401. Responding to Afghanistan’s Humanitarian Crisis: The Potential Role of Digital Payments
- Author:
- Michael Pisa
- Publication Date:
- 05-2022
- Content Type:
- Policy Brief
- Institution:
- Center for Global Development
- Abstract:
- Afghanistan’s humanitarian crisis continues to worsen, with the World Food Programme (WFP) reporting that 22.8 million people—more than half the country’s population—are projected to be acutely food insecure in 2022, including 8.7 million at risk of famine-like conditions.[1] Even before the Taliban took over the country on August 15, 2021, Afghanistan’s economy was buckling under the weight of the country’s worst drought in decades, a deteriorating security situation, and the COVID-19 pandemic.[2] Financial flows into Afghanistan collapsed immediately after the Taliban takeover, as foreign aid was cut, private sector activity fell sharply, and foreign banks and money service providers (collectively: “financial service providers” or FSPs) refused to process payments into the country for fear of inadvertently violating sanctions and anti-money laundering and the countering the financing of terrorism (AML/CFT) regulations. The exceptional nature of the situation hampers efforts to resume normal financial flows to Afghanistan. Never before has an organization designated as a terrorist group by the United States assumed control of an entire jurisdiction.[3] The United States and other countries responded to this novel circumstance by freezing the country’s foreign exchange reserves held abroad; keeping in place sanctions that criminalize most transactions with the Taliban; and denying official recognition of the Taliban as the legitimate head of the Afghan state, which has prevented the Afghan central bank (Da Afghanistan Bank or DAB) from maintaining correspondent accounts with foreign banks. Cumulatively, these measures have limited access to US dollars in the Afghan economy, leaving Afghans unable to pay for the food, fuel, and imported intermediate inputs their economy relies on.
- Topic:
- Security, Economy, Humanitarian Crisis, and Digitalization
- Political Geography:
- Afghanistan and Middle East