US to transfer $3.5bn of Afghan central bank assets to Swiss-based trust fund

Washington — The US on Wednesday announced that it would transfer $3.5bn in Afghan central bank assets to a new Swiss-based trust fund that will be shielded from the Taliban and used to help stabilise Afghanistan’s collapsed economy.

The Afghan Fund, managed by a board of trustees, could pay for critical imports such as electricity, cover debt payments to international financial institutions, protecting Afghanistan’s eligibility for development aid, and fund the printing of new currency.

“The Afghan Fund will protect, preserve and make targeted disbursements of that $3.5bn to help provide greater stability to the Afghan economy,” the US Treasury said in a statement.

US officials said no money would go to the Afghan central bank, known as DAB, until it is “free of political interference” — two of the bank’s top officials, are under US and UN sanctions — and anti-money laundering safeguards are instituted.

“Until these conditions are met, sending assets to DAB would place them at unacceptable risk and jeopardise them as a source of support for the Afghan people,” deputy treasury secretary Wally Ademeyo said in a letter to the central bank’s supreme council.

The new fund has an account at the Basel-based Bank for International Settlements, which provides financial services to central banks.

The fund 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 UN.

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

The crisis also have been fuelled by decades of war, drought, the Covid-19 pandemic, endemic corruption and the central bank’s removal from the international banking system.

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 $7bn in Afghan central bank assets held in the US.

The talks continued despite US anger at the Taliban’s harbouring of late Al-Qaeda chief Ayman al-Zawahiri — killed on July 31 in a CIA drone strike on his Kabul safe house — and international outrage at the militants’ human rights crackdown, including barring girls from state-run secondary schools.

Biden in February sequestered “for the benefit of the Afghan people” the $3.5bn in DAB assets to be transferred into the new trust fund.

The other $3.5bn is being contested in lawsuits against the Taliban stemming from the September 11, 2001, attacks on the US. Courts could decide to release that money, which could be deposited in the new trust fund.

A further $2b in Afghan central bank assets held in European and Emirati banks also could end up in the fund.

The fund, US officials said, will be overseen by a board comprising a US government representative; a Swiss government representative; Anwar Ahady, a former Afghan central bank chief and former finance minister; and Shah Mehrabi, a US academic who remains on the DAB Supreme Council.

Reuters