The Biden administration on Wednesday announced it will create a new fund out of some of Afghanistan’s frozen central bank reserves, aiming to alleviate the country’s mounting humanitarian crisis without enriching the Taliban, which rejected previous attempts at a compromise deal earlier this year.
“This is a very important first step,” said Shah Mehrabi, a former Afghan central bank member who will help run the new fund. “Afghans will always continue to say the $7 billion needs to be given back to the Bank of Afghanistan, and that should happen when [it] is able to address some of the concerns.”
The announcement follows more than a year of fighting over whether the Biden administration should return the $7 billion in Afghan assets that became inaccessible to the country’s leaders after the Taliban’s rise to power in August 2021. Economists say the freezing of these funds has fueled the collapse of Afghanistan’s economy and its hunger crisis, but the Biden administration and other analysts have said the Taliban cannot be trusted to administer such substantial amounts of money. Biden officials also announced in February that half of the $7 billion in funds would be separately earmarked for litigation filed by the victims of the Sept. 11, 2001, terrorist attacks.
The deterioration of Afghanistan’s economy has put pressure on U.S. officials to explore how they might be able to turn the funds back over to the country’s central bank. In June, U.S. officials met with Taliban leaders in Doha, Qatar, to discuss potential compromises that would allow technocrats at Afghanistan’s central bank to use the funds under close supervision to ensure the money does not fall into Taliban hands. The Taliban has rejected those proposals. In a statement, Afghanistan’s central bank strongly criticized the administration decision as “unacceptable” and urged the reserves to be returned “to the Afghan people.”
With a deal elusive, economists and aid groups have grown increasingly concerned about Afghanistan’s economy amid an exodus of capital and people. Human Rights Watch estimated in August that about 90 percent of the country is not getting enough to eat. Some economists say the new fund is insufficient to meet the country’s needs, given that the central bank reserves are critical for shoring up a currency that has cratered. A severe drought and devastating earthquake have also combined to make what some experts have called the world’s greatest humanitarian catastrophe.
“This move can’t possibly compensate for the harm to the Afghan economy and millions of people who are starving, in large part because of the U.S. confiscation of Afghanistan’s central bank reserves,” said Mark Weisbrot, co-director of the Center for Economic and Policy Research, a liberal think tank.
Still, the United States is leaving open the possibility that Afghanistan could eventually reclaim the bank assets in full. Deputy Treasury Secretary Wally Adeyemo sent a letter on Tuesday to the Afghanistan central bank saying that it must meet three conditions — demonstrate political independence from the Taliban, implement anti-money-laundering guidelines, and add a “third-party monitor” — before the United States could consider returning the funds. U.S. officials say the Taliban has refused to do what is necessary for the funds to be returned and for the country to be returned to economic stability.
“The shortcomings of economic management are contributing to the economic and humanitarian crisis in Afghanistan,” Adeyemo wrote in the letter.
He added, “There is currently no institution in Afghanistan that can guarantee that these funds would be used only for the benefit of the people of Afghanistan.”
Luftullah Lutf contributed reporting from Kabul.