The Taliban Have an Economic Crisis on Their Hands

Afghanistan‘s new leadership has some tough choices to make if they want to avoid hyperinflation

Ed Dolan
GEN
Published in
5 min readOct 27, 2021

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Kabul, September 2021: Money exchangers greet potential customers in the Sarai Shahzadah, Kabul’s currency exchange market, which is reopened for the first time since the Taliban took over. Credit: MARCUS YAM / LOS ANGELES TIMES via Getty Images

One of the first places the Taliban went when they entered Kabul in August was the country’s central bank. There, they asked to “inspect” the bank’s billions of dollars in foreign exchange reserves. Apparently, they expected to find those reserves stacked in old oil drums in the basement, the way Taliban field commanders kept the dollars they needed to buy weapons and pay bribes during the war. It was reportedly a big shock to find that central bank reserves existed only as electronic entries on the books of the Federal Reserve Bank of New York, and that the U.S. government was not keen to release them.

As a result of the blocking of reserves and a cutoff of aid, the Taliban, and the Afghan economy as a whole, are facing an economic crisis. There are shortages of everything, money included. It is not just dollars, which formerly circulated freely, that are in short supply. The local currency, the afghani, is also scarce and getting scarcer. Like many less-developed countries, Afghanistan does not print its own currency. Instead, afghani banknotes are printed in the UK, and the printer does not appear to be making new shipments.

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Ed Dolan
GEN
Writer for

Economist, Senior Fellow at Niskanen Center, Yale Ph.D. Interests include environment, health care policy, social safety net, economic freedom.