The announcement by Taliban spokesman Zahibullah Mujahid to completely ban foreign currencies in Afghanistan is a big deal. It may spark a cash crunch and downward spiral in the local economy that could lead to hyperinflation.
“The economic situation and national interests in the country require that all Afghans use Afghani currency in their every trade,” Mujahid said, warning that those in violation of the new law will be prosecuted.
“The Islamic Emirate instructs all citizens, shopkeepers, traders, businessmen and the general public to henceforth conduct all transactions in Afghanis and strictly refrain from using foreign currency,“ the statement posted online reads.
There’s a lot of uncertainty of how the Taliban will enforce such a rule because the economy of Afghanistan has been propped up on dollars for nearly two decades. At least 66% of Afghan bank deposits and 50% of the country’s sovereign debt are dominated by dollars.
The move comes as the US and its Western allies barred the Taliban from accessing more than $9.5 billion in assets stored abroad. For nearly three months, the terror group has been in power and shut out of the international financial system.
Mujahid ordered all businessmen to conduct trade in local currency for the country’s sake and to prevent a deepening economic crisis. Still, the greenback is the preferred currency among locals.
And once can see why as the Afghani collapses…
This story has played out before. In 2019, Zimbabwe’s government outlawed local trading in foreign currencies and introduced the “Zimbabwe dollar.” Since then, inflation has soared. By mid-2019, inflation had increased 175%. In March 2020, inflation reached 500%, and by July 2020, annual inflation was around 737%.
The Taliban are headed down Zimbabwe’s dark monetary hole, where hyperinflation will turn average citizens into trillionaires… unable to afford the most basic of life’s staples – something which could exacerbate already obscene levels of food insecurity in the troubled nation.