Why Afghanistan’s Reserves Remain Stuck in Switzerland: Key Points.

Why Afghanistan’s Reserves Remain Stuck in Switzerland: Key Points.

1. Frozen Afghan State Assets in Switzerland

Approximately $3.9 billion in Afghan reserves are held in a Geneva-based trust, known as the Afghan Fund.

These assets, equivalent to a quarter of Afghanistan’s GDP, remain inaccessible since the fund's creation in 2022.

The fund was established to provide humanitarian support without granting the Taliban access.

2. Impact on Afghanistan’s Economy

The freezing of central bank assets has severely restricted Afghanistan’s financial system.

Commercial banks lack liquidity, leading to a cash shortage that crippled public services and economic activity.

The central bank’s inability to function normally affects price stability, currency exchange rates, and investor confidence.

3. Political and Legal Roadblocks

U.S. President Joe Biden froze $7 billion of Afghan assets in 2021, half allocated for potential compensation for 9/11 victims.

The fund requires unanimous decisions by a board of trustees, which includes Afghan experts, a U.S. Treasury official, and a Swiss diplomat.

Neither the U.S. nor other nations recognize the Taliban, complicating decisions on asset management and use.

4. Taliban’s Role and International Relations

The Taliban appointed sanctioned officials to lead Afghanistan’s central bank, obstructing progress toward releasing funds.

The Taliban’s repression of women and girls has drawn international condemnation, further isolating the regime.

Masuda Sultan, founder of Unfreeze Afghanistan, argues for engagement over isolation to reduce civilian suffering.

5. Humanitarian Crisis Worsened by Funding Shortages

Humanitarian donors have reduced aid as global focus shifts to other crises.

A funding shortfall led the World Food Programme to cut assistance, impacting millions.

The World Bank warned in 2023 that reduced cash shipments would significantly harm the Afghan economy and lead to desperate survival measures, including child marriages.

6. Efforts to Unblock Funds

Afghan business leaders and civil society proposed using Switzerland-held reserves to recapitalize the central bank with international oversight.

Shah Mohammad Mehrabi, an Afghan Fund board member, suggests controlled, monitored releases to stabilize the economy.

Technical training for central bank staff is hindered by Taliban isolation and political disputes.

7. Ongoing Political Impasse

Without political resolution and Taliban reforms, the frozen assets remain out of reach.

Mehrabi emphasizes compliance concerns related to terrorism and money laundering.

Sultan highlights that addressing political issues is crucial to making the funds available for economic relief.

8. Conclusion: Engagement vs. Isolation

The core debate remains between engaging with the Taliban to mitigate suffering or continuing isolation that prolongs the economic crisis.

Despite technical readiness for disbursements, political deadlock prevents the Afghan Fund from fulfilling its mandate.

Source:

https://www.swissinfo.ch/eng/foreign-affairs/why-afghanistans-reserves-are-stuck-in-switzerland/88698920

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