By Karin Strohecker, Simon Lewis and David Lawder
LONDON/WASHINGTON (Reuters) – The insurgent Taliban took over Afghanistan with astonishing speed, but it appears unlikely that it will prove equally as fast in gaining control of most of the Afghan central bank’s roughly $10 billion in assets.
The country’s central bank, Da Afghanistan Bank (DAB), is thought to hold foreign currency, gold and other treasures in its vaults, though the exact contents are unclear, according to an Afghan official. Moreover, the vast majority of the assets are held outside Afghanistan, according to another source familiar with the matter, which may leave most of the hoard beyond the insurgents’ reach.
Reuters was unable to reach Afghan central bank officials. The bank’s governor, Ajmal Ahmady, said in a Twitter thread https://twitter.com/aahmady/status/1427265049668636674 he left deputies in charge of the bank on Sunday, later flying out of Kabul airport after President Ashraf Ghani and other key officials had already fled. Ahmady did not respond to Reuters’ emails and messages seeking comment.
The Taliban said in a statement on Saturday that the treasury, public facilities and government offices were the property of the nation and “should be strictly guarded.”
Here is what we know about the central bank’s assets and reserves:
The most recent financial statement posted online https://dab.gov.af/sites/default/files/2021-08/Monthly%20Financial%20statement%20%20for%20the%20month%20of%20Jawza%20%201400%20%28English%29%20%20.pdf shows DAB holds total assets of about $10 billion, including $1.3 billion-worth of gold reserves and $362 million in foreign currency cash reserves, according to currency conversion rates on June 21, the date of the report.
MANY ASSETS HELD ABROAD
However, a big chunk of it won’t be held in the country.
Central banks, especially in developing nations, often park their assets overseas with institution such as the Federal Reserve Bank of New York (FRBNY) or the Bank of England.
According to DAB’s consolidated statement https://dab.gov.af/sites/default/files/2021-04/DA%20AFGHANISTAN%20BANK%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%20FOR%20THE%20YEAR%20ENDED%20QAWS%20301399%20%28DECEMBER%20202020%29final.pdf, the FRBNY held gold bars worth 101,770,256,000 afghanis – at the time $1.32 billion – on behalf of the Afghan central bank in its vaults by end-2020.
The DAB’s June statement also states that the bank owned investments worth $6.1 billion. While the latest report did not provide details of those investments, a breakdown in the year-end report showed that the majority of those investments were in the form of U.S. Treasury bonds and bills.
Investments were made through the International Bank for Reconstruction and Development (IBRD), an arm of the World Bank, or through the FRBNY and held in New York. Among its smaller items are shares in an investment pool by the Bank for International Settlement, which is based in Switzerland, as well as the Economic Cooperation Organisation Trade and Development Bank in Turkey.
Asked about the holdings, a FRBNY official said the bank does not acknowledge or discuss individual account holders as a matter of policy, but is generally in contact with U.S. government agencies to monitor events that may impact control of a foreign central bank.
An official in the administration of U.S. President Joe Biden told Reuters: “Any central bank assets the Afghan government have in the United States will not be made available to the Taliban.”
DAB’s foreign currency cash holdings worth around $362 million consist almost entirely of U.S. dollars and were held at the bank’s head offices and branches as well as the presidential palace, which is now in the hands of the Taliban.
The year-end statement also details that just under $160 million worth of gold bars and silver coins were held at the bank’s vault at the presidential palace.
The Afghan central bank’s vaults are also home to a hoard of 2,000-year-old gold jewellery, ornaments and coins known as the Bactrian Treasure, according to UNESCO. The around 21,000 ancient artifacts were presumed lost until 2003, when they were found in a secret vault in the central bank’s basement, having survived the previous era of Taliban rule undiscovered.
Afghan lawmakers in January floated the idea of sending the treasures abroad for safe keeping, warning they were vulnerable to theft, according to local broadcaster Tolo News.
Looking at the central bank’s international reserves, the International Monetary Fund (IMF) estimated those at $9.5 billion in 2021 in its latest review published in June https://www.imf.org/en/Publications/CR/Issues/2021/06/28/Islamic-Republic-of-Afghanistan-First-Review-Under-the-Under-the-Extended-Credit-Facility-461288.
This translates into an import cover of more than 15 months – well above the three months seen as a safe minimum. The IMF said it considered the level of reserves “broadly adequate to risks facing Afghanistan.”
ACCESS TO SDRs IN DOUBT
A key question will be the handling of Afghanistan’s share of a pending $650 billion allocation of Special Drawing Rights currency reserves to the Fund’s 190 member countries on Aug. 23.
The distribution of the SDRs, the Fund’s unit of exchange based on dollars, euros, yen, sterling and yuan, aims to shore up the reserves of developing countries strained by the COVID-19 pandemic. As an IMF member, Afghanistan is eligible for an allocation of about $455 million, based on its 0.07% quota shareholding in the Fund.
Insurgents gaining access to those assets would be hard to digest in capitals around the globe, but not all countries have access to the SDRs they are allocated. In 2019, the IMF suspended Venezuela’s access to its SDRs after more than 50 member countries representing a majority of the Fund’s shareholding refused to recognize Nicolas Maduro’s government as Venezuela’s legitimate ruler following disputed 2018 elections.
The fund has not responded to a request for comment on the pending SDR allocation to Afghanistan.
A source familiar with the matter said that IMF actions in such cases are guided by the views of its members. The IMF membership also has not reached a consensus on whether to recognize Myanmar’s military leadership since they seized power in a February coup.
(Reporting by Karin Strohecker in London, Simon Lewis and David Lawder in Washington, Additional reporting by Jonnelle Marte in New York; Editing by Andrea Ricci)
