Foreign exchange in Afghanistan is now traded mostly by money changers, called sarrafs.
The currency of Taliban-controlled Afghanistan has emerged as the best-performing currency in the world this quarter, according to data compiled by Bloomberg. The Afghani has witnessed a remarkable nine per cent rise in value during this period, primarily propelled by the influx of billions of dollars in humanitarian aid and increased trade with Asian neighbouring countries, the outlet further said. Since seizing power two years ago, the Taliban have implemented several measures to maintain a firm hold on its currency.
These measures include prohibiting the use of dollars and Pakistani rupees in local transactions and imposing stricter restrictions on the movement of US dollars out of the country. They have even criminalised online trading, with imprisonment threats for those who violate these rules, said Bloomberg.
However, despite this development, Afghanistan remains a poverty-stricken country with one of the worst global human rights records. While the Afghani has experienced a substantial 14 per cent increase in value over the year, it ranks third on the global list, trailing behind the currencies of Colombia and Sri Lanka.
Afghanistan is largely isolated from the global financial system due to international sanctions. A World Bank report highlights the dire situation, with high unemployment, two-thirds of households struggling to afford basic necessities, and inflation giving way to deflation.
To alleviate some of the economic hardships, the United Nations has been sending regular planeloads of US dollars, totaling up to $40 million, to support the poor for at least 18 months since the end of 2021.
In Afghanistan, money changers known as "sarraf," who set up stalls in markets or run their businesses out of stores in cities and villages, are the primary means of exchanging foreign currency at the moment. Tens of millions of dollars are exchanged daily in the vibrant open-air market known as Sarai Shahzada in Kabul, which serves as the nation's de facto financial hub. As the central bank has stated, there are no trading restrictions.
Due to financial sanctions, nearly all remittances to Afghanistan now rely on the Hawala money transfer system. Sarraf's business largely depends on this system.
The United Nations estimates that Afghanistan needs about $3.2 billion in assistance this year, but only $1.1 billion has been provided, according to the international organisation's financial tracking agency. The organisation spent about $4 billion last year, as 41 million people in Afghanistan faced the threat of hunger.