Despite a significant appreciation recently, the dollar is not the national currency with the best return in the 3rd quarter of the year, the distinction going to the humble Afghani, reports Markets Insider.
The Afghan experienced a period of depreciation immediately after the American withdrawal from the countryPhoto: Saifurahman Safi / Xinhua News / Profimedia
The strictly Taliban-controlled currency has appreciated 9 percent against the dollar since July 1, taking the top spot in the ranking of national currency returns for the past 3 months, according to data provided by financial advisory firm Refinitiv.
Agency Bloomberg shows that this Q3 performance has resulted in a 14% appreciation of the Afghani since the start of 2023, making it the world’s third-best performing currency overall over the past 9 months, behind the Colombian peso and Sri Lankan Rupee.
However, far from illustrating the state of the Afghan economy in any way, the situation rather shows that strict capital control measures can lead to a temporary strengthening of a national currency, regardless of economic realities.
Russia enjoyed a similar effect last year when became in the spring of 2022 the world’s best-performing currency as a result of Moscow’s draconian measures to control capital flows.
The situation was temporary, however, as the ruble then went into a widespread decline that caused inflation concerns and discontent in the Kremlin.
More than three-quarters of Afghans live in poverty
As for Afghanistan, the Taliban have also imposed strict capital control measures after returning to power in August 2021, banning the use of the dollar and the Pakistani rupee, as well as online currency transactions.
But the Afghan economy has suffered badly since the return of Islamist fundamentalists, with the humanitarian crisis exacerbated by soaring unemployment as the Taliban ban women from working in almost any public-facing field.
A recent Red Cross report states that 79 percent of Afghanistan’s population lives in poverty and that 44 percent of the country’s residents do not have enough food.
Although Afghanistan’s GDP is difficult to measure due to a lack of data and the size of the informal economy, some estimates place the country’s economic contraction at 20 percent over the past two years.
