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Afghanistan's economy is in trouble after the Taliban took control

A MARTINEZ, HOST:

Afghanistan's economy has only worsened since the Taliban have taken power. From the team at Planet Money, Erika Beras reports.

ERIKA BERAS, BYLINE: Afghanistan is what economists call dollarized. The dollar is used by everything from a soda to a house. To use the dollar, you need dollars. So a few times a week for the last three years, a shipment of paper money would arrive in Afghanistan. Ajmal Ahmady was the governor of the central bank, Afghanistan's version of the Federal Reserve. His last day was the same day the Taliban took over Kabul. That day, a shipment of U.S. dollars that was supposed to arrive hadn't.

AJMAL AHMADY: That would have caused a severe economic issue under normal circumstances. And so we were trying to resolve how we could potentially deal with that under the assumption that the government would continue.

BERAS: The government didn't continue, and dollars haven't come in since. Foreign aid that accounted for 75% of spending stopped. Ahmady says Afghanistan imports way more than it exports. It needs those dollars.

AHMADY: It's going to be much more challenging to pay for those imports that previously came into Afghanistan.

BERAS: The country has $9 billion in rainy day fund money held by the Federal Reserve, but that money isn't being released to the Taliban. Afghanistan does have its own currency, though - the afghani - but doesn't have a printing press. Like many smaller economies, it relies on companies in other countries to print their money. Simon Gray with the IMF has worked on monetary policy for decades. He says those companies probably won't print and send banknotes to the Taliban.

SIMON GRAY: When you have this sort of change of regime that we've seen in Afghanistan and the new government is not internationally recognized, banknote printers can't just give new banknotes to the people who happen to be in charge.

BERAS: A regime change, a potential dearth of currency - this sounds very familiar to economist Thomas Simpson, a former adviser to the Federal Reserve Board who worked in Iraq in 2003. The Iraqi currency is the dinar. For years, Iraq had its banknotes printed abroad, but after the first Gulf War, they couldn't anymore. So Baghdad's central bank started to print its own. These were informally called Saddam dinars, and they weren't quite the same quality, but both sets remained in circulation, and people knew they weren't the same.

Like, one was more valued than the other one. You knew that if you went to a store and a store owner would know that too then.

THOMAS SIMPSON: Oh, absolutely. I think it was greater than 20 to 1. The old dinars had that much more purchasing power than the Saddam dinar. The Saddam dinars just kept dropping in terms of their value.

BERAS: Simpson says something like that could happen if the Taliban found a way to print its own currency. For Ajmal Ahmady, who established monetary systems and protocols in Afghanistan, watching this is difficult.

AHMADY: I spent seven, eight years trying to put systems in place to improve the economic situation of the country. And we've moved in the complete opposite direction. So it's heartbreaking.

BERAS: There's a lot of uncertainty in Afghanistan after the American departure and the Taliban takeover. Afghanistan's got a lot to figure out, not just how to pay for things but what kind of money to do it in. Erika Beras, NPR News.

(SOUNDBITE OF MOKHOV'S "GOLDEN WAVES") Transcript provided by NPR, Copyright NPR.


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