But even a deal that funnels money into a humanitarian trust fund for Afghanistan seems unlikely to bolster Afghanistan’s central bank, which needs foreign currency to perform its core functions. The bank, modeled after the New York Federal Reserve, sets monetary policy and the exchange rate and stabilizes prices by periodically auctioning dollars to private banks. According to Shah Mehrabi, a board member of the Afghan central bank and also a professor of economics at Montgomery College, long-serving officials who remained in Kabul continued to perform the bank’s core functions, running electronic auctions with the money they have. in Maryland. But the bank could soon run out of foreign cash. The entire banking system could collapse.
Mr. Mehrabi has proposed that the Biden administration allow monthly transfers of small amounts of frozen funds for the sole purpose of auctioning off dollars to private banks. Such auctions are easy to monitor and could be halted if the money was used for other purposes, he said. Such an arrangement would strengthen the hand of technocrats who continued to work under the Taliban. It could be conditional on their independence from the Taliban or on the hiring of certain members of the technical staff. To refuse to release part of the funds as long as the Taliban are in power would remove the money as a source of leverage.
Given the 9/11 trial, it may not be possible to release funds frozen in New York in time to avert a crisis. It might be more realistic for the funds to be released by banks in Europe, which hold a smaller but still significant amount of Afghan central bank money. Since commercial banks in Afghanistan are required to keep certain reserves at the central bank, hundreds of millions of dollars in frozen overseas accounts are part of the life savings of Afghan citizens, which should not be made inaccessible because the Taliban took control of the country.
It wouldn’t cost American taxpayers a penny to issue comfort letters to European banks to make it clear that they will not be punished for giving access to their money to private Afghan citizens. If that doesn’t happen, the world will be treated to the spectacle of Americans and Europeans paying to alleviate a humanitarian catastrophe caused, in part, by the fact that many Afghans have been deprived of their own money.
There are other things the US government can do at the margins to alleviate the liquidity crisis. Before the Taliban took over, the Afghan central bank signed a contract with a Polish company to print around $8.5 million worth of banknotes. A batch of tickets has been delivered, but the rest remain in Poland. This contract must 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 released $280 million in Afghan reconstruction funds that could soon be used for this purpose.
Such efforts would certainly be helpful. But they will not alleviate human suffering if the banking system collapses. When banks burst and fail, they exacerbate crises, as happened in Yemen, according to Dave Harden, an expert on the economies of countries in conflict.
Reasonable people may disagree about how much aid the United States should give to Afghanistan after two harrowing decades of blood and treasure. It is tempting to walk away completely. But self-interest dictates that Americans think clearly about long-term costs. Small efforts now could avoid big problems later, like another mass migration to Europe. They could also keep a foothold in the country. The war was lost, but that does not mean that all the institutions Americans worked with are doomed. There is still time to save the Afghan central bank.