Afghanistan - Amid the knee-high stacks of worn and smelly currency
exchanged at the crowded Shahzada Market, a trader came forth the other
day carrying a brick of brand-new Afghan notes, still shrink-wrapped from
the printer, bearing a production date in July.
a country devastated by war, where the control of Kabul changed hands a
mere three weeks ago, it is impressive that new notes professing to carry
the full faith and credit of Afghanistan's central bank still manage to
find their way into the market.
just one hitch: The Afghanistan National Bank has not issued any new
currency in more than five years, since the Taliban took over Kabul.
the Taliban came here, there was no new money printed for them," said
Ullah Mohammed Fayez, general secretary of the bank. He said the Taliban
did little with the bank except clean out $6 million from its vaults on
Nov. 12, the night before Northern Alliance forces marched into the
the currency we're dealing with comes from somewhere else," Fayez
said. "You'll have to ask the money changers where."
an open secret in the money bazaar: Afghanistan's currency comes from
the Taliban controlled the central bank headquarters for five years and
just a month ago occupied 90 percent of Afghanistan, the Islamic militants
never managed to master the country's money supply.
remained in the hands of the Northern Alliance, the coalition of anti-Taliban
forces that recaptured much of the country in recent weeks.
exiled government of President Burhanuddin Rabbani, ousted from Kabul in
1996 but still recognized by much of the world, never relinquished its
right to print Afghan currency. Whenever it needed to pay its bills,
Rabbani's government went to its printer in Russia and ordered up a new
batch of afghanis - "afs" for short.
Taliban attempted to wrest control of the money supply by banning the
exchange of any afs with new serial numbers. The alliance responded by
printing new notes with old serial numbers - effectively counterfeiting
its own currency. In some cases the same serial number appears on as many
as three notes.
just printed the money with the old serial numbers," said Sayedalla
Hashami, 44, a Rabbani adviser who was just appointed the central bank's
interim governor. "It gave the Taliban a sign: You think you're
smart? We're also smart."
many smart people has made for a lot of confusion. The central bank has no
idea how much specie is actually circulating. "New money" -
bills with high serial numbers - is only accepted in parts of
alliance-held northern Afghanistan. "Old money" - often freshly
printed with recycled numbers - is twice as valuable as "new"
money and is accepted everywhere.
addition, there are several subtle variations of "new" money
printed by Gen. Rashid Dostum, warlord of the northern city of Mazar-e
hundreds of money changers crowded into three floors of the Shahzada
Market can distinguish the different notes almost instantly as they count
vast stacks of afghanis - the biggest note, valued at 10,000 afghani, is
worth about 25 cents, so it takes thousands to add up to serious money.
at a distance, we can tell the difference," said money changer Khwaja
state of Afghanistan's currency is as muddled as its politics. It's a
wonder anyone has any faith in it, but Afghans do: The afghani gained in
value at the time of the Northern Alliance's military advance as traders
became confident that peace was at hand.
no economics behind it," said Hasibullah Mowa, an economics lecturer
at the University of Kabul. "It's all speculation."
central bank ceased most functions in 1992, when mujaheddin ousted the
Soviet-installed government of President Najibullah. Mujaheddin commanders
issued so much new currency it touched off hyperinflation and panicked
depositors. Foreign banks cut off contact, turning Afghanistan into a
factional fighting worsened, the national bank governor joined Gen.
Dostum's renegade faction, and with his signature Dostum was able to order
a new batch of notes from the Russian printer.
banking system contracted further in 1996, when the Taliban captured Kabul
and banned collecting and paying interest as blasphemy. With no loans and
no savings accounts, the central bank only collected utility bill payments
and tax and customs revenue.
private sector stepped in to assume many banking functions. Businessmen
lent one another money - no long-term or large loans but enough to cover
operating expenses. Money changers offered foreign-exchange services,
often providing cash to local residents after their relatives deposited
cash to overseas accounts. The money changers even cashed checks written
on overseas banks. The transactions were based on faith and handshakes.
key to the informal banking system is the use of free-wheeling money
markets, where afghanis are traded primarily for dollars or Pakistani
rupees. One exchange is in Peshawar, Pakistan, the origin of much of
Afghanistan's foreign trade. The other was established in downtown Kabul's
Shahzada Market 70 years ago by a cousin of King Mohammad Zahir Shah and
is still owned by his heirs.
here expressed great faith in free-market forces and said the exchange
rate responded quickly whenever the Northern Alliance attempted to flood
the market with afghanis.
Northern Alliance had a deal with Russia to print money," said Amin
Khosty, the head of the traders' association. "They spend it.
Eventually it ends up here. There is no control, but if there are too many
afs in the market, we know it almost immediately and the price goes
currency market, however, responds fitfully to rumors and is easily
week the rate fell after Russian troops arrived in Kabul. "Right now
there are rumors the Russians brought money with them, so the value of the
af is down," said Mahmud, a money changer.
Taliban attempted to bring the exchange rate under control in 1998 by
shutting the Shahzada exchange, but it was forced to declare defeat after
a black market arose instantly - many currency traders simply did business
at home, defying the government's fixed exchange rate.
a final swipe at the market, the Taliban raided and looted 81 of 300 shops
at the Shahzada exchange the night before the Northern Alliance arrived.
financial interdependence of the Taliban government and the Northern
Alliance helps explain why a vigorous trade was allowed to continue across
front lines during the war. Goods and fuel from Taliban areas flowed
across the lines, carried on donkeys, while animal skins, fruit, and newly
printed currency flowed back.
factions are now moving to create an interim government, and the draft
agreement states that it will have the right to print currency.
new government will need to get rid of all this anarchy and
confusion," said Fayez, the Afghanistan National Bank's general
secretary, who wore a blue banker's suit that he brought out of his closet
after five years of Taliban rule.
"There is only one solution: To get rid of all the money in circulation and print new notes," he said. "Of course, that is a very complicated thing to do."