The US Institute of Peace said in a report that the $3.5 billion in Afghan assets deployed by the Geneva-based foundation may help the country’s lagging economy but won’t reverse its earlier collapse.
The report also highlighted the possible uses of the reserves and made recommendations for the short run.
The report underscored the possible uses of the fund as follows:
- “Provide Afghan banking sector liquidity."
- “Keep Afghanistan current on its debt service obligations (an aim critical to maintaining the country’s eligibility for new funding from international financial institutions)."
- “Support exchange rate stability."
- “Transfer funds, as appropriate, to public Afghan financial institutions, or for any other purpose that benefits the Afghan people approved by the Fund’s Board of Trustees."
- “Pay for critical imports like electricity.
- “Pay for essential central banking services like SWIFT payments.”
The report said that under the bylaws, the founding Board of Trustees has full flexibility and discretion to take the fund forward as it sees fit. However, the board decisions must be “unanimous.”
“The board can appoint or remove board members and add new board members,” the report said. It can also “change the location of the fund.”
An official of the Ministry of Foreign Affairs (MoFA), Zakir Jalali, said the use of these assets in various ways will not play a positive role in the alleviation of the economic crisis in the country.
“The stance of the Islamic Emirate is to not allow any organization or NGO to use these assets in Afghanistan- the $3.5 billion which will be released-- because this money is basically not for expenses,” he said.
Some economists believe that the Afghan assets should be used for a humanitarian response and debt payment.
“As more of the money enters into economic rotation, it can be effective. It can create economic activity. So, lack of funds causes us to not have much activity in the economy and to not have economic rotation inside the country,” said Mansour Hedayat, an economist.
“I think it will have a negative impact because the assets are to support the financial sector of Afghanistan and to be spent in critical situations,” said Sayeda Jan Ahmadzai, a university instructor.
More than $9 billion of Afghanistan’s central bank assets were frozen by US and European Banks. Earlier the US announced that it would transfer $3.5 billion in Afghan central bank assets into a new Swiss-based trust fund that will be shielded from the Islamic Emirate and used to help stabilize Afghanistan's collapsed economy.