Afghans’ lives have become ‘unbearably hard’ due to rise in poverty: WFP

How are sanctions related to the economic crisis?

The United Nations, US, and other government sanctions currently applicable to the situation in Afghanistan were initially imposed on the Taliban and its senior leadership in 1998 after Al Qaeda carried out attacks on two US embassies in Africa – the sanctions aimed to punish the Taliban for hosting al Qaeda in Afghanistan. These sanctions were updated in 2008 and have been adjusted by the US, UK, and other governments at various times since. They remain fundamentally focused on the Taliban as an armed group, not as a government, and its leaders as individuals.

The economic actions that the US and others have taken against the Taliban and entities it now controls were independent of existing sanctions.

Previous UN and US sanctions are not automatically applicable to the Central Bank of Afghanistan. There are no sanctions against Afghanistan itself, its sovereign de jure or de facto government, or any governmental entities as such. There are no sanctions on the Afghan Central Bank. However, some of the Taliban leaders listed for sanctions by the UN, US, and others are now ministers in the new Taliban administration, such as the finance minister, Gul Agha Ishakzai. Two senior officials appointed by the Taliban to serve at the Central Bank of Afghanistan are also listed under US and UN sanctions.

Nevertheless, since August 2021, existing UN and state sanctions on the Taliban and many of its senior leaders have caused many banks and other financial institutions outside of Afghanistan to restrict or block the processing of most transactions involving Afghan bank accounts, out of concern, appropriate or not, that they could face fines or prosecution from US authorities. (Major US dollar denomination transactions involving Afghan banks ultimately require the cooperation of a US-based bank’s “correspondent” account to “settle” transactions.)

In September and December 2021 and February 2022, the US Treasury issued multiple “licenses” and guidance documents authorizing banks and other entities subject to US law to engage in a range of humanitarian activities and transactions with Afghan government entities necessary or incidental to humanitarian operations or legitimate commercial activities, such as remittances. The UK and several EU governments have issued similar licenses or guidance documents. A US Treasury license and new guidance issued February 25, 2022, technically authorizes transactions with the Central Bank.

The Central Bank itself, however, remains cut off from the international banking system and cannot access its assets in foreign accounts, because US and other country’s central banks, and the World Bank, still do not recognize the credentials of any current bank officials.

Moreover, many foreign banks remain unwilling to process foreign currency transactions involving Afghan banks in general. Humanitarian organizations, Afghan banking officials, and private actors have told Human Rights Watch that although some major transactions involving long-recognized accounts have now resumed, many electronic settling transactions continue to be blocked.

According to internal UN surveys of humanitarian actors and Human Rights Watch consultations with aid groups, the vast majority of humanitarian agencies operating in Afghanistan have been utilizing informal and largely unregulated hawala money transfer systems or sarrafs, or money exchangers, to move funds into Afghanistan and pay salaries and obtain cash. These systems, however, impose enormous transactional costs – sometimes over 10 percent – and in any case cannot be scaled up to handle the scope of humanitarian operations that groups are hoping to undertake, which involve hundreds of millions of dollars in cash assistance.
Courtesy: Human Rights Watch