NEW YORK -- The International Monetary Fund announced on Wednesday that Afghanistan will not be able to access funding from the organization, including an upcoming payment of nearly half a billion dollars, as the Taliban establishes control in Kabul.
The decision comes amid uncertainty over whether the international community will recognize a new Islamist insurgent-run government and warnings of an economic crisis on top of the security chaos in the country.
"As is always the case, the IMF is guided by the views of the international community," said an IMF spokesperson via email. "There is currently a lack of clarity within the international community regarding recognition of a government in Afghanistan." Because of this uncertainty, the fund will not release Special Drawing Rights (SDR) or other resources.
The IMF is in the process of allocating the equivalent of $650 billion in newly created SDRs -- reserves based on U.S. dollars, euros, yen, sterling and yuan -- to boost economies ravaged by the coronavirus pandemic. The plan, set to become effective on Monday, was called "the largest SDR allocation in the history of the IMF and a shot in the arm for the global economy at a time of unprecedented crisis" by IMF managing director Kristalina Georgieva.
SDRs are interest-bearing international reserve assets created by the IMF in 1969 to supplement other reserve assets of member countries. The new SDRs are due to be credited in proportion to members' existing quotas in the fund.
About $275 billion of the new allocation was set to go to emerging markets and developing countries, including low-income countries. Afghanistan, where the Taliban are rushing to form a government, was expecting to receive about $455 million, but several U.S. news outlets reported on Wednesday that the Biden administration was pressuring the IMF to block access to the funds.
"The potential of the SDR allocation to provide nearly half a billion dollars in unconditional liquidity to a regime with a history of supporting terrorist actions against the United States and her allies is extremely concerning," a group of 18 U.S. lawmakers wrote to the U.S. Treasury Secretary Janet Yellen on Tuesday.
"Since 2020, we have raised concerns over the potential for vast sums to flow to evil regimes through an SDR allocation," the letter went on. "The Taliban has been added to the list of rogue regimes. These events call for the United States to cut off hard currency to the Taliban, including through its access to Afghanistan's SDRs."
Afghanistan's former central bank governor, Ajmal Ahmady, who fled the country via a military aircraft on Sunday, warned on Wednesday that the population is facing "dire" financial prospects due to an acute shortage of dollars and high inflation. "If people think, it's bad but it's over, I think they're underestimating the impact," he said in an interview with the Financial Times. "We've finished the military phase and now we're going to start the economic phase of the impact."
In an assessment of the Afghan economy in June, as the Taliban were escalating their campaign against government, the IMF said the country "is facing formidable challenges. The precarious security situation and rising uncertainty are hurting confidence, investment, and growth, while the COVID-19 pandemic has imposed a heavy socioeconomic toll, with higher poverty and unemployment."