Jonathan Landay and Andrea Shalal

WASHINGTON (Reuters) – The World Bank is finalizing a proposal to deliver up to $500 million from a frozen Afghanistan aid fund to humanitarian agencies, people familiar with the plans told Reuters, but it leaves out tens of thousands of public sector workers and remains complicated by U.S. sanctions.

The proposal to divert funds from Afghanistan Reconstruction Trust Fund, (ARTF), to be discussed informally by the Board will take place on Tuesday. It was negotiated in recent weeks in consultation with U.S.- and U.N. officials.

Afghanistan’s 39million people are facing a depressed economy, winter food shortages, and rising poverty only three months following the Taliban’s retaking of power after 20 years of war.

Experts in Afghanistan believe the aid will be helpful, however, many gaps still exist, they said, including the way to obtain the funds without having to expose the financial institutions affected to U.S. sanction and the focus on the state workers.

They stated that the money would be used to address urgent medical needs in Afghanistan. In Afghanistan, less than 7 percent of the population is currently vaccinated against coronavirus.

The current policy does not include salaries for teachers and government workers. Experts fear that this could cause the collapse in Afghanistan’s healthcare, education and social services system. Experts warn that hundreds upon thousands of people who are unpaid for several months could abandon their work and flee the country.

One source said that the World Bank would not have oversight of funds transferred to Afghanistan by the World Bank.

“The proposal calls for the World Bank to transfer the money to the U.N. and other humanitarian agencies, without any oversight or reporting, but it says nothing about the financial sector, or how the money will get into the country,” the source said, calling U.S. sanctions a major constraint.

“NOT A SIVER BULLET”

The source said that while the U.S. Treasury provided “comfort mails” to assure banks they could process humanitarian transactions, concerns about the impact of sanctions continue to block the passage of basic supplies such as food and medicine.

“It’s a scorched earth approach. The source said that we’re “driving the country to dust”. Crippling sanctions and failure to take care of public sector workers will “create more refugees, more desperation and more extremism.”

All donors must approve any decision to divert ARTF funds, and the United States is the biggest.

The spokesperson for the State Department confirmed that Washington was working closely with other donors and the World Bank to determine how the funds should be used, and potentially pay those in critical positions like teachers and healthcare workers.

The spokesperson said the U.S. government remains committed to meeting the  critical needs of the  Afghan people, “especially across health, nutrition, education, and food security sectors … but international aid is not a silver bullet.”

TALIBAN BYPASS

Established by the World Bank in 2002, the ARTF is Afghanistan’s largest source of funding for its civilian budget. This was more than 70% of Afghanistan’s total foreign aid.

    The World Bank suspended disbursements after the Taliban takeover. Washington stopped providing U.S. Dollars to Afghanistan at the same time and also joined the effort to freeze approximately $9 billion of Afghan central bank assets.

    A World Bank spokesperson confirmed that staff and executive board members are exploring redirecting ARTF funds to U.N. agencies “to support humanitarian efforts,” but gave no further details. The United Nations has declined to comment.

A potential swap of U.S. dollar for Afghanis has been explored, however these plans were “basically just few PowerPoint slides at the point”, one source stated. Two sources claim that this approach would allow Afghan private banks to deposit ARTF funds into international accounts. These institutions would then disburse Afghanis through their Afghan bank accounts to aid groups in Afghanistan.

    This would bypass the Taliban, thereby avoiding entanglement with the U.S. and U.N. sanctions, but the plan is complex and untested, and could take time to implement.

    One major problem is the lack of a mechanism to monitor disbursements of funds in Afghanistan to ensure Taliban leaders and fighters do not access them, a third source said.

Two U.S. ex-officials who are familiar with U.S. internal administration discussions said that U.S. officials claim that U.S. or U.N. sanctions placed on Taliban leaders prevent financial assistance to any government official.