The alarming drop in value of Afghanistan’s currency, the Afghani, against the dollar happens amid an economic and humanitarian crisis that has also led to a sharp increase in the price of goods, including essential items like food and fuel.
The Money Exchanger's Union in Sarai Shahzada, Afghanistan’s biggest money exchanging market, said on Monday that one dollar was exchanged for 123 Afghani, while on Sunday it was 110 Afghani, and a month ago it was below 90.
The exchanger's union said some people have played a role in the increase of the dollar price by spreading rumors, and were pushed out of the market on Sunday.
On Monday, the market’s “Boli” section, which is the main section for determining the value of currencies and also where big money exchange transactions occur, was closed.
“A number of people who in fact are not money exchangers have come here and are promoting fake rates. I hope the situation gets better in the coming days,” said Sayed Ali Sadat, a member of the money exchangers' union.
The closure of the “Boli” section and the unprecedented increase in the dollar price has led to a situation where some exchangers refuse to sell dollars to customers.
“This is the first time that the Afghani has lost its value to this level. We are in contact with the central bank and are calling for the bank to intervene in the currency market,” said Haji Zirak, a member of the union.
The exchange rate of Afghanis for dollars increased dramatically after the fall of the former government on August 15th. On August 14, one dollar was sold and bought for around 82 Afghani. The increase in the dollar price, however, has increased especially fast in recent days, from below 90 to 123.
A number of economists meanwhile said in the last 10 days the drop of the Afghani's value against the dollar has been out of control. According to them, this situation can damage small and medium investments in the country and will halt business activity.
According to economists and banking analysts, this is the most that the Afghani has lost value against a foreign currency in recent memory. They said currently inflation has reached to 12 to 14 percent, and the persistence of this situation will destabilize the economy of the country.
“It has led to an increase in the prices of goods and the customers suffer as a result. This situation will also decrease savings, and if gets more severe it will destabilize the entire economic system,” said Seyar Qureshi, a financial and banking analyst.
“During the Mujahideen period in 1992, and once after that, the Afghani lost its value dramatically,” said Sayed Massoud, an economic analyst.
During the Mujahideen era the Afghani lost its value against foreign currencies, which led to the printing of money without proper backing and increased the amount of money in the markets. The government was forced to print 5,000 and 10,000 Afghani banknotes. Now, it is feared that Afghanistan will once again witness such a situation.
Meanwhile, the Islamic Emirate’s caretaker cabinet on Monday in a cabinet meeting discussed the issue.
The Prime Minister’s deputy Abdul Salam Hanafi ordered the economic commission to immediately take the necessary measures to stabilize the value of the Afghani in the market, said a statement released by Islamic Emirate spokesman Zabihullah Mujahid.
The unprecedented increase in the price of dollars and the decrease of the Afghani’s value, has led to a sharp rise in the price of essential goods in the markets.
Based on the new prices based on exchange rates from Kabul markets, the following changes in price have occurred for essential goods in the past few days:
• One bag of flour (42kg) has reached 2,800 Afghani, while a month ago it was around 2,000 Afghani, and a few months ago it was below 2,000 Afghani.
• One bag of rice (24kg) has reached 2,800 Afghani, while a month ago it was around 2,000 Afghani.
• One bottle of oil (16 liters) has reached 3,200 Afghani, while a month ago it was around 2,500 Afghani, and a few months ago it was below 2,000 Afghani.
• A liter of fuel reached 90 Afghani, while a month ago it was around 60 Afghani, and before the former government’s collapse it was around 40 to 50 Afghani.
• A kiligram of liquid gas has reached 100 Afghani, while a month ago it was around 70 Afghani, and before the collapse it was around 40 Afghani.
Shopkeepers said some wholesalers on Monday closed their markets as the news about the rapid increase of the dollar value spread throughout the city.