Jonathan Landay

WASHINGTON, (Reuters) – The United Nations will launch this month a scheme to exchange millions of dollars in aid for Afghan currency. This is a strategy to end humanitarian and economic crises as well as bypassing blacklisted Taliban leaders. According to an internal U.N note that was seen by Reuters

Foreign financial aid has ceased since August’s Taliban overthrow. International banks have been wary about testing U.N and U.S sanctions against the Islamist hardline group. This leaves the United Nations and other aid organizations struggling to get cash, even though they receive humanitarian donations.

Last month’s U.N. explanation note outlined an urgently required Humanitarian Exchange Facility. The United Nations has warned https://www.reuters.com/world/asia-pacific/un-chief-tells-security-council-afghanistan-hanging-by-thread-2022-01-26 that more than half of Afghanistan’s 39 million people are suffering extreme hunger and the economy, education and social services are collapsing.

According to the note, “The objective overall is for the HEF to be up and running by February.” We want to allow several trials swaps before we fully establish the facility. This will help us to show how it works.

U.N. officials and humanitarian representatives warn that this facility is only temporary until Afghanistan’s central banks can operate independently. Then, approximately $9 billion worth of foreign reserve money will be released.

It is not clear when this could occur. The reserves held by the United States are tied up in legal action https://www.reuters.com/world/asia-pacific/just-give-us-our-money-taliban-push-unlock-afghan-billions-abroad-2021-10-29 and Western governments are reluctant to release funds unless they see the Taliban show greater respect for human rights, especially those of women and girls https://www.reuters.com/world/asia-pacific/un-rights-office-demands-release-afghan-women-activists-2022-02-08.

HEF will allow UN – who is looking for $4.4 billion in humanitarian aid this year – and aid groups to access large amounts of national currency, the Afghani. It would also give the HEF the ability to grant the United Nations access, which has been seeking $4.4 million, to the HEF.

To pay foreign creditors and support the struggling private sector, the United Nations will use assistance dollars (potentially tens to millions) in exchange.

According to the U.N., “The flow of funds from the facility would not be affected by funds being moved over the Afghan border.”

The money is not directed at the Taliban. However, it states that the HEF needs to be approved by the Taliban-run central banking for the “flow of funds and exchange rate used” and withdrawal of AFN cash deposited in AIB (Afghanistan International Bank).

‘STARVATION CRISIS’

Stephane Dujarric of U.N. spoke out against the leak and said that UN does not comment. Antonio Guterres, U.N. Secretary General, has stated that Afghanistan is “hanging by one thread”, and has long called for international intervention to address the economic crisis that hampers aid efforts.

According to Wednesday’s World Bank report, Afghanistan’s economy is still in decline. Inflation for basic household goods reached 42% in January and nearly 40% in the same period last year, according to its latest figures. The World Bank said wages and labor demand continued to drop, along with imports which fell 66% from a year prior.

U.N. officials, aid groups and others have long advocated for a cash swap system. But the U.N. Note seen by Reuters offers new details.

Graeme Smith is a Senior Consultant for the International Crisis Group. He told the U.S. Senate Foreign Relations Committee that an immediate exchange facility was needed, but it would only be a temporary measure.

He stated, “It does not suffice.” “Nobody should believe that it will replace the functioning of a central banking system.”

To complicate matters, Taliban leaders banned foreign currency use in countries where U.S. Dollars were widely used. The United Nations has flown in shipments of $100 bills, but the central bank has not converted them, leaving the world body sitting on about $135 million in cash that it cannot use https://www.reuters.com/world/asia-pacific/un-has-millions-afghanistan-bank-cannot-use-it-2022-02-03, a U.N. official said last week.

These funds are kept in Kabul, in the vaults AIB. Officials said that AIB is a private bank that will be involved in the new cash swap.

It was noted that security in cash flight and delivery limits are the main reasons to establish the new exchange facility.

Officials from the U.N. as well as the World Bank have been working on the HEF. They completed a risk analysis, sought a U.S. Treasury licence to shield international banks from sanction, and hired a private firm to supervise participants and protect against money-laundering.

David Miliband is the head of International Rescue Committee and warned that the effects of Afghanistan’s current economic crisis would be catastrophic. He called for an overhaul in U.S. policy and international relations toward Afghanistan.

The Senator committee heard from him Wednesday that “Current policy will actually mean that an Afghan starvation crise kills…more Afghans than in the 20 years of war.”