Economists urge US to return Afghanistan's frozen assets

Plunge in economic activity and sharp cuts to foreign aid from abroad have sent Afghan economy into tailspin

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Several dozen prominent economists urged the US on Wednesday to hand over to Afghanistan $7 billion in central bank reserves that were frozen when the Taliban seized control of the country a year ago.

"We are deeply concerned by the compounding economic and humanitarian catastrophes unfolding in Afghanistan and, in particular, by the role of US policy in driving them," 71 economists and development experts said in a letter to US President Joe Biden and Treasury Secretary Janet Yellen.

"Without access to its foreign reserves, the Central Bank of Afghanistan cannot carry out its normal, essential functions.

"Without a functioning central bank, the economy of Afghanistan has, predictably, collapsed."

The signatories included Nobel economics prize winner Joseph Stiglitz, and Yanis Varoufakis, who served as Greece's minister of finance when the country was negotiating with creditors after the 2008 economic collapse.

They said the US could not justify holding on to the reserves, which it froze in American banks as the Washington-backed government in Kabul fell to the Taliban in August 2021.

The economists said that the plunge in economic activity and the sharp cuts to foreign aid after the US military withdrawal had sent the Afghan economy into a tailspin.

"Seventy per cent of Afghan households are unable to meet their basic needs," they wrote.

"Some 22.8 million people — over half the population — face acute food insecurity, and three million children are at risk of malnutrition."

This is worsened by the refusal of the US to return to the Afghan central bank the $7bn in foreign exchange reserves, as well as $2bn blocked by countries including Britain and Germany, they said.

"These reserves were critical to the functioning of the Afghan economy, in particular, to manage money supply, to stabilise the currency and to pay for the imports, chiefly food and oil, on which Afghanistan relies," they wrote.

The economists said a recent US offer to give the Taliban access to half of the money by setting up a trust with international regulation was not enough.

"By all rights, the full $7bn belong to the Afghan people," they said. "Returning anything less than the full amount undermines the recovery of a devastated economy."

Updated: August 10, 2022, 9:59 PM
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