In Taliban-controlled Afghanistan, aid groups are overwhelmed by the starving. More than half the population, the United Nations has warned, won’t get enough to eat this winter. The biggest problem isn’t a lack of food. Rather, it’s the disappearance of what had been the lifeblood of the Afghan economy — Western cash.
As fears of a humanitarian disaster mount, the West faces a desperate dilemma: Can it help Afghans without aiding the Taliban?
The answer depends on your definition of “aid.” But a range of creative solutions are circulating — with some already being put to use — that could begin to address warnings from relief agencies that Western sanctions on the Taliban are hurting the Afghan people.
Since the fall of Kabul in August, the Taliban — unrecognized and under sanctions by the United States and European Union — have been barred from accessing $10 billion in Afghan government funds, mostly frozen in the U.S. Federal Reserve. Meanwhile, flows of foreign aid — once used to cover the majority of public expenditures — have slowed to a trickle.
The result is a convergence of financial woes that take the troubles of a poverty-stricken, war-torn country, mixes them with the hardships faced by U.S.-sanctioned states like Iran and Venezuela, then piles on the dire experience of a nation like Argentina during its catastrophic debt default and banking crisis. In short, the Taliban, cut off from foreign funding, cannot pay salaries, leaving families unable to buy food. The Afghan Central Bank, under Taliban control, is choked off from the international banking system and cannot provide enough currency to local banks, which, in turn, cannot fund businesses and individuals. The broader private banking system is so starved of cash that even Afghans who have savings are waiting hours in line for minimal withdrawals.
The United Nations is in the midst of a record funding appeal for Afghanistan. But without a solution that restores the flow of money into and throughout the country, the number of Afghans at risk of hunger is doomed to soar, aid groups say.
“We have to figure out, are we really willing to see the government of Afghanistan devolve and crash by cutting off money?” Sean Callahan, chief executive of Catholic Relief Services, told me. “How many more people does that throw into need?”
For the Afghan people, a solution is urgent. As my colleague Pam Constable reported, the Taliban have scant resources to protect millions of vulnerable people against another harsh winter. Many are forced to choose between food and fuel, boosting potential for a full-fledged humanitarian disaster.
That disaster, for the most part, is man-made. Many Afghans were struggling before the Taliban’s takeover. But 80 percent of Afghanistan’s budget depended on overseas funding. Cut off from that flow, “a large, newly impoverished urban working class” has mushroomed, Constable wrote.
“Everywhere we go, we find thousands more people who need help,” Babar Baloch, a spokesman for the Office of the U.N. High Commissioner for Refugees in Geneva, told Constable.
The Biden administration, as my colleague Karen DeYoung reported, has joined much of the world in saying that the Taliban cannot be recognized unless it ensures the human and civil rights of all Afghans, including minorities and women, and breaks ties with terrorist organizations such as al-Qaeda. As a stopgap, the U.S. Treasury granted narrow licenses for the flow of humanitarian assistance, including hundreds of millions of dollars from Washington. Under pressure from aid groups and U.S. lawmakers, the U.S. Treasury expanded the definition of humanitarian assistance last month.
Callahan and others say new exemptions have helped, but not nearly enough. They’ve enabled, for instance, Catholic Relief Services to expand aid operations to include things like paying teachers without fear of running afoul of U.S. sanctions. But they haven’t solved the bigger problem: Getting money into Afghanistan from overseas and moving it around the country.
Many large banks remain too wary of Washington’s sanctions regime to handle transactions to Afghanistan, aid groups say. That’s left a large number of charities to rely on cumbersome and costly systems that involve working with middlemen outside the country to access funds within Afghanistan, an option few see as a solution for preventing a humanitarian emergency.
Even with the administration’s new exemptions, “we’re not getting a lot of assistance from the banks,” Callahan said. “Money transfers continue to be a challenge.”
A senior U.S. Treasury official told me that the department had not levied specific sanctions on Afghanistan’s central bank and was actively reviewing options for addressing the country’s cash crunch. But there are challenges.
He blamed the hesitancy of foreign banks to do business with the central bank on their own internal risk calculations, including the lack of a recognized government and fears that deposits could be diverted to criminal activities including terrorism. In addition, he said, litigation from 9/11 families has tied up the more than $7 billion frozen by the New York Federal Reserve following the fall of Kabul, complicating any possible release of funds.
Even if the United States was to consider unfreezing those funds, technical questions, he said, would need to be addressed — including who could legally ask for them in a Taliban government unrecognized by Washington.
Yet observers say there are plenty of options that could help, and there are signs the Biden administration is moving in that direction after sharp criticism in recent months of not doing enough to address the humanitarian crisis.
The Post’s David Ignatius on Tuesday reported that Secretary of State Antony Blinken had backed a plan to ease Afghanistan’s liquidity crisis through a new World Bank “humanitarian exchange facility.” The facility would allow donors to convert their dollars and euros into the local currency to pay doctors, nurses and other aid workers. The facility is likely to begin operating in mid-February and is expected to send $20 million to $40 million into the country each month.
The State Department, he reported, has also encouraged the World Bank to make money available from a $1.5 billion Afghanistan Reconstruction Trust Fund, with an initial payment of about $280 million released in recent weeks and hundreds of millions more in the pipeline. The administration is additionally “encouraging a cash infusion program” that would ship between $120 million to $150 million a month to ease Afghanistan’s liquidity crisis through a financial services company based in Europe.
More radical steps have also been floated, some of which either the Taliban or Washington could oppose. For instance, Alex Zerden, a former U.S. Treasury official, argues for the privatization of the Afghan central bank to allow for large transfers while also ring-fencing them from possible Taliban looting. Short of that, the central bank’s core functions — such as auctioning off dollars to local banks — could be transferred to a private bank, which could be approved and monitored by the United States and other partners.
“The Afghanistan International Bank is the most likely candidate for this deputization,” he wrote for the Lawfare Blog.
Shah Mehrabi, a member of the Afghan central bank’s governing board and an economics professor at Montgomery College in Maryland, has floated the idea of tapping frozen Afghan government assets overseas for small monthly transfers to the central bank, solely for purpose of auctioning off dollars to private banks, according to the New York Times editorial board. Such auctions, he argues, are easy to monitor and could be cut off if the money was misused.
Since the U.S.-based funds are caught up in litigation, the Times points to the $2.5 billion worth of Afghan central bank reserves in Europe as an alternative source.
Less radical solutions could help, too. Human Rights Watch and aid organizations argue that the U.S. Treasury could draft letters to big foreign banks, explicitly stating that wire transfers for approved uses will not get them into hot water. In an email, Amanda Catanzano, a senior official with the International Rescue Committee, argued for a suite of possible solutions, including U.N.-sanctioned currency swaps and jump-starting the banking system by unfreezing the foreign assets held by certain Afghan individuals and corporations, if not the government.
“The idea that Washington can’t do more is disingenuous,” John Sifton, Asia Advocacy Director at Human Rights Watch, told me. “There’s a lot they can do that they’re not doing now.”