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US to move USD 3.5 billion in Afghan central bank assets to Swiss-based trust

The United States announced that it would transfer USD 3.5 billion in Afghan central bank assets into a new Swiss-based trust fund. The move is to shield the funds from the Taliban and use them to help stabilise Afghanistan’s collapsed economy.

“The Afghan Fund will protect, preserve and make targeted disbursements of that USD 3.5 billion to help provide greater stability to the Afghan economy,” the US Treasury said in a statement. It added that no money would go to the Afghan central bank, known as DAB until it is “free of political interference”.

US demands that the bank’s top Taliban officials, two of whom are under US and UN sanctions, are replaced with banking professionals and anti-money laundering safeguards are instituted.

“Until these conditions are met, sending assets to DAB would place them at unacceptable risk and jeopardize them as a source of support for the Afghan people,” US Deputy Treasury Secretary Wally Adeyemo said.

The Afghan Fund, managed by a board of trustees, could pay for critical imports like electricity, cover debt payments to international financial institutions, protecting Afghanistan’s eligibility for development aid, and fund the printing of new currency. The new fund is housed in the Basel-based Bank for International Settlements, which provides financial services to central banks.

The fund most likely will not resolve serious problems driving dire economic and humanitarian crises threatening to worsen as winter approaches. Nearly half of Afghanistan’s 40 million people face “acute hunger,” according to the United Nations.

The Taliban’s biggest fiscal challenge is developing new revenues to compensate for financial aid that provided up to 75 percent of government spending that the United States and other donors ended after the Islamists seized Kabul in August 2021 as the last American troops left, ending two decades of war.

Legal struggle for Afghan funds

The crises also have been fueled by the prolonged war, drought, the COVID-19 pandemic, endemic corruption and a cutoff of the central bank from the international banking system. The creation of the new trust fund comes after months of talks between US President Joe Biden’s administration, Switzerland, other parties and the Taliban, who demanded the return of USD7 billion in Afghan central bank assets held in the United States.

In February, Biden sequestered “for the benefit of the Afghan people” the USD 3.5 billion in DAB assets to be transferred into the new trust fund. The remaining USD 3.5 billion is being contested in lawsuits against the Taliban stemming from the September 11 attacks on the United States. Courts could decide to release that money, which could be deposited in the new trust fund.

Another approximately USD 2 billion in Afghan central bank assets held in European and Emirati banks also could end up in the fund.

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