US Markets

IMF blocks Afghanistan's access to SDR reserves over lack of clarity on government

Credit: REUTERS/TIM WIMBORNE

The International Monetary Fund said on Wednesday it suspended Afghanistan's access to IMF resources, including some $455 million in new monetary reserves, due to a lack of clarity over the country's government after the Taliban seized control of Kabul.

By David Lawder

WASHINGTON, Aug 18 (Reuters) - The International Monetary Fund said on Wednesday it suspended Afghanistan's access to IMF resources, including some $455 million in new monetary reserves, due to a lack of clarity over the country's government after the Taliban seized control of Kabul.

The IMF's announcement came amid pressure from the U.S. Treasury, which holds a controlling share in the Fund, to ensure that Afghanistan's share of a Special Drawing Rights reserves allocation scheduled for Monday not fall into Taliban hands.

"There is currently a lack of clarity within the international community regarding recognition of a government in Afghanistan, as a consequence of which the country cannot access SDRs or other IMF resources," an IMF spokesperson said in an emailed statement.

"As is always the case, the IMF is guided by the views of the international community," the spokesperson added.

The Fund has traditionally relied on its membership to decide whether to engage with governments that take power in coups or disputed elections.

In 2019, the IMF suspended Venezuela's SDR access after more than 50 member countries representing a majority of the Fund's shareholding refused to recognize President Nicolas Maduro’s government following his disputed re-election. The IMF also suspended dealings with Myanmar after the military seized power in a February coup.

The IMF is due on Monday to complete a $650 billion allocation of SDRs - the fund's unit of exchange based on dollars, euros, yen, sterling and yuan - to its 190 member countries in proportion to their shareholdings in the Fund.

The increase in reserves is aimed at bolstering the balance sheets of poorer countries that have been severely strained by the coronavirus pandemic. Afghanistan, based on its 0.07% quota shareholding, stands to receive about $455 million.

A U.S. Treasury official said earlier on Wednesday that the department was taking steps to prevent the Taliban from accessing the country's SDR reserves.

The official, speaking on condition of anonymity, did not provide details on the specific actions being taken by the Treasury, which follow a letter from Republican lawmakers urging Treasury Secretary Janet Yellen to "intervene" at the IMF to ensure that no IMF Special Drawing Rights are made available to the Taliban.

Even if Afghanistan were to regain access to the SDRs, it would be unlikely the Taliban could spend those resources because that would require another country to be willing to exchange the SDRs for underlying currencies, a transaction that would likely be blocked by long-standing U.S. financial sanctions against the Taliban.

Afghan and U.S. officials have said most of the Afghan central bank's nearly $10 billion in assets are held outside Afghanistan, likely putting them beyond the insurgents' reach. A Biden administration official said previously that any Afghan central bank assets held in the United States would not be made available to the Taliban.

(Reporting by David Lawder and Tim Ahmann; Editing by Peter Cooney)

((tim.ahmann@thomsonreuters.com; +1 202 898-8370; Reuters Messaging: tim.ahmann.reuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

World Markets

Latest US Markets Videos

Reuters

Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV.

Learn More