Analysts seek proper management of new banknotes

Photo: Reuters

As the new banknotes have arrived in Kabul, a number of experts on Thursday said there is a need for an effective mechanism to ensure a smooth flow of new banknotes in the market to keep afghani’s valdue stable against other currencies.

The new banknotes worth 10 billion AFN, published by a Polish company, arrived in Kabul this week.

The banknotes are expected to replace worn-out banknotes in the local markets that are facing a shortage of cash for the past year after major political changes in the country.

Experts also suggest that worn-out banknotes should be collected from the market as soon as possible.

“In fact, if we do not collect the old banknotes, the management of old banknotes will be difficult and it will leave a negative impact on the prices and there will be no control,” said Sayed Massoud, an economic affairs analyst.

“If the central bank does not seriously consider the supply and demand issue, the increase or distribution of new banknotes in the market can affect the value of afghani against foreign currencies,” said Siyar Qureshi, a banking expert.

A member of the Supreme Council of the Taliban-controlled central bank has said that the new banknotes will replace the worn-out banknotes and be used for financing the country’s budget.

The process of transferring Afghan banknotes has been facilitated by the US Treasury Department.

“Money is a medium of exchange and it is printed and distributed according to the gross national product and the volume and exchanges that should take place in the country. If banknotes are printed more than needed, it will reduce the value of the currency and will impact prices too,” said Azrakhsh Hafezi, an economic affairs analyst.

Currently, worn-out money is circulating in the markets of Kabul and provinces, and some shopkeepers say that they face problems during trade due to worn-out banknotes.

Photo: Reuters

Two transactions facilitated by US

Two weeks ago, US State Department’s Spokesman Ned Price said that two transactions to pay to print new banknotes had been facilitated by the US

He said at a press conference that “these two transactions have been underway for several months now. Banks dealing with Afghanistan see any banking transactions originating from or going to Afghanistan as extremely high-risk.”

He said the United States and its partners had been working hard with international banks “to facilitate payment transfers from Afghanistan’s central bank to European printing companies where new banknotes would actually be produced.

“These companies will now prepare new Afghanis, which will be used to replace worn-out banknotes. And this will address one of the aspects of Afghanistan’s ongoing liquidity crisis, consistent with US efforts to support basic human needs and avoid an economic collapse,” he said.

Mehrabi meanwhile said Wednesday: “These transactions that were facilitated by the Treasury are welcomed by all Afghans.”

He said the contract was for notes valued at 10 billion Afghanis, mostly in small denominations and that a second contract with a French company had been reached for a similar value.

New notes as replacements only

A spokesperson for Afghanistan’s finance ministry told Reuters that the new banknotes would be used solely by the central bank for replacing old notes, and not to fund the budget.

Mehrabi in turn said that the bank would release its financial statements to ensure the cash was accounted for.

He said the central bank had agreed to be subject to third-party monitoring and the US Treasury had approved of an agency to carry out the monitoring.