s certainly possible to become a failed [00:34:00] state. And just to give an idea of how the kind of inflation and price increases that people are, which aren’t the same thing, but what people are dealing with from an inflation perspective, the lower price of cheaper wheat has gone up 50% since June, before the withdrawal. Those are the figures I see. So we’re talking about a significant price and then the cost of diesel and the cost of wheat and the cost of bread and the cost of these staples. How can Afghanistan become a failed [00:34:30] state? It’s pretty obvious, if it were to descend into a civil war or if the economy were to break down beyond a point of no return. Yes, for now the Taliban have the monopoly on power. And I don’t think there’s a real threat to their control, but that could change.
And of course the economy could reach a point where we really see universal poverty. So I think we always have to remember with Afghanistan, things can become worse. And I think we always… There’s this tendency to assume we’ve hit rock bottom. [00:35:00] And I don’t think there is a rock bottom. I think that it can get much worse. In terms of alignment between the Taliban and the United States. There’s not much right now. And one of the reasons is what Dr. Rubin referenced, which is the fact that there’s not even alignment within the Taliban movement itself. And I don’t mean to say that I think they’re going to factionalise or split apart. Everybody says that’s going to happen every year. But I mean that there is, obviously… It’s pretty obvious that there’s [00:35:30] divisions within the Taliban and they don’t have a very coherent policymaking process, or maybe they do if you consider that it just belongs to one man.
But that’s not the kind of model of governance that allows you to engage with sophisticated diplomacy with the rest of the world. And this is actually much more difficult now than the Doha process, because they have to deal with regional stakeholders. They have to deal with the European Union. They have to deal with the United States. During the Doha process, it was [00:36:00] Baradari and Halilzal, developing this personal relationship and working out a deal. And obviously there was… It’s more complex than that, but it’s apples and oranges compared to what the Taliban have to do today.
So because the Taliban themselves can’t present coherent policy, because the Taliban themselves can’t stick to their own promises, because it’s unclear when you talk to Muttaqi or when you talk to Suhail or Shaheen or whoever, are you getting the Taliban position, or are you just getting a statement from them as an individual? It’s very [00:36:30] unclear. So how do you conduct diplomacy with a group like that? So I think there is very little alignment. What I would say to… It’s very easy to criticize the Taliban. What I’d say to Western policy makers is look, you have to get used to very incremental, disappointing, slow moving diplomacy, and that’s how this is going to work. And there’s going to be more disappointments than successes, but the alternative is dismal.
Dr. Barnett Rub…: Can I just say 1 point? [00:37:00] 1 short thing?
Masuda Sultan: Yeah, absolutely.
Dr. Barnett Rub…: Look, it is more the rule than an exception to have both antagonism and common interests with the same country. That’s a normal condition in international relations. We have common interests with Russia about certain things, arguably about Afghanistan. We have common interests with China about certain things, arguably about Afghanistan, but not on others. So its [00:37:30] just that, I think the United States has not proven very skilled at negotiating things with countries, with which it is otherwise sharply at odds, and the other countries aren’t either. And the thing is here, the payoff is so great. And the incentive for the United States seems to be so small, really, that not much is happening.
Masuda Sultan:Got it. So getting back to this question then, [00:38:00] of the mechanics of it, I want to turn to Dr. Mehrabi and say, a lot of people say, how can we trust them with this money? And you’ve talked about a tranches plan where 150 to 200 million dollars is released at first. Can you just tell us a little bit about the monitoring possibilities there are, the options there are, to making sure this money is spent in [00:38:30] the way that it’s supposed to?
Dr. Shah Mehrab…: Okay. I think I want to make the one short comment on what my colleagues said before. I think it needs to be pointed out there’s great interest of the United States to be engaged, and actively engaged, with Taliban. And I think credit should be given to the Treasury Department as well as State Department in continuing their dialogue in negotiation. More specifically [00:39:00] in the area of disbursement of these funds. I think that needs to be noted. And it’s not that State Department or Treasury love to interact with that interim Taliban administration, but it’s because it’s in the interest of the United States. United States obviously does not want to see a narco-state, even though the interim Taliban administration have decided that they’re going to cease production of opium. But also, clearly, [00:39:30] the interest of the United States with regard to geographical location of Afghanistan, as well as the immense resources that Afghanistan has, is of interest to our private sector in the United States.
So I would argue that indeed there’s substantial interest of the United States to be actively engaged in this process of trying to resolve and from my perspective, the reserve issues. And then also at the top of it to be able to address [00:40:00] and make sure that poverty does not continue, with humanitarian aid coupled with other assistance to make sure that the economy functions the way that it used to function prior to ITA come into power. So that’s the point… The question that you had Masuda was how would this auction take place? Now we have… as I said, made a statement before, that we have been auctioning this USD [00:40:30] for the past 20 years. And how we do it, this is all electronic. Electronic auction easily can be monitored by anyone. But at the top of it, what I had suggested, if we want to have even more evidence, more proof, you can hire an external auditing firm to go ahead and monitor the auctioning process.
We auctioned. We, am talking about DAB, okay. I usually use, our name. I’m talking about the Afghanistan Bank. The Afghanistan [00:41:00] Bank auctioned currency twice a week, depending on the state of the economy. And as I said to you, the verification can be forthcoming without any difficulty. So it is… as some have argued without evidence that this could be used for other purposes, if that comes into being, we can go ahead and stop it. Any misuse of this particular fund for the sole purpose… If it is not used for the sole purpose of [00:41:30] auctioning off, it should be cut off overall. Did I answer your question Masuda?
Masuda Sultan: Yes, absolutely. Because we did have some questions in the audience about what the money would be used for in this first batch. And it’s pretty clear that you’re saying auctions. The other issue was that there’s… Folks are saying, “Well, their currency has stabilized. Are auctions still necessary?”
Dr. Shah Mehrab…: I think this is… The currency stabilized for a very short period of time. I don’t know [00:42:00] what the data, whoever has is looking at. The currency stabilized partly because we, the DAB, auctioned off 12 million over a number of months. And that brought about a short term stability in the currency. And now again, I guess the new data shows that it has gone up again. That is, when you look at exchange rate, it went up from 88 to 90.1. So I think it would be wrong to argue that indeed there’s a [00:42:30] stability in exchange rate to begin with because the data doesn’t back that up.
And the second thing is obviously is the price. You can see clearly that the prices have gone up to about 51.2%. Now this is from 42% when it was in the month of June, it has jumped up to by about 10% on a year to year basis. So in both of these data clearly shows that indeed, yes, we still need to engage, that is, DAB needs to engage [00:43:00] in auctioning of more than what the limited amount of money that they have at their disposal to bring about or to address the issue of price stability, as well as reducing exchange rate volatility.
Masuda Sultan: Thank you. And I should also point out the humanitarian dollars coming into Afghanistan right now. The UN appeal was 4.4 billion. About half of that was funded. So we can’t necessarily expect [00:43:30] humanitarian aid dollars to be coming in the same levels. Even Special Representative Tom West has said that it’s not sustainable. So whatever support the currency is getting right now, one would have to imagine that the humanitarian aid dollars would keep up, in addition to all the other factors mentioned by Dr. Mehrabi. So a question from Nora in Ireland who works in a coalition [00:44:00] called… United Against Inhumanity is the organization actually. And they’ve also been working on the frozen funds issue. She says, “Does the panel have insights on the proposition of a parallel bank? I.e., it’s clear that the Taliban are not in favor and ditto the DAB, but it seems the notion does not go away, and is still on the table, including at the UN and the World Bank.” Anybody want to take a stab at that one, about whether you have insights on the parallel bank?
John Sifton:[00:44:30] Yeah.
Masuda Sultan: John. I see. Yeah.
Dr. Shah Mehrab…: Should I go-
John Sifton: I would just like to say-
Masuda Sultan: We’ll come back to Dr. Mehrabi.
John Sifton: Yeah. I would just like to say this has been under discussion for some time. And from the reports that we’ve heard, the Taliban are very uneasy with anything that resembles a secondary shadow bank that would act as a central bank. But I also want to specify [00:45:00] that there are things that only central banks can do under international regulatory frameworks for currency, for inter-relationships between central banks. You can’t just… It’s not like you can just snap your fingers and have a trustee bank in the capacity of a central bank. It just doesn’t work that way. But it’s kind of moot point at this point because the Taliban would never agree to an arrangement to that effect anyways.
[00:45:30] Which is why I think we really do need to go all in on the proposals that Dr. Mehrabi has discussed, which is to agree on a monitoring structure and auditing structure. Which is really not that strange in the world of international financial institutions. Ask any country that has faced an enormous economic crisis, whether it’s Sri Lanka today or Greece in 2015 or Argentina in the 1990s. When you’re in [00:46:00] a situation like that, you are going to have to agree to a lot of outside monitoring and basically you’re handing over decisions to an international financial institution. That’s not that strange. And this Taliban for their part has to get used to that idea and understand that they can’t just have a fully independent central bank that does whatever it wants.
Masuda Sultan: Dr. Mehrabi you were shaking your head during that.
Dr. Shah Mehrab…: I have argued since September that a parallel [00:46:30] institution to DAB, it results actually tantamount to dismantling the central bank that we spent 20 years to establish. This institution we have invested a lot of funds. We trained a lot of people, that is DAB trained a lot of people, both in terms of the personnel, getting education, as well as the training in many other central banks throughout the world. Now, to be able to come up with a parallel institution, [00:47:00] it does not make any sense whatsoever. Look, you cannot construct an independent entity like a central bank overnight. Commercial banks, their functions are to make profit. Central bank is not there to make profit. At the top of it, the functions in responsibility that are delegated to any central bank and not only the Afghanistan bank, those are clearly cannot be carried [00:47:30] out by a private entity, by a private commercial bank.
So unless you want to destroy the central bank, then you need to go ahead and invest. That is United Sates need to invest in that institution. I have argued also that in areas where the training is needed or capacity could be built, because a few people, they exited central bank because they were encouraged by the United States and others. Those people who got out of the central bank [00:48:00] now they are begging DAB to accept them. They want to go back and work in that particular institution. So capacity building, yes. Let’s try to do the assessment. And especially in the area that is needed, the area that needs more training probably is the AML CFT. I have told you that I think AML CFT department needs to be in one way or another evaluated, assessed and training will have to be offered. Many other areas, monetary policy department, [00:48:30] and market operation department. They don’t need training. We don’t want to go ahead and use the taxpayer money again, in the areas where there’s enough talent and technocrats exist.
Hadiya Afzal: Mm-hmm. Yeah, I will just add that it’s very true that the Afghanistan central bank was modeled after the US Federal Reserve. And the questions we’re having about setting up a parallel disbursement system would not be questions if it was [00:49:00] about the US Federal Reserve or another nation’s, for example. A couple of related questions as well about the legality of the seized assets that I was hoping one of our panelists could just quickly address perhaps. So Jean-Francois Cautain asked if it would be possible to explain the legality or not of the US removing the credentials of Afghanistan Bank. And another question, asking if there are legal challenges to the US confiscating Afghanistan’s [00:49:30] reserves?
John Sifton: As somebody who worked on some of the amicus briefs in the 9/11 litigation, I can try to answer that. One thing is just to recognize is that the decision by the federal reserve in August was not made pursuant to sanctions. It was actually made pursuant to anti-money laundering provisions. And it actually is not that odd when a government is in transition. When a government is in transition, regardless of the cause, [00:50:00] the Federal Reserve is not simply going to allow any person who presents credentials purporting to be an accredited representative of the central bank to just start taking money out of the bank. When the Myanmar Junta seized power last year in Myanmar, they attempted to withdraw all of their federal reserves in the New York Fed as well. And they were also denied their credentials because the concern was that they were essentially looting the national [00:50:30] wealth of Myanmar.
So, that decision was made in August in a midst of chaotic upheaval. The question for Tom West and US Treasury is whether a year later, it makes sense to continue to deny these credentials when it’s having such an enormous impact on the economy of Afghanistan. If you’re concerned about looting, then negotiate with the Taliban about oversight just as Dr. Mehrabi is saying, reach a consensus. We started raising this issue with the White House [00:51:00] in September of last year saying, “If you don’t figure out a way to provide some amount of credentials to the bank, to restore some of their both paper liquidity and electronic liquidity, you’re going to see a spiraling… Death spiral in the Afghan economy that’s going to make the humanitarian and development cutoff simply an appetizer to a far worse crisis.”
And here we are a year later, and the agreement still hasn’t been made. Is that the US’s fault alone? Of course not. The Taliban has been stubborn [00:51:30] on a number of issues. Was the decision to bar women and girls from attending school in March, did that set back to negotiations? Absolutely. But that’s what we get back to Barmey Rubin’s point about why you can’t seek to blame a single party. This is a joint, this is a situation of joint responsibility in which all of the parties involved here, both the US, the Taliban authorities, and the World Bank Board as an entity, have a joint responsibility [00:52:00] to figure out a way to move forward on these banking crisis issues.
Masuda Sultan: Thank you, John. We have two questions-
John Sifton: Well I should [Inaudible 00:52:10]-
Masuda Sultan:… and I want to make sure that we hear from Negina, since she is on ground in Kabul. One of the things we hear about Negina-jan is a physical cash issue with Afghani disintegrating. And we also heard about markets not taking disintegrated Afghanis. Now we know there’s [00:52:30] billions of printed afghani sitting in Europe, in Poland, and in France. I’ll ask the panelists later if they know anything about the status of the delivery of those Afghani to the country, but Negina-jan, can you tell us what it’s like banking, just what kinds of things people go through?
Negina Yari: Thank you, Masuda-jan. Regarding the banking and current physical cash in the market of Afghanistan. [00:53:00] As we see that during last one year, the banking situation is very hard, especially the private banking system that they’re providing very less money for the people of Afghanistan. Recently, they’re only providing at the most of the rural provinces, less than 200 USD for the people that they hold the private account with the private sector. Regarding the banking system services for the organization, as we see [00:53:30] that the most of the funds, which driven to a big amount of projects funds for the organization, it’s still freeze in banking of Afghanistan. And even they’re not… They cannot withdraw the total fund of the project. Only they can withdraw on 5% per week, which is not a good amount. Even for the one year our organization cannot implement the project with this amount of the fund.
So the banking system services [00:54:00] for the organization is very hard, especially those organization that they’re not willing to open their accounts with the Afghans’ international bank and those fund which is already submitted from the donors before the 15 of August it’s still in the banks and organization didn’t have access to these funds. Another hand, that the physical cash that currently using through the market system, especially the Hawala System, that the organization, also the people of Afghanistan [00:54:30] in the market that are using. The physical cash situation is also too bad because there’s no printed new cash for Afghanistan. That’s why people is just using the very old cash in the market. And sometimes in most of the provinces, the people are facing, lack of cash in the market because we see that all those people that they are withdrawing their cash from the banks, they’re keeping their money in the [00:55:00] house because it’s a kind of less interest for the banks and they’re not willing to deposit.
So the cash cycle that it was going through in an out system is not going well. That’s why the condition of the physical cash in the market is also not good. Sometimes through the Hawala system, that the donor are sending the money to the market, this Hawala person is also not willing to provide this cash for the organization and for the people, because there is not enough cash in [00:55:30] the market to give this cash for the people of Afghanistan. And the cycle which is going honestly in the market situation is not good because a big percentage of the people is just keeping the money at home.
And the system, the markets, and the value of the cash, the situation of the physical cash in the market is getting too old. And that’s why today we see that people is just carrying the [00:56:00] very old and also the very status of the physical cash going inside of the country. I hope that the situation getting well, but I think that until the banking system not getting any positive change for the market, people also will not interest to submit their moneys to the bank or deposit their money. That’s why it’s not a [00:56:30] good situation for the banking and physical cash in the country. Thank you very much.
Masuda Sultan: Thank you. Negina jan. Hadiya, I’ll leave it to you to take us through the end.
Hadiya Afzal: Of course. So thank you everyone for joining us today, before we wrap, I would love to have all of our speakers just give one last statement about their hopes for hopefully a year from now and what a Afghanistan might look like and the US responsibility one year on now. [00:57:00] So maybe we can start with Adam.
Masuda Sultan: How long should they go for Hadiya?
Hadiya Afzal: 30 seconds to a minute. I think we’re about ready to wrap. So yeah.
Adam Weinstein: I’m going to keep my expectations narrow. I hope that a year from now that the Taliban and the United States still have some form of diplomacy and that we haven’t seen a significant economic decline beyond what’s already happened in Afghanistan. I think that’s what we can hope for. And the reason I say that is that the [00:57:30] problems that Afghanistan are facing cannot be solved in a year. We have to start thinking in decades, and it’s going to take long term thinking versus short term thinking, which has dominated the last 20 years. And we’re going to have to think about how do we prevent this country from becoming a failed state and the Taliban are going to have to think about that too.
Hadiya Afzal: Great. Thank you very much. John, would you like to go?
John Sifton: Thanks a lot and thanks for putting this together. I think it’s very [00:58:00] important that a year later we not lose sight of the enormous humanitarian crisis that is unfolding. I think because so many humanitarian groups came in and ramped up operations, a worse catastrophe was averted. But with rising prices due to global inflation across the boards, lessening capacities by the World Food Program, and this entrenched economic restrictions on the central bank, [00:58:30] we could face the catastrophe we were warned about this winter. Things can get worse, as Adam pointed out. We have to understand the situation’s already extraordinarily bad, but it could get worse. Which is why sustained attention on these issues needs to be brought to bear. And I think the best way to do that is to have conferences like this, but also keep it in the news, keep it in people’s consciousness, on social media, in media articles and reports. It’s just [00:59:00] absolutely essential that we continue to bear witness on these issues.
Hadiya Afzal: Yeah, agreed. This is a huge economic and humanitarian crisis. And I think oftentimes overlooked in the front pages now. Which is why it’s more important than ever for advocates and allies like yourselves to all make sure that we are talking about as much as we can. Dr. Rubin, would you like to go next?
Dr. Barnett Rub…: Yeah. Well, this discussion remind you a little of an old Soviet joke which is, [00:59:30] what is the difference between a pessimist and an optimist? A pessimist says, “Things couldn’t be worse than they are now.” And an optimist says, “Oh yes, they could.” So in that sense, I’m an optimist. But let me point out some things we haven’t discussed. No country in the world, or the region has tried to restart a proxy war in Afghanistan. That is a big change from the past 40 years.
And it shows that there is some learning going on [01:00:00] and I hope that that will be sustained. Certainly on the side of the Afghan people, the lack of very massive overt opposition to the Taliban should not be mistaken for support, but I know that there is a discussion going on among many Afghans about how to oppose or advocate against, advocate with the Taliban without taking up arms, without just going back to the cycle of one armed group trying to take over from another armed group. [01:00:30] I wouldn’t say I’d predict anything, but I would be very curious to see how those two processes develop in the next year.
Hadiya Afzal: Thank you. Thank you very much for that insight. Negina, would you like to speak next? Negina, if you could give us a statement? I think you might be muted.
Negina Yari: [01:01:00] Yeah. I was muted. Thank you very much for providing this opportunity in order to discuss in details about the economic condition Afghanistan and about the current status of the funds and humanitarian activities, which is going on in the country. At the ground we see that situation of the people is getting worse day by day. And it also giving a remind us what will happen for the next and what will happen for the people of Afghanistan, which is we are getting near to the [01:01:30] next season of the winter. So I hope that the international community and also the big donors of Afghanistan should take care of this. And there should be a possibility of the option before Afghanistan, because if we think only about recognition of Afghanistan, and if that it takes a long period of time and also unfreeze [inaudible 01:01:53] Afghanistan, also take time. So what is the B option for Afghanistan? If the situation getting like [01:02:00] this it’ll affect the people of Afghanistan.
Hadiya Afzal: Yeah. Agreed. Definitely. I think it’s very important to keep in mind that [inaudible 01:02:15] most affected by this-
Negina Yari: This condition anymore. [inaudible 01:02:19].
Hadiya Afzal: No, thank you very much, Negina. It was great to hear from you today. Dr. Mehrabi, would you like to wrap up for us? Give your final thoughts on this before we let everyone go?
Dr. Shah Mehrab…: Thank you. I think it is important to [01:02:30] keep in mind why this catastrophic situation that Afghanistan is facing. It is partly I would argue is because of frozen billions of dollars in the country’s reserve that will have to be resolved. I’m an optimist. I think the progress on the talks that are continuing what could result in a situation where indeed the ordinary Afghans could not be faced, what is double-digit inflation. [01:03:00] But also there’s a great signs, of in many areas to be looked at, is that we had a, for example, issue of that was brought up by Negina with regard to the afghanis. That issue has been resolved. So if you need to go ahead and get new bills, new afghanis, the central bank has plenty of new bills that they could easily exchange it for you. So that situation is no longer a problem.
World Food Program also had complained or the fact that they [01:03:30] do not have enough afghanis. They could not go ahead and get enough afghanis. And that situation also had been remedied. So there is the work that we did with the Polish company finally resulted in a positive move with transferring the funds to Afghanistan. So I’m very optimistic. And also I think you have to keep in mind, despite all the challenges, the Afghanistan banks have reopened, they are functioning. What funds, limited funds. We still have problem with the corresponding bank, but in [01:04:00] the volume, in the scale is not there yet. But as an optimist, I predict that we will have that. All right.
Hadiya Afzal: Thank you. Thank you very much to all of our panelists for their contribution and insights today, and thank you to everyone who attended for joining us for this discussion. We’ll be recording. We recorded it. So hopefully we’ll have clips up posted, and we’ll be sure to share this around on socials. Masuda, any last words?
Masuda Sultan:No, I like to end on time. [01:04:30] Thank you so much, everyone.
Hadiya Afzal: All right. Thank you all. Enjoy your afternoons.
Dr. Shah Mehrab…:Bye-bye.
