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Frozen Afghan bank reserves contribute to the country's economic collapse

STEVE INSKEEP, HOST:

One year after the Taliban took power in Afghanistan, the Afghan central bank is still short of cash. The United States holds many of its assets. It's frozen them for a year since neither the U.S. nor any other country has recognized the Taliban rulers as legitimate. When we recently visited Kabul, former President Hamid Karzai said the money should come back.

HAMID KARZAI: Americans should return Afghanistan's reserves.

INSKEEP: The $7 billion or so?

KARZAI: The $7 billion. That does not belong to any government. They belong to the Afghan people.

INSKEEP: The absence of the money has contributed to Afghanistan's economic collapse. President Biden has held back some of the money, while some 9/11 victims seek a share of it in court. The future of the rest is uncertain. And a man named Shah Mehrabi says much remains on U.S. account books and even in storage.

SHAH MEHRABI: Dollars, deposits, bonds, treasury bills and gold that were all held at the Federal Reserve Bank of New York.

INSKEEP: Mehrabi gave us one perspective on Afghanistan's central bank. The old Afghan government named him to its supreme council.

MEHRABI: It is a board that is in charge of policymaking and the highest decision-making body of the Central Bank of Afghanistan.

INSKEEP: Americans will be familiar with the Federal Reserve Bank of the United States, which also has a board that governs it. It's the equivalent. That's what you were part of, is that governing board.

MEHRABI: Exactly. It would be correct to say that it was modeled after Federal Reserve Bank.

INSKEEP: Like the Fed, the Afghan central bank is supposed to hold down inflation. And Mehrabi took pride in that.

MEHRABI: It had performed very well. It - as a matter of fact, it had kept prices stable for years and much - a single digit in the past 15 years or so.

INSKEEP: Now he says that single-digit inflation has risen to more like 52%. Doing something about this is still Mehrabi's job. He is still a board member even though his government fell and he has not been back to Afghanistan since the collapse. He is living these days outside Washington, D.C.

MEHRABI: The Taliban has not really interfered whatsoever since August 15 of 2021.

INSKEEP: Do you mean to say you're still doing your job?

MEHRABI: I'm still - yes. I'm constantly in contact with the central bank.

INSKEEP: Are there still branches of the central bank functioning inside Afghanistan?

MEHRABI: Yes. Our audit department travel periodically to all of these branches. And they've been able to do that. Actually, that audit department had a lot of security problems when - during the prior administration. And that security problem no longer exists. So it is easy for them to travel to different branches.

INSKEEP: I want to be explicit about this because it seems to be true in all parts of Afghan life. Previously, if your audit group was moving around, they had to be worried about being killed by the Taliban. Now the killers are in charge, so they're OK.

MEHRABI: I think your explanation with regard to security is accurate.

INSKEEP: Are there governing members of the Central Bank of Afghanistan who remain in Afghanistan?

MEHRABI: Yes. There are some who are there, then others who are outside Afghanistan.

INSKEEP: Does the bank have any money?

MEHRABI: The bank does have money, but not adequate to be able to perform the necessary function of the central bank. The loss of foreign exchange reserve has created a liquidity problem.

INSKEEP: U.S. officials say they want some assurance that the money would not be misspent if it's returned. In other words, they want to know the central bank is reasonably independent of the country's new rulers. Shah Mehrabi is less upset about this than you might think. He says the Biden administration has taken steps to get money flowing, especially for humanitarian aid. What he does not know yet is how the central bank would ever get back to normal.

MEHRABI: No increase in humanitarian aid can compensate for the macroeconomic harm of soaring prices for basic commodities. It could not fully compensate for the banking collapse or balance of payment crisis. Another consequence is that it could ripple through the Afghan society and harm the most vulnerable people.

INSKEEP: During your time continuing the governance of the Central Bank of Afghanistan, to your knowledge, has there been an occasion when any Taliban official has placed a call or drop by and said, I want this or that?

MEHRABI: Not to me. I have not been contacted by them.

INSKEEP: Have you heard of any such thing?

MEHRABI: No. I'm not physically there. So you know, it is different to be physically present rather than being in outside. So I think I would not be able to comment on something that I have not seen or heard. But I can clearly say that there's been no intervention with regard to what I have done in the past year and what I have advocated.

INSKEEP: Can you envision a mechanism by which the central bank would be seen as so independent that the United States and other nations could trust it to deal with it like a normal central bank and not fear that at some point, the money is siphoned off for extremist activity, for example?

MEHRABI: I think the important point is that there has to be a monitoring, constantly monitoring, and capacity building issues that will bring the trust of the United States into this particular central bank. Without that, it would be very difficult to have normal functioning of the central bank and acceptance of the central bank by the United States and other international partners. Their concerns are legitimate. And also, the brain drain issue needs to be addressed.

INSKEEP: Of course, a lot of employees at the central bank have left the country, fled the country. You've lost a lot of expertise. Are the Taliban allowing female employees of the central bank who remain to go to work?

MEHRABI: No, that is one area of contention. And the international community has brought this issue up with regard to allowing both male and female to perform their task for which they were trained. The United States invested a lot of money in terms of educating these people, as well as giving them practical experience. That vacuum that is created needs to be filled. And that isolation from international financial system will have to be ceased in one way or another to address the issue of poverty and mass starvation that this country is experiencing and will continue to experience, especially in the winter, harsh months that lies ahead and in front of us.

INSKEEP: Shah Mehrabi, thank you very much.

MEHRABI: You're welcome. Good talking to you, Steve.

INSKEEP: He's a member of the Supreme Council of the Central Bank of Afghanistan.

(SOUNDBITE OF RICHARD SKELTON'S "LOWE") Transcript provided by NPR, Copyright NPR.

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