In recent days, the Afghan currency has strengthened against the US dollar. Two days ago, at the Sarai Shahzada Exchange Market, Afghanistan’s primary currency exchange center, one US dollar was valued at less than 66 Afghanis. The Da Afghanistan Bank, now under Taliban control, has announced that, as of the time of this report, the exchange rate for one US dollar is 68 Afghanis. However, citizens report that, despite the decrease in the dollar’s value against the Afghan currency, the prices of food and other goods have remained unchanged. Economic experts argue that the robustness of the national currency doesn’t necessarily translate into economic prosperity, poverty reduction, or job creation. They assert that the value of the Afghan currency is linked to strategic and untouched reserves, which, although halted, still play a crucial role in maintaining monetary stability. These experts highlight factors contributing to the Afghan currency’s rise, including the weekly dispatch of over $40 million by the United Nations, increased Afghani currency usage in border provinces, significant funds allocated for intelligence activities, financial support from expatriates to their families, decreased purchasing power of the people, the return of tens of thousands of migrants, and a reduction of more than half in the country’s imports.
After the Taliban took control of Afghanistan, the Afghan currency witnessed an unprecedented decline against major foreign currencies. Nevertheless, with the weekly cash assistance from the United Nations to Kabul, the Afghan currency stabilized in the market. The past two years have seen a rollercoaster of fluctuations in the value of the Afghan currency against the dollar, and in the latest development, the value of the dollar against the Afghan currency has decreased.
Two days ago, at the Sarai Shahzada Exchange Market, the largest money exchange center in Afghanistan, one US dollar was exchanged for less than 66 Afghanis. However, the next day, the dollar’s value increased again. Over the past two years, the value of the dollar has been volatile. According to the announcement of the Central Bank of Afghanistan called Da Afghanistan Bank, yesterday, one US dollar was exchanged for 68 Afghanis.
This comes as, according to the calculations of the previous government in the year 2005 when they introduced the new currency, one US dollar was equivalent to 48 Afghanis. Subsequently, the value of the Afghan currency against the dollar decreased, and by the year 2015, the worth of one US dollar was calculated at 57 Afghanis. However, it reached 67 Afghanis later on, and with the fall of the previous government, the value of the Afghan currency suddenly plummeted.
However, citizens of the country state that despite the decrease in the value of the dollar against the Afghan currency, the prices of food and commercial goods remain high, and there has been no change in market rates.
Omid, a resident of Mazar-e-Sharif, speaking to the Hasht-e Subh Daily, expresses that despite the increase in the value of the Afghan currency against foreign currencies, there has been no change in prices. He adds, “The rates haven’t changed at all; a 5-liter cooking oil container, which used to cost 400 to 420 Afghanis when the dollar was around 78 Afghanis, is still priced the same now that the dollar has reached 68.”
This resident of Balkh province specifies that currently, a 49-kilogram bag of flour is priced at 1,750 Afghanis. According to him, when the dollar was at 78 to 80 Afghanis, it was the same price. He emphasizes that as the dollar rises, the prices of goods also go up, but when it falls, there is no corresponding decrease in prices.
Simultaneously, the food prices in Kabul indicate that despite the decrease in the value of the dollar, there has been no change in the prices of these commodities. According to the rate sheet of one of the stores in Kabul, a 49-kilogram bag of Kazakhstan flour is priced at 1,670 Afghanis, old Sella rice, 24 kilograms, at 3,000 Afghanis, Madina green tea, per kilogram, at 340 Afghanis, Russian 5-liter oil at 410 Afghanis, Alakozai 5-liter oil at 530 Afghanis, Iranian chickpeas, per kilogram, at 115 Afghanis, kidney beans, per kilogram, at 880 Afghanis, and a kilogram of sugar at 68.6 Afghanis.
Ferdous, a Kabul resident, states that with the fall of the dollar rate, there has been no change in the prices of food items. He adds, “When one dollar was 79 Afghanis, the prices of commodities were the same; now that it has decreased, it has not changed. The fluctuation in the dollar does not affect prices.”
However, economic experts also state that the strength of the national currency does not necessarily translate into economic prosperity, poverty reduction, and job creation. According to these experts, the decrease in the value of the dollar against the Afghan currency has multiple reasons. In their view, the reduction in the purchasing power of the people is one of the factors contributing to the decrease in the value of the dollar against the Afghan currency. They argue that the decrease in imports and the increase in exports have reduced the trade deficit, strengthening the national currency.
Azarakhsh Hafezi, an economic expert, speaking to the Hasht-e Subh Daily, mentions that Afghanistan’s strategic reserves, despite being frozen, have added value, positively impacting the credibility and guarantee of the available currency. According to him, the weekly injection of 40 to 50 million US dollars in cash aid from the United Nations has had a tangible positive effect, physically introducing dollars into the country’s financial market through exchanges.
Mr. Hafezi adds that in the past, Afghanistan had imports ranging between 10-12 billion dollars, which has now decreased to less than half, between 4.8 to 5.5 billion dollars. This reduction is attributed to the decreased purchasing power of the people. According to him, the increase in exports, which used to be around 840 million dollars, has reached over two billion dollars in the past fiscal year, with a key role played by the increase in mineral extraction. He further emphasizes that the strengthening of the Afghan currency is also a result of the challenges faced by the Afghan currency against the Pakistani rupee and the Iranian toman, due to which the usage of Afghan currency has surged in border provinces.
This economic expert highlights that the substantial funds sent for proxy wars and intelligence activities have contributed to the increase in the value of the Afghan currency. Although these funds enter the country illegally, according to him, they find their way into the financial market. According to Mr. Hafezi, personal contributions from individuals abroad range from 1.7 to 2.3 billion dollars, further adding to the strengthening of the Afghan currency.
On the other hand, Taher Qayomi, the deputy of the Money Exchangers Union in Sarai Shahzada Exchange Market, tells the Hasht-e Subh Daily: “Migrants who have returned to Afghanistan have faced a slight shortage of Afghan currency because they received Afghan currency. The optimism of the people has led them to embrace this currency. Previously, in the provinces of Kandahar, Khost, and border areas, they clung to Pakistani rupees, but now these same people have turned to the Afghan currency, and the exchange rate has improved slightly.”
Mr. Qayomi adds that the optimism of the people and the messages of buying and selling goods in Afghan currency from television have had a positive impact, prompting people to embrace the Afghan currency. Regarding the decrease in the value of the dollar, he states: “The rate was 66, people had turned to it when it reached 66, and now it has temporarily reached 70 Afghanis. That wasn’t the actual rate; it was just a unit for small transactions in a small period, the main transactions were at 67.5. Afghanis”
This comes as the value of the dollar against the Afghan currency has fluctuated over the past two years. According to economic experts, this trend, due to the artificial nature of the economy, is not stable, and Afghanistan will continue to experience economic instability and severe currency fluctuations until favorable conditions for employment and work are created for the citizens.
