Afghanistan’s currency has hit rock bottom against foreign currencies, especially the US dollar. On Monday, a US dollar was exchanged for 80.50 Afghani, the lowest exchange rate since the printing and circulation of the new Afghani banknotes introduced following the ouster of the Taliban regime. Concurrent with the unprecedented drop in the value of the national currency comes the resignation of the governor of Da Afghanistan Bank (DAB)—the Central Bank of Afghanistan. Although DAB Governor Khalil Sediq says he has stepped down due to an ailment he is suffering from, it seems that the record devaluation of Afghani has prompted him to quit.
One of the reasons for the latest plunge in the value of Afghan currency is the smuggling of dollars out of the country, especially into Iran. After President Donald Trump-led US administration last year pulled out of the Iran nuclear deal known as the Joint Comprehensive Plan of Action (JCPOA) reached between Iran and six world powers: the US, UK, France, Germany, China and Russia, Washington reinstated sanctions on Tehran. The new sanction regime led to an unprecedented devaluation of the Iranian rial, thereby increasing demand for dollar in Iran. Given the shortage of US currency, the smuggling of dollar out of Afghanistan into Iran beside through other legal channels, which also existed in the past, has spiraled. According to some unconfirmed reports, some four to five billion dollars were sneaked out of Afghanistan into Iran only in 2018, leading to a hike in demand for dollars, and a subsequent drop in Afghani value.
In addition to the smuggling of dollars, the worsening political situation and uncertainty in Afghanistan are also to be blamed for the devaluation of Afghani. On the one hand, the foreign aid dollars have growingly shrunk, and on the other hand, the progress of Afghanistan in enhancing its exports is not as swift as it can compensate for the reduction of dollars in Afghan market due to foreign aid cuts. Moreover, some investors are also transferring money out of Afghanistan because of the unknown political future of the country. The drop in Afghani value can make life conditions difficult for an overwhelming majority of Afghan people whose earnings are in Afghan currency, but basic goods are bought for dollars and imported into Afghanistan. The government leadership must utilize all means that can help maintain the value of Afghan currency, and prevent Afghan people from reducing to impoverishment.
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