Central Asia/Russia


	May 15, 2002	atimes.com

Central Asia/Russia

Afghanistan's play money
By Pratap Chatterjee

MAZAR-I-SHARIF, Afghanistan - A crowd of men, fists full of dollars and pockets bulging with local currency, can be spotted at any time of day outside the Kefayat market, near the central mosque in this city in northern Afghanistan. Others sit behind tables and glass cases stacked with six-inch thick bundles of local money.

"Jumbishi, daulati," whispers one trader to passers-by, mentioning just two of the currencies being used in this country. Others sidle up to prospective customers and flash the green United States currency and say: "Dollar, dollar."

Banks are virtually unknown in Afghanistan. Foreign-exchange counters with computers and counting machines are non-existent. Instead, traders will often summon friends to thumb rapidly through banknotes to count them and check their authenticity. And unlike almost any other country in the world, Afghanistan boasts multiple rival currencies backed by different warring factions.

The daulati, the most widely used currency in Afghanistan, was printed by the previous government of president Burhanuddin Rabbani, before it was expelled from Kabul by the Taliban in 1996. After the government treasury's printing presses were destroyed in fighting, Rabbani's government had money printed in Moscow. This currency is officially recognized by the interim government headed by Hamid Karzai in Kabul.

A second currency, known as jumbishi, is printed by ethnic-Uzbek General Rashid Dostum, a highly independent member of the Northern Alliance who is jockeying for more power. Dostum's currency, also printed in Moscow, looks identical to those printed by Rabbani in almost every respect except for variations in color and serial numbers. The Dostum afghani usually trades at a rate of 2:1 against the daulati and is mostly in circulation here in the north.

Traders also sell currency printed before king Zahir Shah was deposed in 1973 after a 40-year reign. That currency, which bears the king's portrait, is still legal tender.

All these currencies rise and fall against the US dollar and other international currencies depending on the events of the day. Already this year there have been two major currency crashes. The first occurred in late January when Abdul Qadeer Fitrat, acting governor of the nation's central bank, said the daulati was "not a viable currency". His sentiments were echoed by Warren Coats, the International Monetary Fund (IMF) assistant director for monetary and exchange affairs, who was visiting Kabul at the time.

The second crash occurred in late April when former king Zahir Shah returned to the country. In two days, the rate fell from 31,000 daulati to the US dollar to 39,000 to the dollar. The Central Bank in Afghanistan spent more than $1 million to stabilize the daulati and bring it back to its former exchange rate to the dollar.

The fluctuation of Afghan currencies against the dollar are not simply a result of speculation on current events. Traders point out that Burhannuddin Rabbani is still issuing banknotes to bankroll himself. In December, Rabbani acknowledged that he had spent $8 million worth of afghanis to pay his commanders. Dostum and Iranian-backed warlord Gulbuddin Hekmatyar are also rumored to be distributing counterfeit local currency.

The situation has provoked a sharp warning from Paul Chabrier, director of the IMF's Middle Eastern department. "Unless the issuance of new Afghan banknotes not backed by the central bank is stopped, it could lead to massive inflation and destabilize the economy. Already, it has caused a progressive weakening of the official currency in the foreign exchange market," he said in a recent IMF newsletter.

Adopting the US dollar would allow the government to sidestep crises like these in a manner that did not put it directly at odds with warlords that it may lack the military and political power to confront. Not that this would solve all the problems. Just before Kabul fell to the Northern Alliance, IMF officials report, someone went to the vaults of the central bank and stole $6 million in dollar bills and about $1 million worth of Pakistani rupees. On another occasion, Pakistani media reported that an ally of interim Defense Minister Mohammed Fahim expropriated currency shipments meant for the central government.

Meanwhile, the IMF's Chabrier has backed away from endorsing the dollar as an alternative currency. "The authorities are very clear that a new, single Afghan currency will have to be established at some point in the future, replacing the current afghanis. But what should be done between now and then?" he asked. "It isn't easy, however, to devise a new currency, this will take some time. A key issue is what picture will go on the currency notes. Should the currency picture a human face, which was unacceptable under the Taliban, or a monument? If the latter, which monument would satisfy the various ethnic groups?" added Chabrier.

Either way it is a profitable business for the traders at the Kefayat market here. Business has soared since the Taliban was defeated as money came flooding back into the country - causing the exchange rate for the afghani to drop to one-third of its value under the previous regime.

Jamshed, another local currency trader who works on the fourth floor, says the number of traders has also multiplied. "I don't know the exact number of traders in the building but I estimate that there are about 600 people working here and outside the building. They trade in US dollars, Pakistani rupees, Iranian tumen, and some of them even trade in Russian rubles and British pounds," he explains. Jamshed says he trades between $2,000 and $8,000 a day but some traders can exchange up to $200,000 in a day, a fortune in this country where the average salary is probably $20 a month.

One thing seems certain, though - at least one of the two major currencies will be phased out, and it is likely that this will be the jumbishi currency, popular here in the north. "The people in northern Afghanistan will face a lot of failures if the money is declared illegal. People here have a lot of jumbishi money in their pockets, in their houses," says Najibullah, another trader. "Most of our merchants use jumbishi, so it is not good for people here in northern Afghanistan if the money is declared illegal."

(Inter Press Service)