Afghanistan's financial system is about to collapse, lender warns, as the US keeps nearly $10 billion in reserves frozen from the Taliban

·2 min read
Taliban CIA base
Members of the Taliban on September 6 after the US pulled all of its troops out of the country. AAMIR QURESHI/AFP via Getty Images
  • The Afghan financial system is in an "existential crisis," the head of one of its top lenders said.

  • He told the BBC people were only withdrawing money and "most of the banks are not functioning."

  • The US froze nearly $10 billion of the Afghan central bank's reserves after the Taliban takeover.

  • See more stories on Insider's business page.

Afghanistan's banking system is close to collapsing, the head of one of the country's biggest lenders has said.

Syed Moosa Kaleem Al-Falahi, the chief executive of the Islamic Bank of Afghanistan, told the BBC that Afghanistan's financial industry was dealing with an "existential crisis." He said customers were panicking after the Taliban took over the country last month and Western nations and agencies froze the country's funds in response.

"There's huge withdrawals happening at the moment," he said.

"Only withdrawals are happening, most of the banks are not functioning, and not providing full services."

The US last month froze nearly $9.5 billion in assets that belong to Afghanistan's central bank. Most of that money is held by the Federal Reserve Bank of New York.

And the International Monetary Fund said last month that Afghanistan could no longer access its resources. The World Bank also announced it was pausing funding to projects in the country.

The UN said earlier this month that Afghanistan's frozen assets should be released to avoid "a severe economic downturn."

Al-Falahi said that Western nations and agencies freezing funds meant Afghanistan was turning to China and Russia for help.

"It seems that sooner or later, they will be successful in dialogue," he said. China has already sent aid to the Taliban-run country and pledged tens of millions of dollars.

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