The Afghan central bank has ordered banks to pay remittances in local currency only, the latest move to preserve scarce US dollars, according to people familiar with the matter.
Hard currency remittances have been an important source of external finance for Afghanistan over the years, but the dollar’s availability has dried up following the Taliban’s conquest of the country.
Western Union Co’s agent banking partners in Afghanistan have in recent days received a directive from the country’s central bank to only pay remittances in Afghanistan, a source close to a foreign exchange provider said.
Remittances sent before the directive and selected by the sender for payment in dollars may continue to be paid in dollars, the source said.
MoneyGram International Inc (MGI.O) said it only pays in Afghani, without further details.
Both resumed their money transfer services to Afghanistan last week, after suspending their services in August after the capture of Kabul by the Islamist militia.
No comment was immediately available from the central bank.
Under the leadership of acting central bank governor Haji Mohammad Idris, a Taliban loyalist who has no formal financial training, the central bank has struggled to restrict dollar outflows amid a hiatus in the economy. foreign aid and a rush from some Afghans to get savings from the country.
Further controls are expected to accelerate the depreciation of the afghani against the dollar, exacerbating inflation in a country where more than a third of the population lives on less than $ 2 a day.
“It is a matter of concern that the remaining physical liquidity in US dollars will decrease further,” said an Afghan banker. “With the restrictions we anticipate, the dollar will rise to over 100 afghanis to the dollar.”
The afghani was trading at around 80 to the dollar just before the fall of Kabul on August 15.
Last week, the central bank asked banks to restrict withdrawals from corporate customers to local currency only, capped at around 20% of each customer’s weekly operating costs, the banker said.
With around 80% of bank deposits in dollars, bankers believe the checks should minimize the risk of insolvency.
Since reopening in the second half of August, banks have been operating with limited services, including weekly limits of $ 200 on withdrawals and a few wire transfers.
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