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Afghani Emerges as Top-Performing Global Currency

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By Daniel Edu

In a surprising turn of events, Afghanistan’s currency, the Afghani, has emerged as the world’s best-performing currency in the September quarter. It experienced a remarkable rally of 9 percent during this three-month period and has seen a 14 percent increase so far this year. This unexpected surge in the Afghani’s value can be attributed to foreign aid flows and the release of funds by the United States to the war-torn country.

As of the most recent exchange rate, one Afghan Afghani is equivalent to approximately Rs 1.06 and 78.54 against the US dollar.

It’s worth noting that Afghanistan’s economy, which is predominantly agrarian, had suffered a significant decline of nearly 30 percent, and its currency had plummeted to 124.2 against the US dollar on August 16, 2021. On August 14 of the same year, the local currency was quoted at 80.96 against the US dollar, according to a currency analyst at HDFC Securities.

The analyst, who chose to remain anonymous due to the unavailability of data from the current Afghan regime, revealed that the country’s economy, already grappling with high unemployment and widespread poverty, is now facing deflation, according to a recent World Bank report.

The Afghani’s remarkable rally, from 85 to the US dollar in early August to 73.38 on August 31, marked its strongest performance since the Taliban’s takeover. However, in September, the currency experienced a 6.5 percent decline, closing at 78.54 on a recent Tuesday, according to HDFC Securities.

Despite this decline, the Afghani has held its position as the best-performing currency globally in the September quarter, with a 9 percent gain in the quarter and a 14 percent increase year-to-date, as per Bloomberg data cited in some reports.

It’s important to note that the Afghani market lacks liquidity, and experts believe that the currency’s rally may be a one-time occurrence and is unlikely to be sustained.

The primary drivers of the significant rally in the Afghani’s value, particularly in August, include the resumption of aid from the United Nations and other international agencies to the war-torn nation. Additionally, the release of USD 280 million out of the frozen funds by the United States, out of a total of USD 8 billion since the Taliban’s takeover, has contributed to the currency’s appreciation.

Furthermore, the US Treasury Department recently announced its intention to transfer an additional USD 3.5 billion of frozen funds to an Afghan fund established in Switzerland to support economic stability in Afghanistan.

Reports indicate that the Afghani’s 9 percent rally has outpaced the 3 percent gain of the Colombian peso, making it one of the standout performers in the global currency market.

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