The United Nations on Monday warned of a big collapse of Afghanistan’s banking system. The country’s economy has been badly hit after withdrawal of foreign development support, which has led to a crunch in liquid cash, lower deposits in the bank and people being unable to repay loans.
The U.N. Development Programme (UNDP) has written a three-page report on Afghanistan’s banking and financial system, which notes that the economic cost of a banking system collapse “would be colossal,” and it would cause a negative social impact.
The report explains that if the banking system fails, rebuilding it could take decades. The non-performing loans had doubled to 57% in September from the end of 2020, and at this rate, the banks might meet their end in the next six months.
After the Taliban came to power on August 15, the war-torn country saw a withdrawal of foreign development aid, which has resulted in a downfall of the banking system. Billions of dollars have been frozen abroad, and the United States is now in talks with the United Nations and the UNDP on how to avert the collapse of the banking system and offer liquidity. However, Abdallah al Dardari, head of UNDP in Afghanistan, has made it clear that America’s support to the banking sector does not mean the country supports the Taliban.