Billions of dollars in humanitarian aid and growing trade with Asian neighbors pushed Afghanistan’s currency to the top of the global active currency rankings this quarter. An unusual achievement for a poverty-stricken country with one of the world’s worst human rights records.
Two years ago, the Taliban government in Kabul introduced several rules and measures to strengthen the Afghan currency. These include banning the use of dollars and Pakistani rupees in local transactions and imposing restrictions on remittances from outside the country.
Online shopping is prohibited. And the provision of imprisonment has been kept for the violation of these laws. Many have already been sentenced. All in all, the Afghan currency is the third most active currency in the world this year after Colombia and Sri Lanka.
However, Afghanistan’s economic situation is very bad. International sanctions have left the country with a deflationary currency as opposed to inflation as two-thirds of the population lacks purchasing power and rising commodity prices. So the UN thinks more aid is needed for Afghanistan.
Kamran Bokhari, an expert on Middle East, Central and South Asia in Washington, said Afghanistan’s hard currency, or paper currency, is working, but economic, social and political instability will make the surge likely to be a short-term phenomenon.
In Afghanistan, foreign currency is now traded mainly through money changers. Locally known as ‘Saraf’. Those who keep stalls in markets or work from shops in towns and villages. Sarai Shahzada, Kabul’s bustling open market, is now the country’s main commercial center. There are millions of dollars worth of currency exchanged every day. According to the country’s central bank, there is no limit to transactions in this market.
Due to international financial sanctions, almost all remittances are now transferred to Afghanistan through a centuries-old ‘hawla’ system common in various regions including the Middle East. Hawla is a key part of Saraf’s business. Natural resources are now the country’s biggest source of income.