Editor in Chief: Moh. Reza Huwaida Friday, November 16th, 2018

The Depreciating Effect of Afghan Currency Value on People’s Lives

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The Depreciating Effect of Afghan  Currency Value on People’s Lives

Since about a year, Afghan money has lost its value insofar asunprecedented in nearly past two decades in exchange for the US dollar. This news is not only a concern of the Afghan money exchange Union but has negatively affected on the daily life of people. Economic analysts say that the impoverishment of Afghan money directly affects the people’s living’s standard and thus will weaken the Afghan economy. Currently, one dollar is close to 72.85 AFN. It is said that the Central Bank of Afghanistaninject the US dollar twice a week, while, according to experts and money exchangers it is neither a permanent solution nor enough to keep the value of Afghani stable.
The Afghan government needs to take regular and long-term plans to increase national income, domestic production and exports to maintain the national currency stable. Given that Afghanistan is an import country and that large transactions are conducted with the dollar, the rise of the dollar against the Afghani currency normally effect ordinary people as they are to do their jobs and transactions with Afghani money. So, high exchange rate will directly reduce their living standards and purchasing power. the only solution to increase the value of the Afghani against the foreign currency is to increase the economic strength and national income of Afghanistan.
Unfortunately, the central bank, as a policymaker and responsible institution for the stability of the Afghan currency has not done anything effective, except direct intervention by pumping dollars to maintain its value. Whereas, the currency policy is all economic policy which affect the supply and demand of currencies, in particular the exchange rate of domestic currency against foreign currencies. Other countries, never allow to use direct-policy (Direction Action) using the Auction tool, but the central bank has relied on this policy inappropriately. This shows ineffectiveness of the Central Bank of Afghanistan as the value of Afghan currencies today is decreasing with the passing of every moment.
However, recently officials from the Central Bank of Afghanistan (CBA) said that the value of the Afghani currency continues to drop against the US dollar in the face of ongoing political tension in the country. “The tensions we witnessed in the country over the past two months is one of the key reasons behind the price hikes and the dropping of the Afghani currency against the dollar; these issues need to be resolved, because it has major implications,” said Khalil Sediq, Chairman.
According to some of the parliament members, the current currency falls is really ‘worrisome’ as this would worsen economic problems in the country. Comparing to few years ago, one dollar was around 50Afs but it jumped to 72.80 now and if no steps were taken for stabilizing the currency’s value, people would face serious economic problems.In the past, Da Afghanistan Bank (DAB) would offer millions of dollars to the market for maintaining the value of Afghani but now either the amount had decreased or some mafia circles purchase the dollars to bring them to market as soon as the dollar’s rate go higher.
Residents and moneychangers in Kabul are also concerned about the fast depreciating value of the Afghani against dollar. They believe further decline in the Afghani may moreintensely harm people’s lives and small businesses because they the ones who use Afghan currencyand pay the rising price for goods on the local markets. In late March the price of one US dollar was 69 Afghanis compared to the current date is 72.85 Afghanis. As quoted from some Moneychangers at Shazada Market, say the Afghani has been unstable from the beginning of the solar year. Even today,Tuesday4:00pm, it further depreciated until one dollar was purchased for 72.85 Afghanis and sold for 72.95 Afghanis in the market. It is true that the value of dollar has increased against many global currencies but Afghani is the one which greatly decreased as our economic problems are greater.
Meanwhile, in regard to this issue,  a number of economic commentators says that government must stop people from smuggling dollars to neighboring countries. “Government needs to come up with a comprehensive policy to control forex bazars, because the increase of dollars on the market poses serious harm to those with a low income,” quoted from Haseeb Mauhid, economic analyst.
Moreover, they believe that the insecurity, reliance on imports, the dependent economy, and the US economy growth are blamable factorsfor why the dollar worth has increased against the Afghani. Afghanistan is an importing country and regularly the money goes out of the country while, domestic exports are lower, it cannot return the paid money to the Afghan market.
Given that Afghanistan is an import country, as long as our currency policy is managed on the basis of myopia policy, the direct intervention by pumping dollars, the Afghani currency will keep losing its value against other currencies.The recent history has clearly taught us that this strategy is not successful for longer term as the rate of US dollar increased from around 50 up to 72.85 afs now. Meanwhile,on the assumption that the importance of economy in Afghanistan is overridden by other political agendas, it is not likely to anticipate significant changes in economy of the country. However, the national unity government paid some good attention in build of economic infrastructures but it is not enough to satiate the needs of growing population and persistent droughts.We extremely, need to take long-term economic strategy to increase national income, domestic production and increase the exports in order to maintain the national currency stable. And more importantly, we have to ensure a safe environment for investors, industrialists and overall economic activities throughout the country.

Mohammad Zahir Akbari is the permanent writer of the Daily Outlook Afghanistan. He can be reached at mohammadzahirakbari@gmail.com

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