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Washington File

17 April 2003

Afghan Central Bank Governor Aims to Build Confidence in Currency

(Governor outlines financial reforms, future challenges) (380)
By Scott Bohlinger
Washington File Writer
Washington -- The governor of the Afghan Central Bank of Afghanistan,
Anwar ul-Haq Ahady, said his main task is to build confidence in the
new currency, the afghani, among Afghan citizens.
Speaking recently at the Center for Strategic and International
Studies in Washington, Ahady said he would lead by example and deposit
his personal money in the bank. Afghan citizens will do likewise when
they realize that their deposits are safe, he said.
Before the overthrow of the Taliban regime in 2001, two versions of
the afghani were in circulation, one produced by the Taliban in Kabul,
the other by the opposition Northern Alliance.
The new Afghan government, under President Hamid Karzai, did away with
both versions, exchanging them for the new afghani at a rate of 1,000
to one.
Ahady said the new afghani is trading at a fairly stable price using a
modified float mechanism based on a combination of market forces and
pegs.
Another challenge facing the Central Bank, Ahady said, comes from the
informal financial sector of money changers and the hawala, the
alternative remittance system.
Ahady said he does not support legal action against the informal
financial sector, but believes the Central Bank will be able to win
over its clients by providing cheaper and more reliable services.
The hawala system, he noted, not only charges high rates for its
services, but also is unreliable, sometimes causing intended
recipients not to receive their money. Ahady said the Central Bank can
correct problems arising from money transfers, because it keeps
centralized records and issues receipts.
Ahady said overall fiscal reform will be difficult to achieve if the
central government can not get control over the whole country. He said
that authorities in the western province of Herat have been
withholding tax receipts and customs revenues from Kabul. Herat
controls the important border crossing with Iran.
The governor said the role of the Central Bank in the national economy
will evolve as the economy develops. The overall role of foreign banks
in Afghanistan is still not decided, he said, and the Central Bank
will consider each application for entry into the Afghan market based
on its particular merits.
(The Washington File is a product of the Office of International
Information Programs, U.S. Department of State. Web site:
http://usinfo.state.gov)



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