But even a deal that funnels some money into a humanitarian trust fund for Afghanistan seems unlikely to shore up Afghanistan’s central bank, which needs foreign currency to perform its core functions. The bank, which is modeled on the New York Federal Reserve, sets monetary policy and the exchange rate and stabilizes prices by periodically auctioning off dollars to private banks. Longtime civil servants who remained in Kabul have continued to perform the bank’s core functions, conducting electronic auctions with the cash they have on hand, according to Shah Mehrabi, a member of the Afghan central bank’s governing board who is also an economics professor at Montgomery College in Maryland. But the bank could soon run out of foreign cash. The entire banking system could fall apart.
Mr. Mehrabi has proposed that the Biden administration allow monthly transfers of small amounts of the frozen funds for the sole purpose of auctioning off dollars to private banks. Such auctions are easy to monitor and could be cut off if the money was used for any other purpose, he said. Such an arrangement would bolster the hand of technocrats who have continued to work under the Taliban. It could be conditioned on their independence from the Taliban or on hiring certain technical staff members. Refusing to release any portion of the funds as long as the Taliban are in power would remove the money as a source of leverage.
Given the Sept. 11 lawsuit, it may not be possible to free up the funds frozen in New York in time to stave off a crisis. It may be more realistic for funds to be released from the banks in Europe, which hold a smaller but still significant amount of the Afghanistan central bank’s money. Since commercial banks in Afghanistan are required to keep some reserves in the central bank, hundreds of millions of dollars in the frozen overseas accounts are part of the life savings of Afghan citizens, which should not be rendered inaccessible because the Taliban took over the country.
It would not cost American taxpayers a dime to issue letters of comfort to European banks to make it clear that they will not be punished for giving private Afghan citizens access to their money. If this doesn’t happen, the world will be treated to the spectacle of Americans and Europeans paying to mitigate a humanitarian disaster caused, in part, by the fact that many Afghans have been cut off from their own money.
There are other things the U.S. government can do on the margins to ease the liquidity crisis. Before the Taliban took over, the Afghan central bank inked a contract with a Polish company to print about $8.5 million worth of bank notes. One batch of notes has been delivered, but the rest remain in Poland. That contract should be fulfilled. In the medium term, international agencies are proposing to pay Afghan civil servants directly, bypassing the Taliban-led Ministries of Education and Health. Last month, the World Bank unfroze $280 million in Afghan reconstruction funds that could soon be used for this purpose.
Such efforts would certainly help. But they won’t make a dent in the human suffering if the banking system collapses. When banks splinter and fail, they exacerbate crises, as happened in Yemen, according to Dave Harden, an expert on the economies of countries in conflict.
Reasonable people can disagree about how much aid the United States should give Afghanistan after two heartbreaking decades of blood and treasure. It is tempting to walk away entirely. But self-interest dictates that Americans think clearly about long-term costs. Small efforts now could avoid big problems later — such as another mass migration in Europe. They could also preserve a toehold in the country. The war has been lost, but that doesn’t mean every institution that Americans worked with is destined to disappear. There’s still time to save Afghanistan’s central bank.