UN warns of ‘colossal’ collapse of Afghan banking system
- Date: 22-Nov-2021
- Source: Gulf Today
- Sector:Financial Services
- Country:Middle East
UN warns of ‘colossal’ collapse of Afghan banking system
The United Nations on Monday pushed for urgent action to prop up Afghanistan's banks, warning that a spike in people unable to repay loans, lower deposits and a cash liquidity crunch could cause the financial system to collapse within months. In a three-page report on Afghanistan's banking and financial system seen by Reuters, the UN Development Programme (UNDP) said the economic cost of a banking system collapse — and consequent negative social impact — "would be colossal." An abrupt withdrawal of most foreign development support after the Taliban seized power on Aug. 15 from Afghanistan's Western-backed government has sent the economy into freefall, putting a severe strain on the banking system which set weekly withdrawal limits to stop a run on deposits. "Afghanistan's financial and bank payment systems are in disarray. The bank-run problem must be resolved quickly to improve Afghanistan's limited production capacity and prevent the banking system from collapsing," the UNDP report said. Finding a way to avert a collapse is complicated by international and unilateral sanctions on Taliban leaders. "We need to find a way to make sure that if we support the banking sector, we are not supporting Taliban," Abdallah al Dardari, head of UNDP in