Afghanistan Central Bank Reserves

Afghanistan Central Bank Reserves

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Updated March 13, 2023
Afghanistan Central Bank Reserves
Since the Taliban’s August 2021 return to power,
assistance, E.O. 14064 leaves the remaining $3.5 billion
Afghanistan has faced an extreme recession and a
unavailable until these legal challenges are resolved.
humanitarian crisis. A U.S. hold on assets of the Afghan
central bank (Da Afghanistan Bank, or DAB) deposited in
Economic Impact in Afghanistan
the United States has attracted particular scrutiny from
Afghanistan’s economy has been hamstrung by a number of
some observers who describe this as one of the most
factors, including a lack of natural resources, rampant
important factors impacting the humanitarian and economic
corruption, and decades of conflict. The country’s economy
situations in Afghanistan. Members of Congress have
has contracted sharply since the Taliban’s August 2021
expressed a range of views on how to proceed with the
takeover, exacerbating the humanitarian situation. Along
assets, including whether the U.S. government should
with other factors, including the cessation of international
continue holding or utilizing the assets for economic
development assistance and U.S. and international sanctions
assistance or other purposes.
on the Taliban, the U.S. hold on Afghanistan’s central bank
assets has arguably contributed to the country’s economic
According to a June 2021 DAB financial statement, total
breakdown.
international reserves were around $9.5 billion. Of this
amount, $7 billion was deposited at the Federal Reserve
The U.S.-backed former government relied heavily on
Bank of New York, with the rest remaining in Afghanistan
international development assistance. Foreign donors
or deposited in foreign financial institutions.
financed more than half of the government’s $6 billion
annual budget and as much as 80% of total public
On February 11, 2022, President Biden signed Executive
expenditures. Between 2002 and 2021, the United States
Order 14064 to block U.S.-held Afghanistan central bank
provided more than $17 billion to the Afghan government
reserves, and separately stated his intention to disburse $3.5
in on-budget assistance—funds that went directly, or
billion of the $7 billion currently held in the U.S. Federal
indirectly through multilateral trust funds, to Afghan
Reserve Bank “for the benefit of the Afghan people.” In
government entities. That aid and other support for
September 2022, the Biden Administration announced the
Afghanistan helped raise the country’s per capita gross
establishment of the “Afghan Fund” to “protect, preserve,
domestic product from $179 in 2002 to $508 in 2020.
and—on a targeted basis—disburse $3.5 billion for the
Afghanistan’s central bank reserves grew from just under
benefit of the Afghan people.” Based in Switzerland, the
$7 billion in 2013 to $9.8 billion at the end of 2020 (Figure
new Afghan Fund has a four-member board made up of a
1).
U.S. Treasury Department official (Counselor Andrew
Baukol), a Swiss foreign ministry official (Ambassador
Figure 1. Afghanistan Central Bank Reserves (Billions
Alexandra Elena Baumann), and two Afghans (former
of Current USD)
finance minister Anwar-ul-Haq Ahady and Shah Mehrabi, a
U.S.-based economic expert who remains on the DAB
governing board). The board met for the first time in
November 2022 and again in February 2023 and, as of
March 2023, has not made any disbursements. The U.S.
Agency for International Development reports that DAB
must undergo a third-party assessment of its performance in
three areas prior to any disbursement from the Afghan
Fund: (1) overseeing anti-money laundering measures, (2)
combatting the financing of terrorism, and (3) maintaining
its “independence from outside interference.”
Against the backdrop of establishing the Afghan fund for
the benefit of the Afghan people, there is ongoing litigation

brought by some victims of the September 11, 2001 (9/11),
Source: International Monetary Fund.
terrorist attacks to use the Afghan assets to satisfy their
The United States held the DAB assets days after the
judgments against the Taliban. The Afghan assets held in
Taliban entered Kabul to prevent the group from accessing
the Federal Reserve were subject to writs of execution in
them. That decision has contributed to instability in
these cases, but a court found that the assets are immune
Afghanistan’s currency, the afghani (which lost
from attachment. The decision is on appeal at the U.S.
considerable value against the U.S. dollar after August 2021
Court of Appeals for the Second Circuit. After setting aside
but has been relatively stable since March 2022), and a
half of the Afghan assets for humanitarian or economic
severe liquidity crisis. Afghanistan is a highly cash-
dependent society: According to the World Bank, 85% of
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Afghanistan Central Bank Reserves
Afghans did not have bank accounts as of 2020.
Taliban is the legitimate government of Afghanistan.” The
Afghanistan does not have the technical capability to print
court declined to issue a stay while the creditors appeal,
its own currency. Even in parts of the country where food is
although the appellate court may reverse the decision.
available, many Afghans struggle to pay for it, illustrating
the impact of the country’s financial crisis on the broader
U.S. Policy and Issues for Congress
humanitarian and economic conditions.
U.S. policymakers have grappled with the question of what
to do with the U.S.-based assets of governments in flux
Taliban and International Response
before, as the ultimate disposition of assets may serve as
The Taliban view the U.S. hold on DAB assets as a
leverage to influence the behavior of foreign actors. Several
pressing policy priority and have sought to marshal
Presidents and Congresses have each at times determined
domestic Afghan and international pressure on the United
the ownership of and rights to assets to further foreign
States to release the funds. In a November 2021 open letter
policy goals. Presidents have used frozen foreign assets as a
to Congress, the Taliban’s acting foreign minister wrote,
bargaining tool during foreign policy crises, in some
“Currently the fundamental challenge of our people is
instances, by returning the assets to the sanctioned foreign
financial security and the roots of this concern lead back to
government or by channeling them to successor
the freezing of assets of our people by the American
governments, as occurred after the breakup of Yugoslavia.
government,” and he called on the United States both to lift
In some cases, a President has made frozen assets available
the hold on DAB assets and end sanctions on the Taliban.
to opposition governments, as occurred in the case of
The Taliban have also allowed and amplified public
Panama and Venezuela. Sometimes a portion of frozen
protests in Kabul where marchers called for the release of
assets has serviced the debts of the foreign government. In
DAB assets. A number of countries with which the Taliban
the case of Iraq after the First Gulf War, the President
have ties—including China, Russia, Iran, Uzbekistan, and
directed some blocked assets be used for humanitarian
Pakistan—have also called on the United States to release
relief or to finance the United Nations Compensation
the assets.
Commission. The United States retained the remaining Iraqi
assets until vesting (taking title to) them in 2003 to provide
Potential Impact of 9/11 Litigation on
humanitarian assistance and to assist in reconstruction.
U.S.-Held DAB Assets
Congress has in some cases directed that frozen foreign
Several groups of 9/11 victims—including those injured,
assets be used to pay terrorism judgments owed by a
the estates of those killed, and spouses and other family
foreign government designated under U.S. law as a state
members of victims—who have or are seeking judgments
sponsor of terrorism, including Cuba and Iran.
against the Taliban for their role in supporting the 2001
terrorist attacks seek access to the frozen Afghan
Congressional reaction to the establishment of the Afghan
government assets in order to collect damages. One group,
Fund appears relatively muted, though Members of
known as the Havlish plaintiffs, has a default judgment
Congress have expressed a range of views about the assets
against the Taliban and other defendants worth
in general. Some Members contend that the assets represent
approximately $7 billion. The U.S. government filed a
one of few remaining points of U.S. leverage over the
statement of interest arguing that a portion of the DAB
Taliban and that the United States should not release them
funds will be set aside for humanitarian uses and is not
without securing concessions from the Taliban with regard
blocked within the meaning of the Terrorism Risk
to the role and security of women or other issues. Other
Insurance Act (TRIA, 28 U.S.C. §1610 note), making it
Members have advocated for releasing the assets, arguing
unavailable for attachment under that statute.
that doing so would ameliorate humanitarian and economic
conditions in the country.
The United States advised the court that the judgment
creditors should have the opportunity to pursue the
Many Members appear to be balancing addressing the
remaining DAB assets under applicable law, but it observed
humanitarian crisis and economic contraction in
that TRIA permits attachment only to satisfy compensatory
Afghanistan with the risk of buttressing a Taliban
and not punitive damages. The court granted the
government viewed as hostile to U.S. interests, as well as a
government’s request to modify the writs of execution to
desire to secure compensation for 9/11 victims. Releasing
enable the transfer of $3.5 billion to the Afghan Fund.
the assets conditionally or in small, monitored tranches may
Under the Foreign Sovereign Immunities Act (28 U.S.C.
minimize (though likely not eliminate) the risk of the
§§1602–1611), foreign sovereign central bank assets in the
Taliban having access to additional financial resources.
United States are generally immune from attachment to
Applying the assets solely to humanitarian relief might help
satisfy judgments. The U.S. government argued that the
stave off mass suffering in the short term, but it might not
case requires deciding whether the DAB assets belong to
be sufficient to address the underlying currency liquidity
the Taliban and are attachable to satisfy its debts without
and broader economic contraction.
implicitly recognizing the Taliban as the government of
Afghanistan.
Martin A. Weiss, Coordinator, Specialist in International
Trade and Finance
The court denied the judgment creditors’ motion for
Clayton Thomas, Specialist in Middle Eastern Affairs
turnover of the assets for lack of subject matter jurisdiction
Jennifer K. Elsea, Legislative Attorney
because the DAB is an instrumentality of Afghanistan and
its assets are entitled to immunity. The court also found
IF12052
itself “constitutionally restrained from determining the
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Afghanistan Central Bank Reserves

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