Head of Afghan central bank warns of further economic collapse under Taliban

Victoria Craig Aug 18, 2021
Heard on:
Neat piles of Afghan currency are shown at the central bank in Kabul, Afghanistan, in 2002. Chris Hondros via Getty Images

Head of Afghan central bank warns of further economic collapse under Taliban

Victoria Craig Aug 18, 2021
Heard on:
Neat piles of Afghan currency are shown at the central bank in Kabul, Afghanistan, in 2002. Chris Hondros via Getty Images

The central bank governor who fled Afghanistan last weekend told the BBC that he wished the country would have been left with more time to plan for the withdrawal of U.S. troops. Speaking for the first time since tweets of his dramatic exit from the country went viral, Ajmal Ahmady spoke of the chaos at Kabul airport as he tried to leave on Sunday.

Ahmady, who was also Afghanistan’s acting minister for industry and commerce, accepted that wide-ranging corruption in the country had been a contributing factor in undermining confidence in the authorities. He said that among his immediate concerns are the country’s beleaguered economy, with fears of rapid inflation and the value of the currency collapsing.

Ahmady spoke with Marketplace’s Victoria Craig. Below is an edited transcript of their conversation.

Victoria Craig: Mr. Ahmady, just take us through the last few days, because you’ve had a series of tweets over the last 24 hours or so sort of walking through a pretty dramatic exit from the country. So just tell us what that was like and how you made your exit.

Ajmal Ahmady: Sure. I think, as I mentioned in social media, there was a series of events that happened very quickly starting with the fall of Zaranj two Fridays ago. This accelerated last Thursday when a number of provincial capitals fell, including Kandahar, Herat and Badghis, and I believe Logar, as well. And then, over just the course of three days, proceeded to the fall of Kabul. During this period, I had continued my work on both Saturday and the morning of Sunday, until I arrived in the airport. And by my arrival, between my arrival in the afternoon at the airport, you know, the city fell by that evening. And, of course, I outlined some of the incidents at the airport itself, which I’d go into detail if you’d like.

Craig: Before we get to that, you tweeted that Saturday night was really a pivotal moment for you. Tell me about how you made the decision to leave the country and why.

“When I feared for my personal safety”

Ahmady: On Saturday, I received a phone call from someone, and they informed me that I think that the issue was more serious than I had taken it. They advised me to leave, and as a precautionary measure, I purchased a ticket to leave the country on Monday, which I thought was, which I think was early enough, but it apparently wasn’t early enough. And I think that was the first time when I feared for my personal safety.

Craig: What was going through your mind at that point?

Ahmady: A lot of people mentioned that in 1996, when the Taliban first came to power in a similar way, there weren’t firefights in the city; they simply awoke and found Taliban control of the city. And so my fear, at that point, was that I would fall asleep one Saturday and awaken to have them patrolling the streets. And that, I think, based on the conversations, that most other people would have been gone, but that I would be left.

Craig: So you went to the airport and you were met with the scene that I think everyone around the world is very familiar with now: Hundreds of people just trying to escape the country to get anywhere they could. So what was that experience like for you? How were you able to get on a flight and out of the country?

Ahmady: At that point, the large crowds had not yet stormed the runway. There were still two planes, a Flydubai flight and Emirates flight, that we’re supposed to be leaving. So the situation was still tense but calm at that period. I think the news hit, and I mentioned this, at around 4 p.m. that the president himself had left the country. And I think at that point, line of command, chain of command and other controls were lifted. And then everyone began storming the remaining presumed flight out of the country, a Kam Air flight, which I received a ticket for at the last minute. But when we boarded that plane, everyone from the canceled flights had also tried to board that plane. So at that point, it became chaotic.

“My friends and colleagues were able to push me on board”

I stayed on that plane for a number of minutes, perhaps half an hour. And it became apparent to me that that flight, I think, probably would not leave. So we left, went on the tarmac, and at this point, there were the scenes that you see at the airport, where there are hundreds of people on the ground. It was a surreal experience. Helicopters were taking off. There’s a military aircraft that was taking off. There was another military plane on the tarmac. I considered either leaving the airport — my colleagues were persuading me to go to their house and stay with them — or whether to stay at the airport. And so we approached this military aircraft. It wasn’t a U.S. military aircraft; I won’t mention the country, but it was a third country who were evacuating their embassy staff. And there were large numbers of people rushing towards that airplane, trying to get on board. So my friends and colleagues were able to push me on board, and it was an unfortunate but surreal experience.

Craig: And when you arrived at the airport, you were surprised at just how many of the Afghan leadership team you saw there, weren’t you?

Chaos began when the Afghan president left

Ahmady: I was. I saw the second vice president with a security detail going on a plane. I think the news was that he was heading to Qatar to manage the negotiations with Taliban there; I’m not sure if that’s true or not. There were rumors that the first vice president had left, although unconfirmed, and I believe now it’s confirmed that he’s still in the country, and there were other people that had already left. And then I think the chaos began when it was announced that the president himself had left at approximately 4 or 5 p.m. that day.

Craig: Do you feel safer now that you’ve left the country?

Ahmady: Yes.

Craig: You mentioned on Sunday was when you departed, and you said in your tweets that you left your deputies in charge. What’s happened to them since then? Have you been in touch with them?

Ahmady: I’ve been in touch with the staff there. The banks and the central bank and I believe all government offices have been closed for a number of days. And so until that point, I think it’s going to be unclear what the situation is like. But there’s been a broad-based amnesty provided to government employees by the Taliban. We don’t know the accuracy or if it will be implemented. But I think, at this point, I’m hopeful that none of the staff will be harmed.

Craig: So what happens to the country now? I mean, what happens to the economy? What shape is it in when you left?

Shortage of foreign currency

Ahmady: I think the economic situation will deteriorate. We were able to maintain that economic stability, even as provinces were falling, even during that last week. But there’s a number of factors that I think are going to lead to a worsening of the situation. I think, first of all, we have a large number of international reserves, but I would expect that the U.S. government would freeze those assets for the current time. So that’s going to cause a shortage of currencies — of foreign currency — which can be utilized. I would expect donor flows to significantly decline over the next few months. And that’s going to cause pressure on the currency to depreciate, and that, in turn, will lead to higher inflation pressure on the banking sector and likely increases in poverty rates.

Craig: You mentioned you expect inflation will likely rise. I mean, what happens then? Are the people who are left running the central bank in control? Do you have confidence in the Taliban that they’ll let those people left make decisions about the economy and how to fight some of these effects?

Ahmady: I think so. I think they’re going to hopefully trust the people who have been working there. The central bank is a nonpolitical institution. The people who have been there have been working professionally in the past for, in some cases, 30 years. So it’s my belief that at the beginning, they will be allowed to run the bank, but the situation has changed. And again, without a foreign or sufficient foreign currency, it’s going to be a challenging situation to be able to manage.

“Banking sector remained healthy” as provinces fell

Craig: Do you think there was anything you could have done to help prepare, not just the country, but the economy for this almost inevitable conclusion?

Ahmady: I think from the central bank side, we tried to do all we can. Currency typically fluctuates quite widely. We were able to maintain the depreciation of the currency at only low single digits, approximately 4% or 5%. Even as provinces were falling, the banking sector remained healthy. There was sufficient liquidity in the market. And so from the central bank side, we were able to manage the situation quite well. And in terms of our operations, we made sure that as provinces fell that our vaults and money that we held in provinces were secure. And I think it was more of a politics and security issue rather than macroeconomic failure.

What role did corruption play in the economic situation?

Craig: Some people have accused you in the past of the kind of corruption that we’ve seen in the Afghan government over the last several years. Do you feel at all responsible for what’s unfolded?

Ahmady: No. Because, if you take a look at the activities, or the programs that I’ve been able to implement, I think they’ve been positive. I think the accusations that have been leveled against me, there has been not one concrete document or any other evidence of this. At the central bank, for example, we have coordinated very closely with the [International Monetary Fund], with the U.S. government, with the World Bank. There’s a number of institutions overlooking every transaction that we’ve had. And the foreign reserves that I talked about, that information is with the U.S. government, it’s with the IMF and other foreign partners. And they can walk you through every single line to ensure that the funds that were there are still there.

Craig: The World Bank says the average annual growth in Afghanistan was 9% in the 10 years to 2013. But some of the institutions that you mentioned there, some of these international institutions, have warned that the biggest obstacle facing the Afghan economy is corruption. So why, in the last 20 years with a U.S.-backed government, was more progress not made in reversing some of that?

Ahmady: There was significant amounts of corruption in in the Afghan government, you cannot deny that that is true. But I think you have to take a look at the direction. And I think it’s a question of narrative. There was a significant amount of corruption. But I think there were actions being taken to reduce that, there were systems being put in place to reduce that corruption. And it’s very difficult to do, in just the span of a few years, when during the past 15, there were increases. So one example of that is we tried to digitalize salary payments, where there were a lot of allegations of faux soldiers on payrolls. And so we digitalized it, we connected the central bank payment system with the Ministry of Finance, so that we would know for sure. But it is a fact that even during the implementation of such projects, there were a lot of people trying to stop it because they didn’t want transparency to arise in such systems. So yes, there was corruption. Yes, we were trying to do our best to reduce that. But I don’t think that you can explain what’s happened over the past week, just a result of that.

Craig: Do you think if you and other leaders of Afghanistan had spent more time trying to tackle corruption, that would have prevented what we’ve seen in the last several days?

Ahmady: The corruption that was there was systemic. So there was significant focus on trying to reduce it. But there were challenges in trying to actually get corruption down to levels that I think would have improved the situation. Was it the only, or major, contributing factor? I think it was a major factor. But I think also the framework that [U.S. special representative to Afghanistan Zalmay] Khalilzad negotiated, which excluded the Afghan government, contributed to the delegitimization. And I think it was some part the Afghan failures, Afghan government’s failure, handling corruption and improving the execution of programs. I think you can count issues and problems on both sides.

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