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Economy, Currency and Banking

hawala, government loans, purchasing power, puls, unit of currency

The unit of currency in Afghanistan is the afghani, which is divided into 100 puls. From 1981 to 1996 the official rate of exchange was fixed at 50 afghanis equal U.S.$1; after 1996 it was fixed at 3,000 afghanis equal U.S.$1. The actual market rate of the afghani has fluctuated, however. High inflation rates (up to 57 percent) contributed to a drastic decrease in the purchasing power of the afghani from 1981 to 1994, a trend that continued during the Taliban regime. The afghani, so devalued by two decades of wartime inflation, now has little value outside of Afghanistan and Pakistan.

Afghanistan’s central bank was founded in 1938 and is the largest bank in Afghanistan. The central bank issues all notes, executes government loans, and lends money to cities and to other banks. All private banks in Afghanistan were nationalized in 1975, mostly because a lack of clear terms for borrowers and lenders had made it difficult for people to use the country’s credit resources. No stock market or other modern form of economic development exists in Afghanistan. Instead, traditional “money bazaars” exist to provide money-lending and foreign exchange dealings. This informal and largely undocumented money transfer system, called hawala, is common throughout the Middle East and South Asia, and is considered to be one of the means by which terrorism from this part of the world has been funded.

Article key phrases:

hawala, government loans, purchasing power, puls, unit of currency, largest bank, private banks, stock market, Afghanistan, borrowers, Pakistan, South Asia, terrorism, little value, trend, cities, percent, notes, Middle East, lenders, world, means, people


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