China Says U.S. Has No Reason to Freeze Afghan Reserves Overseas

(Bloomberg) -- China said the Biden administration should respond to the Taliban government’s request to release about $9.5 billion of reserves held in the U.S. accounts, wading into a debate on how to support Afghanistan from sinking into an economic and humanitarian crisis.  

With no access to reserves, Afghanistan faces a liquidity crisis that may see banks close. The Taliban has already sought for additional humanitarian aid from the the international community just after the United Nations raised more than $1.2 billion in emergency pledges earlier this week. 

The U.S. and its Western allies want to see the Taliban address human rights issues in Afghanistan, in particular that of women and girls, and to ensure no terror groups flourish in the country before any significant engagement. China, along with Afghanistan’s neighboring countries, would be more inclined to engage to prevent a humanitarian crisis from seeping across borders.   

“These assets belong to the Afghan people. The U.S. has no legitimate reason to freeze them,” Chinese Foreign Ministry spokesman Zhao Lijian said at a regular press briefing Wednesday in Beijing. The U.S. should “stop the wrong practice of sanctions and stop making obstacles for Afghanistan’s peace and reconstruction,” he said.

Biden Hurting Poor by Blocking Afghan Reserves, Official Says

The Taliban’s acting central banker Mohammad Idris reassured businesses earlier on Wednesday that Afghan banks are secure and “in good condition.” He asked Afghans to “adjust their operations in a normal and regular manner and conduct their business affairs with complete surety.” 

Yet, since the resumption of bank operations last month, the central bank ordered the banks to limit the withdrawals to $200 per week, or 20,000 Afghanis, for each customer. The order has infuriated local depositors, including corporate clients, who say the withdrawal limit isn’t enough to pay employees or finance spending.

“Our business operation is on the verge of collapse,” Seraj Ahmady, who runs a cafe in downtown Kabul, said by phone. “I have already fired some of the staff, and we may soon close our five-year-old business.”

Afghanistan International Bank, the country’s largest bank in assets, has halted international transfers on orders from the central bank, Serajuddin, an employee of the bank, said by phone. The bank also limited online spending to $1,000 from $3,000 previously, he added.

Soon after taking over last month, the Taliban said that no Afghans were allowed to take U.S. dollars out of the country in a bid to preserve foreign exchange reserves in the country. Earlier, Afghans could take up to $10,000 out of country before militant group swept to power.

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