Setting the Scene
In the hushed confines of an economic classroom, the air was pregnant with anticipation. The professor, a seasoned economist, entered the room, wearing an enigmatic smile that hinted at the intriguing question he was about to pose. With a twinkle in his eye, he addressed the curious students, “Can anyone tell me which is the world’s best-performing currency right now?” The question hung in the air, momentarily paralyzing the room.
As seconds turned into minutes, the professor encouraged his students to venture a guess. Tentative answers began to trickle in, ranging from the stalwart US Dollar to the resilient Euro. But the professor had a revelation that would leave everyone stunned—the Afghani, the currency of Afghanistan, had emerged as the world’s top performer.
The Afghani’s Astonishing Ascent
In an age where economic powerhouses like the US Dollar, Euro, Japanese Yen, and the British Pound typically reign supreme, the Afghani’s meteoric rise comes as an unexpected revelation. Data compiled by Bloomberg reveals that the Afghani has surged by an astounding 9% this quarter, surpassing the Colombian peso’s 3% appreciation. For the year, it has seen a remarkable increase of 14%, trailing only behind the currencies of Colombia and Sri Lanka.
This incredible feat stands in stark contrast to Afghanistan’s neighbour, Pakistan, where the rupee has experienced a harrowing depreciation of nearly 22% in the ongoing calendar year alone, despite a recent 6% gain this month.
At the dawn of the year, the Afghani was valued at 104.56 against one US dollar. Now, it stands proudly at 77.09 against the greenback, making it even stronger than the Indian rupee against the US dollar. But how did this unprecedented surge come to be?
The Taliban’s Unconventional Measures
Inquisitive minds in the classroom sought answers, and the professor was ready to provide a deeper insight into this perplexing economic phenomenon.
“Sir,” a curious student raised his hand, “how is Afghanistan’s currency getting stronger?”
The professor began to explain that a combination of factors had contributed to the Afghani’s newfound strength:
- Banning the Use of Foreign Currencies: The Taliban swiftly prohibited the use of US dollars and Pakistani rupees in local transactions. They also implemented stringent measures to restrict the outflow of US dollars from Afghanistan.
- Criminalising Online Currency Trading: The Taliban took the unusual step of criminalizing online currency trading, threatening violators with severe penalties, including imprisonment.
- Humanitarian Aid by the United Nations: Since the Taliban’s return to power in August 2021, the United Nations has extended a helping hand with USD 5.8 billion in aid and development, with USD 4 billion transferred in 2022 alone. However, this year, despite a need for approximately USD 3.2 billion in aid, only USD 1.1 billion has been provided so far, revealing a significant funding gap.
- Smuggling of Dollars: Traders and smugglers have been funnelling as much as USD 5 million from Pakistan into Afghanistan, providing a lifeline to the Taliban in recent months. Afghanistan’s central bank, Da Afghanistan Bank, has been conducting weekly auctions of approximately $16 million to support their currency.
Yet, despite these remarkable developments, Afghanistan’s future remains uncertain.
A UNDP report paints a sobering picture, predicting real GDP growth of just 1.3% in 2023 and a further decline to 0.4% in 2024. GDP per capita is projected to drop from USD 359 in 2022 to USD 345 in 2024. If international aid diminishes during this period, it could plunge Afghanistan into prolonged extreme poverty, enduring for decades.
While the Afghani currency shines brightly on the global stage, its fate is inexorably tied to political stability. Should the Taliban lose control, the Afghani too may suffer, leaving us to wonder whether this remarkable ascent is a fleeting phenomenon or the beginning of a new era for Afghanistan’s economy.
In the annals of economic history, the Afghani’s remarkable rise will undoubtedly find a place of prominence. From the ashes of turmoil and uncertainty, it has emerged as a beacon of strength. However, the road ahead remains uncertain, with Afghanistan’s political landscape poised to determine the Afghani’s ultimate fate.
As we ponder the extraordinary journey of the Afghani, one thing becomes abundantly clear: in the world of currencies, even the most unexpected contenders can defy the odds and rise to greatness. The Afghani’s ascent is a testament to the resilience and adaptability of nations in the face of adversity, and it reminds us that economics, like life itself, is full of surprises and possibilities.