Release Afghanistan’s Frozen Funds!

Father with his daughter on the outskirts of Kabul. The family fled Jalalabad 10 years ago because of fighting © UNHCR/Andrew McConnell
Father with his daughter on the outskirts of Kabul after fleeing Jalalabad because of fighting ©Andrew McConnell

UAI launched a campaign, in March 2022, to secure the release of some US$9.1 billion – the sovereign external reserves of Afghanistan – that had been arbitrarily seized by the US government, and some of its European allies, after the return of the Taliban to Kabul in August 2021. Some US$7 billion had been deposited, in good faith, by Da Afghanistan Bank (DAB), the central bank of Afghanistan, in the US Federal Reserve Bank in New York. Smaller amounts are held in banks in Germany, Italy, the United Kingdom and in the Bank of International Settlements in Switzerland.

A Seizure with Severe Consequences

The unilateral seizure of Afghanistan’s external reserves in February 2022 by the Biden Administration was done with the de facto support of some European countries; they did not object to upending the Afghan banking system, crashing the economy, and aggravating a perilous humanitarian situation.

It is worth noting that the frozen assets are the property of the Afghan people, who had no say in the return of the Taliban to Kabul in August 2021. The assets also included the savings of regular Afghans, who were unable to access their resources as liquidity issues mounted and the economy went into freefall.

External reserves are fundamental to meeting the responsibility of a country’s central bank. A critical role of such banks is to support the economy and banking system so that they function effectively, are trustworthy and attractive to investors. Thus, the DAB, as all central banks, engages in foreign exchange markets to maintain the value of the local currency, the afghani; this helps secure price stability. The DAB must also avoid financial crises or shocks that are detrimental to trade and investment.  In brief, the DAB works to ensure liquidity and avoid inflation, a problem that risks, for example, putting basics such as bread and tea beyond the reach of poor families.  The lack of access to the country’s external reserves severely compromises the DAB’s ability to help maintain a well-functioning economy that is fundamental to the well-being and everyday survival of Afghans

UAI’s Proposal

The UAI campaign argues that the DAB should be given limited, conditional, and internationally monitored access to a minimum of US$150 million of the frozen funds, on a monthly basis, to allow it to deliver on its responsibilities.  

In September, 2022 the Biden Administration established a “Fund for the Afghan People” as a not-for-profit Foundation in Switzerland to “protect, preserve, and – on a targetted basis – disburse its assets for the benefit of the Afghan people.” The US$3.5 billion allocated to the Fund represented half of the seized resources in the United States.  Disbursements of the Fund were intended to support “Afghanistan’s macroeconomic and financial stability, thereby benefitting the Afghan people.” Governed by a Board of four Trustees, the Fund has not yet made any disbursements to re-capitalize the DAB. 

The Human Cost of Inaction

The seizure of Afghanistan’s reserves is tantamount to economic warfare, if not collective punishment and should cease forthwith. It condemns the bulk of the Afghan population to catastrophic levels of poverty, hunger, deprivation, indebtedness and displacement.  It also involves the troubling use of negative coping mechanisms such as young girls being exchanged in marriage so that other children can be fed.

Call to Action

UAI calls for the immediate, internationally monitored, and phased release of US$9.1 billion, and accrued interest, that belongs to the Afghan people.

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