Afghanistan’s money is crumbling to pieces like its economy

Do you remember cash? These days, it’s easy to forget what bills look like when you wave a phone or a credit card like a magic wand, or more, what the actual bills look like — and how they’re abused in an average five-year lifespan.

Not for Allah Mohammad Araya. In a country so sanctioned that much of his own cash is out of reach, he sat cross-legged in a corner of Kabul’s main foreign exchange market, sifting through a pile of paper waste in what was actually a disaster area Afghanis, the currency of Afghanistan.

“Out of 10,000 Afghani bills here, maybe 1,000 of those bills are still good,” he said, pointing to a 100 Afghani bill that was so faded that one side appeared smooth. Another looked more like scotch tape than money. A third wasn’t much better, the victim of a bad cut-and-paste job where the color scheme — and serial numbers — didn’t match.

“Not even the Fed takes that,” he said, shaking his head before holding it up to the sun for a closer look.

Forex traders sort through stacks of Afghan currency

Forex traders sort stacks of Afghan currencies at the Sarai Shahzadeh market in Kabul.

Hands hold a wad of Afghan cash

Moneychangers hold worn Afghan bills in Sarai Shahzadeh, Kabul’s foreign exchange market.

A year after the Taliban took power, Afghanistan’s economy remains in crisis. Cuts in international aid have slashed the country’s GDP by 45%, and the World Bank and International Monetary Fund expect economic output to contract by another third by the end of 2022. Half of the country’s 39 million people are in need of humanitarian assistance, according to the United Nations.

To make matters worse, sweeping Western sanctions and Washington’s freeze on $7 billion of Afghan central bank balances deposited at the Federal Reserve Bank in New York mean that credit card and online payments are no longer possible. That has turned Afghanistan into a cash-only economy not only at a time when capital controls limit how much money you can withdraw from the bank, but also when no new bills come into circulation to replace worn-out ones.


In economically stricken Afghanistan, old banknotes are falling apart.

In previous years, the Afghan central bank — known as the Da Afghanistan Bank, or DAB — confiscated 3 to 4 billion afghans (about $33 to 45 million) worth of obsolete banknotes annually and replaced them with new ones printed abroad. (Afghanistan doesn’t have its own mint.) But international sanctions against working with the Taliban have spooked foreign printers and plunged the country into a liquidity crisis as Afghans struggle with a currency that is – literally – falling apart.

“The condition of these bills is appalling and getting worse by the day,” said Amin Jan Khosti, a longtime Moneychangers Union member and head of FX Market Sarai Shahzadeh. “People try to iron them, they play with serial numbers. We told DAB and we know they are trying to find solutions.”

Bundle of worn Afghan cash

Afghanistan has become a cash-only society due to international sanctions, but much of the local currency is crumbling.

In January 2020, the then Republic of Afghanistan commissioned the Polish State Security Printing Works (PWPW) to print 380 million banknotes worth 10 billion Afghanis for a contract worth more than US$4 million. At the time of the Taliban takeover, PWPW had completed 70% of the contract, said Shah Mohammad Mehrabi, a Washington-based member of the Afghan central bank’s board of directors who was appointed by the previous administration but continues to serve under the Taliban.

“The last tranche was supposed to be delivered last September. But it was suspended when the Taliban interim government came to power and sanctions were imposed,” Mehrabi said.

Discussions between DAB and the US State Department and US Treasury Department resulted in assurances to the PWPW that it would not violate prohibitions. “But then we had logistical problems,” said Mehrabi. “Who would deliver these Afghans to the central bank?”

Even Qatar, which has backed the Taliban’s diplomatic efforts, has been reluctant to do so without Western assurances. According to Mehrabi, the Ministry of Finance stated that “all companies have been granted approval” but no agreement was reached between Qatar and DAB.

And there was another problem: DAB had no intermediary through which to send payments, including to PWPW.

“Whenever DAB tried to make a payment to PWPW through another intermediary, the payment was refused,” Mehrabi said, adding that a new deal with French company Oberthur Fiduciaire for 390 million banknotes signed by the previous Afghan government negotiated has yet to be signed.

Money changers next to stacks of Afghan currency

Currency traders arrange stacks of Afghan bills and await clients at Sarai Shahzadeh currency market in Kabul.

The consequences of the lack of invoices are compounded by the general rise in prices, which have risen in part due to the impact of the war in Ukraine, said Philippe Kropf, communications director for the United Nations World Food Program in Afghanistan.

People need more cash to pay for basic goods, but the amount of hard currency available is shrinking.

“We inject $55.8 million in cash each month to beneficiaries, commercial transportation companies, food suppliers and salaries,” he said. “But the physical failure of money exacerbates problems with cash-based transfers. Now we are telling our beneficiaries to check the money they receive and make sure it is ok.”

You can watch the currency depreciate in near real-time at Sarai Shahzadeh Marketplace, a dirt-caked, ramshackle building occasionally choked by the miasma of sewage from the nearby Darya-e-Kabul River.

Bundles of Afghan currency

Bundles of Afghan currency, the Afghani, stand ready for exchange at a marketplace in Kabul.

Carpet sellers in front of their shops are waiting for customers

Carpet vendors stand in front of their shops waiting for customers at Kabul’s Mandawi Market.

Inside are labyrinthine corridors with hundreds of exchange offices and swarms of currency brokers. Many congregate on the rooftop, which functions as an open-air currency auction site and includes a cafeteria serving fries and egg sandwiches, not far from Araya, the dealer, who was sifting through old bills on his rug under an umbrella .

He was idly flipping through a pile of Afghan 100 bills – each worth about $1.13 – before settling on a particularly sad example. He leaned forward to check the date of manufacture.

“These are supposed to last about three years,” he said with a rueful smile on his face. “These have been around since 14.”

On the other side of the roof was Qudratullah Mohammadi, a kind-faced man, hidden behind nine rubber-banded stacks of ragged Afghanis.

“Tens, 20s, 50s, 100s – these are the worst,” he said, pointing to his pile of rejects. “I argue with people, I fight with them, but most of them don’t accept these bills” when trying to exchange foreign currency for Afghanis.

“I’m saving them for the day the central bank will take them over,” Mohammadi said.

The aversion to lower-denomination notes is also affecting transactions in the other direction, said Faiz Zaland, a professor of political science at Kabul University. Forex dealers are imposing a fine on customers who exchange lower-denomination Afghanis for foreign cash because the central bank refuses to accept them.

“You get a rate if you give them 1,000 and 500 Afghani bills, but you have to pay more for 10s and 50s,” Zaland said.

Open air market in Kabul

Afghans shop for dried groceries at Mandawi market in Kabul.

Shoppers at an outdoor market in Kabul

Vendors and customers crowd at Mandawi Market in Kabul.

Some have attempted to bypass the banking system entirely, using cryptocurrencies, which rose in popularity after the Taliban took over. A report by data firm Chainalysis ranked Afghanistan 20th out of 154 countries for crypto adoption; a year earlier it hadn’t even earned a ranking.

Converting that into money is a complicated process. One method was using Bitcoin to purchase Universal Cash, one of the currencies used in the hugely popular online game PlayerUnknown’s Battlegrounds, or PUBG. This can then be resold to a number of exchange offices for cash.

But the Taliban recently imposed a nationwide ban on digital currency trading. In August, local media reported that authorities had shut down 16 cryptocurrency exchange offices in western Herat province.

“When bitcoin price more than halved, [government] decided to stop it all. They closed some people here,” said Mohammad Mansour, a forex trader with an office in a Sarai Shahzadeh side tangle.

Others believe the Taliban’s moves indicate they are in no rush to resolve the liquidity crisis.

“The incentive of not having enough money in the market is that your exchange rate remains high against the US dollar,” Zaland said. In early 2021, it took 77 afghans to buy $1, but now it takes about 88 — a smaller than expected devaluation of the afghani.

Forex traders auction US dollars

Currency traders are auctioning US dollars for Afghan currency at the Sarai Shahzadeh market in Kabul.

Forex trader holding a wad of US banknotes

US dollars remain in demand in Afghanistan, although the local currency has not depreciated as much against the greenback as feared.

In any case, the talks are largely frozen for the time being: After a US drone attack on a house in Kabul in July that killed al-Qaeda leader Ayman Zawahiri, Washington paused talks with DAB, Mehrabi said.

This month, the State Department and Treasury Department issued a joint statement announcing the establishment of the Swiss-based Afghan Fund, which will “protect, preserve and target disbursements” for half of the frozen reserves, with the $3.5 billion used to stabilize the Afghan economy while keeping the money “out of the hands of the Taliban and other malicious actors.”

The statement said that in order to restore trust internationally, DAB must demonstrate that it is free from political interference, has “adequate” controls to combat money laundering and terrorist financing, and is subject to third-party assessment and monitoring.

All of this adds up to a major headache for Abdul Qaher Faqiri, a Kabul-based businessman with projects involving importing goods and mining. He leaned back in his chair and took a battered 20 Afghani note from his wallet.

“Afghanistan is like our money,” he said, turning the bill over to examine the tears and discoloration from years of use. “It’s all a big, big problem.” Afghanistan’s money is crumbling to pieces like its economy

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