UN has millions of dollars frozen in Afghanistan bank

Taliban have banned the use of foreign currency in a country where US dollars were common

Taliban stand guard as women carry placards during a rally in Kabul demanding the US and international community unfreeze Afghanistan's assets. EPA

The UN is unable to use about $135 million it has in the bank in Afghanistan because the Taliban-run central bank cannot convert the funds to the local currency.

The UN had taken the US dollars into the country and deposited it with the Afghanistan International Bank “with a clear promise from the central bank that fresh cash will be automatically converted to afghanis,” said Abdallah Al Dardari, the head of the UN Development Programme in Afghanistan.

“This did not happen,” he told the ACAMS Global Sanctions Space Summit. He said the programme itself has "$30 million stuck at [Afghanistan International Bank] that I cannot convert to afghanis and without afghanis, as you can imagine, we cannot implement all our programmes".

The Taliban, who seized power in August, banned the use of foreign currency in a country where US dollars were common.

The group have long been under international sanctions, which the UN and aid groups say are now hindering humanitarian operations in Afghanistan, where more than half the country's 39 million people suffer from extreme hunger, and where the economy, education, and social services face collapse.

Billions of dollars in Afghan central bank reserves and foreign development aid have been frozen to prevent them from falling into Taliban hands.

International banks are wary of breaching sanctions, leaving the UN and aid groups struggling to get enough money into the country.

Liquidity is also a problem.

Mr Al Dardari told Reuters in November that while there was about $4 billion worth of afghanis in the economy, only about $500 million worth was in circulation.

The UN and the World Bank are discussing a possible swap facility, aid groups and UN officials have said.

This would allow cash for humanitarian operations to be paid into a mechanism abroad and then afghanis could be collected “from major traders and mobile companies from inside Afghanistan,” Mr Al Dardari said on Thursday.

He also said lessons could be learned from a programme in Myanmar, where electronic payment systems bypassed the central bank.

Myanmar's military has been hit with sanctions by the US and others since a coup a year ago.