US sets up Afghan relief fund with previously frozen money

Amid famine and drought, $3.5bn in frozen funds from Afghanistan’s central bank will be managed by US and international partners

The people of Afghanistan face humanitarian and economic crises exacerbated by the pandemic, drought and corruption. Photo: Andy Scott

The US will set up a fund to benefit the people of Afghanistan through a joint effort by the Treasury and State Departments as well as a Swiss financial organisation and Afghan economic experts, President Joe Biden's administration has said.

The Treasury Department said in a statement that “the US remains committed to supporting the people of Afghanistan amidst ongoing economic and humanitarian crises”.

Earlier this year, Mr Biden signed an executive order enabling $3.5 billion of the $7bn in frozen funds in the Afghan central bank to be earmarked for the benefit of the people of Afghanistan in an effort to keep funds away from the Taliban.

“The Taliban are not a part of the Afghan Fund and robust safeguards have been put in place to prevent the funds from being used for illicit activity,” the Treasury Department statement said.

The other $3.5bn will stay in the US to finance payouts to claims brought by family members of people killed on September 11, 2001, and other victims of terrorism that are still working their way through the courts.

The Afghan Fund will maintain its account with the Bank for International Settlements (BIS) based in Switzerland. The BIS is an international financial organisation that provides a range of financial services, including banking services to central banks, monetary authorities and international financial institutions.

“The Taliban’s repression and economic mismanagement have exacerbated long-standing economic challenges for Afghanistan, including through actions that have diminished the capacity of key Afghan economic institutions and made the return of these funds to Afghanistan untenable,” said Wally Adeyemo, deputy US treasury secretary.

“Through this fund, the United States will work closely with our international partners to facilitate use of these assets to improve the lives of ordinary people in Afghanistan.”

An external auditor will monitor the fund, as required by Swiss law.

“The people of Afghanistan face humanitarian and economic crises born of decades of conflict, severe drought, Covid-19 and endemic corruption,” said Wendy Sherman, deputy US secretary of state.

“Today, the United States and its partners take an important, concrete step forward in ensuring that additional resources can be brought to bear to reduce suffering and improve economic stability for the people of Afghanistan while continuing to hold the Taliban accountable.”

The World Bank reported that income and economic output in Afghanistan have fallen 20-30 per cent, imports have declined by about 40 per cent and roughly 70 per cent of Afghan households report they are unable to fully meet basic food or non-food needs.

Disbursements from the Afghan Fund could include keeping Afghanistan current on its debt payments to international financial institutions — which would preserve their eligibility for development assistance — and paying for critical imports, such as electricity.

When the Taliban took over Kabul, Afghanistan’s central bank lost access to its accounts at financial institutions around the world — not only in the US — because of the uncertainty regarding who could authorise transactions on its accounts.

Since then, the economic situation in Afghanistan has continued to deteriorate due to the Taliban’s poor economic management and failure to restore critical capabilities to the central bank, such as adequate anti-money laundering and counter-terrorism finance controls.

“The people of Afghanistan face enormous challenges: an economic crisis born of decades of dependence on international aid, severe drought, Covid-19, and endemic corruption,” said US Secretary of State Antony Blinken.

“We also recognise that victims of terrorism, including of the September 11 terrorist attacks, have brought claims against the Taliban and are pursuing the central bank’s remaining assets in federal court.”

A spokesman for the Taliban government described Mr Biden's order as “theft”.