Da Afghanistan Bank

Da Afghanistan Bank. It is the central bank of Afghanistan, established in 1939 during the reign of Mohammed Zahir Shah. The bank's headquarters are located in the capital city of Kabul and it is responsible for issuing the national currency, the Afghan afghani. Its primary roles include formulating monetary policy, regulating the country's commercial banks, and managing foreign exchange reserves.

History

The bank was founded in 1939, replacing the Afghan National Bank which had been established earlier under Amanullah Khan. Its creation was part of broader modernization efforts during the early 20th century. Following the Soviet–Afghan War and subsequent civil conflicts, the institution faced significant instability, including the looting of its reserves. The Islamic Republic of Afghanistan, established after the 2001 invasion, undertook major reforms with assistance from the International Monetary Fund and the World Bank. These reforms were dramatically disrupted by the Taliban's return to power in August 2021, leading to a freeze of the nation's international assets and a change in leadership under the new Islamic Emirate of Afghanistan.

Functions and responsibilities

As the central bank, its core functions include acting as the sole issuer of banknotes and coins for the Afghan afghani. It formulates and implements national monetary policy aimed at ensuring price stability. The bank also supervises and licenses all commercial banks and money service businesses operating within the country. Furthermore, it manages the state's foreign exchange reserves and acts as the banker and fiscal agent for the government of Afghanistan, handling transactions for ministries and public enterprises.

Organizational structure

The bank is governed by a Supreme Council and an Executive Board, with leadership traditionally vested in a Governor appointed by the head of state. Following the fall of Kabul in 2021, Haji Mohammad Idris was appointed as acting governor by the Taliban leadership. Its operations are divided into numerous departments, including the Banking Supervision Department, the Monetary Policy Department, and the Financial Intelligence Unit. The institution maintains a network of branches across major provincial centers like Kandahar, Herat, and Mazar-i-Sharif.

Monetary policy and currency

The bank's primary monetary policy objective has historically been to maintain the stability of the Afghan afghani. It employs tools such as setting interest rates on its deposits and utilizing open market operations. A significant reform was the 2002–2003 currency redenomination, which introduced the new afghani (ISO 4217 code AFN) to replace multiple competing issues. The bank maintains the national gold reserve and manages the country's Special Drawing Rights account with the International Monetary Fund. Since 2021, severe liquidity crises have forced a heavy reliance on physical cash shipments and strict capital controls.

Challenges and international relations

The bank has faced profound challenges, most severely following the 2021 Taliban offensive and the subsequent freezing of nearly all its foreign assets by the United States and international institutions like the Federal Reserve Bank of New York. This has precipitated a severe liquidity crisis and hampered basic banking functions. Its relationship with international bodies such as the World Bank, International Monetary Fund, and the Asian Development Bank has been largely suspended. The institution also grapples with combating terrorism financing and money laundering under international scrutiny, while managing an economy crippled by sanctions and the collapse of the former Islamic Republic of Afghanistan.

Category:Central banks Category:Economy of Afghanistan Category:Banks established in 1939