According to a report by Bloomberg, Afghanistan’s currency, the Afghan afghani, has seen a 9% climb this quarter, making it the best performer in the region. This rise can be attributed to billions of dollars in humanitarian aid and increased trade with Asian neighbors. In an effort to maintain control over the afghani, the Taliban has taken measures such as banning the use of dollars and Pakistani rupees in local transactions and tightening restrictions on bringing US currency outside the country. The currency’s rise, however, is seen as a short-term phenomenon due to the country’s economic, social, and political instability.
Despite Afghanistan’s currency gaining strength, its neighboring country Pakistan has seen a significant devaluation of its currency, the rupee, with a loss of nearly 22% of its value this year alone. While Afghanistan has implemented stringent controls to stabilize its currency, experts believe that the instability in the country will limit the long-term impact of the afghani’s rise.
In Afghanistan, foreign exchange is primarily traded through money changers in bustling open-air markets. Remittances to the country are also brought in via the Hawala system. The Central Bank of Afghanistan has raised the limit for dollar withdrawals, easing some pressure on the currency. However, with widespread unemployment and inflation turning into deflation, the situation in Afghanistan remains challenging for its citizens.