Editor in Chief: Moh. Reza Huwaida Saturday, June 23rd, 2018

The Tale of Afghan Currency

|

The Tale of Afghan Currency

Afghani (AFA) is the currency of Afghanistan. The well-sized and charmingly colored paper money we have, on hand, today was not available just nine years back. Then, the Afghans did not expect their currency would, one day, have the value it is having today. The international intervention in Afghanistan, like everything, has caused our currency too to change for better. Just like the country itself, the currency of Afghanistan has also seen numerous ups and downs during its history.

During the Taliban and Mujahidin's governments, the people used to carry money in bags for purchasing small item such a tin of ghee or a bag of flour. This practice was quite problematic and disappointing too as Afghan currency was among the currencies with lowest values.

But the issuance of new currency notes for Afghans with pictures of sacred places of the country on them instead of photos of personalities changed everything. The introduction of new currency is deemed a prominent step of government to stabilize the value of Afghani and increase the trust of people on it. The people got rid of the headache of carrying huge amounts of money in bags for buying tiny items. This is no less than a blessing.

Before the invasion of US of Afghanistan, warlords, political parties, foreign powers and forgers each made their own Afghani banknotes, with no regard to standardization or honoring serial numbers. During the Mujahedeen, the value of Afghani had gone extremely low. The huge supply of Afghani into the market was the main reason for its low value. 5,000 and 10,000 notes were introduced for the first time Afghanistan during the Mujahedeen era.

During Burhan ud Din Rabani's tenure of government increased amounts of Afghani were supplied to the market. In addition to that, General Abur Rashid Dostum in North produced his own money. Among common people this Afghani was known as 'Dostumi' and had lower value than the notes supplied by the Rabani's government.

However, In December 1996, shortly after the Taliban took control of Afghanistan's institutions, Ehsanullah Ehsan, the chairman of the Taliban's Central Bank, declared most Afghani notes in circulation to be worthless (approximately 100 trillion Afghani) and cancelled the contract with the Russian firm that had been printing the currency since 1992. The exchange rate at the time of Ehsan's announcement was 21,000 Afghani to the U.S. dollar.

The Northern Alliance then had banknotes produced in Russia which were sold on the markets of Kabul at half their value. In April, 2000, the Afghani traded at 6400 AFA per USD. By 2002, the Afghani was valued at 43,000 AFA per USD.

In economics, the term currency can refer to a particular currency, for example, the American Dollar, or to the coins and banknotes of a particular currency, which comprise the physical aspects of a nation's money supply. The first Afghani with an ISO number 4217 and code AFA was introduced in 1925. In 1936, the Afghani was pegged at 4 Afghani = 1 Indian rupee. From 1940, the Afghani was pegged to the U.S. dollar. Between 1979 and 1982 and again from 1992, the Afghani's value floated.

The most significant step taken by post Taliban Karzai's government in stability of Afghani was introduction of new Afghani between October 7, 2002, and January 2, 2003. The new Afghani was introduced with the ISO 4217 code AFN. All the previous Afghanis were exchange at 1 new Afghani = 1000 old Afghani. The collection of old Afghani from the market and its replacement with new Afghani has largely helped in having control over the value of Afghani.

The new Afghani has different colors and features that largely help in preventing printing and entrance of fake Afghanis in the market. Today's Afghan currency has more value than that of our neighboring countries that is Iran and Pakistan. But the currencies of these two countries are still commonly used in many provinces of Afghanistan. In Jalalabad and Kandahar, for example, Pakistani Rupees are acceptable in business transactions.

In capital Kabul and many other provinces of Afghanistan US dollars are still used in major dealings. Other currencies such as Euro, Pounds etc are also being used. But in general, over the last few years, the trend to use foreign currencies has gone decreasing because of appreciation of value of Afghani. This appears to be attributable to the relative stability of the exchange rate since the introduction of the new currency, administrative measures aimed at promoting its use, such as the requirement that shopkeepers must price goods in Afghani.

Currently 48 AFA is exchanged for one US Dollar in government transactions although exchange rate differs in open market. Da Afghanistan bank (DAB), the central bank of Afghanistan also believes that in the last nine years, the Afghani has been able to maintain its values against foreign currencies.

According to the DAB, the reason behind appreciation of value of Afghani is its high demand. For the purpose of stability of Afghani the donor countries prefer to pay in Afghanis than Dollars or Euros. Deployments of more troops to Afghanistan and hundreds of ongoing reconstruction and development projects have also contributed in appreciating of value of Afghani.

A few years back, most of the people preferred opening their banks accounts in foreign currencies especially in US Dollars. The reason was the bad experience the people had from the 1990s towards the value of Afghani. However, with the passage of the time the concept of the people towards of Afghani has gone changing. According to DAB, now the people prefer depositing their money in Afghanis. The trust of the people towards Afghani has increased.

Afghani is the identity of Afghanistan it should be significant in both public and government's transactions. For better economy, stability of Afghani and sovereignty of Afghanistan, experts maintain that only one currency i.e. Afghani should be used in all transaction of the country.

For that the government of Afghanistan has to continuously put efforts – sign all development contracts in Afghanis, restrict the use of other currencies in common transactions and work for maintaining the value of Afghani stable through better economic plans an policies.

Mohd. Ahsan is permanent writer of the Daily Outlook Afghanistan. He can be reached at outlookafg hanistan@gmail.com

Go Top