New York: The Taliban's reign in Afghanistan is under threat: the war-torn country's banking system is on the verge of collapsing.
Afghanistan's banks have been shut down for nearly two weeks since the Taliban seized power. Many people in the country have been left without cash as a result of this.
"No one has money," an Afghan central bank staffer told CNN. Many families don't have enough money for everyday expenses, and some salaries have been halted, according to the employee, who spoke anonymously due to concerns for their safety.
All of this increases the possibility of a serious economic and humanitarian crisis in Afghanistan just weeks after the Taliban took control.
The main issue is that Afghanistan's economy is heavily reliant on foreign currency and international help, both of which have been mostly banned since Kabul's fall. According to the World Bank, grants account for 75% of Afghanistan's government spending.
Afghanistan's banks are still closed, despite the Taliban's order for them and other services to reopen, due to a lack of cash, according to a central bank source.
"You've got a house of cards on the verge of collapsing," a source familiar with the Afghan economy told CNN. "The system's instability will be exposed as soon as you open the banks."
'Existential flash point'
Similarly, the Afghan financial industry is predicting a major crash.
"Afghanistan and its financial sector have reached a 'existential tipping point,' with the banking industry on the verge of collapse," according to the report received on August 23 by the Afghan-American Chamber of Commerce. A banking and finance working group comprised of major Afghan commercial banks, clients, and investors drafted the memo.
The central bank of Afghanistan, which is the backbone of the country's financial system, appears to be in chaos.
Many current Afghan central bank workers have been barred from returning to work since the Taliban gained power, according to an Afghan central bank source.
The source remarked, "My employees are concerned about their uncertain future."
According to the Afghan-American Chamber of Commerce statement, central bank authorities "refused to answer any messages" from the banking industry as of August 23. The memo stated that requests for funds from the central bank were not honoured.
Due to a fear of a "run" by clients for deposits, the Afghan banking company decided to close all banks across the country on August 15 and has not reopened.
Another factor mentioned in the August 23 document was the Taliban's failure to nominate a new governor of the national bank. According to media accounts, the Taliban nominated Haiji Mohammad Idris as acting governor of the national bank later that day.
The next head of the central bank is largely unknown. He appears to be a loyalist with no experience or skills that would give the Afghan banking system confidence.
Part of the issue is that Afghanistan, which is run by the Taliban, has become a pariah state virtually overnight.
The Biden administration moved quickly to prevent the Taliban from gaining access to billions of dollars stored by the US central bank.
The International Monetary Fund (IMF) has put a hold on $450 million in disbursements that were set to arrive in Afghanistan this week. The World Bank then put a stop to financial aid to Afghanistan.
For a country with such a significant trade deficit as Afghanistan, the cash shortage is a nightmare.
The Afghan banking association demanded that the US government promptly allow access to the central bank's assets, citing a "rapid depletion of funds."
"Without access soon, we worry the entire Afghan economy and banking sector will fail, and asset liquidation will be ordered," according to the memo, "and public frustration and possible violence would soon occur as the public [will] not be able to buy food and other services."
Growing risk of a humanitarian disaster
All this will represent an immediate governance test for the Taliban – and might open up ISIS and other groups that are aimed at further destabilising the region.
"The Taliban came in with no idea what they were getting themselves into," a CNN economic source familiar with Afghanistan said.
Fears are growing that Afghanistan's situation may quickly turn into a humanitarian calamity.
Ajmal Ahmady, the former head of the Afghan central bank before fleeing the country, warned of economic hardship, currency shortages, inflation, and an increase in refugees fleeing the nation in a recent interview with CNN.
Ahmady urged on the international world, particularly the United States, to stay in Afghanistan.
"Humanitarian assistance must not only continue, but must increase in the coming days and months," he stated. "Let us not wait for another crisis to strike."
Consider that nearly half of Afghan households (47%) lived in poverty, according to the World Bank.
"This is going to get very bad very rapidly," an economic source with knowledge of Afghanistan told CNN, adding that a humanitarian disaster is "inevitable" if the current course continues.
The employee of the Afghan central bank expressed anxiety about the future.
"I have a lot of wishes, but they're all going to die," the employee explained. "We're on our way to a bleak future."
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