Khan's Afghan relief fund faces fire on all fronts| MENAFN.COM

Monday, 23 May 2022 01:46 GMT

Khan's Afghan relief fund faces fire on all fronts


(MENAFN- Asia Times)

PESHAWAR – The Pakistan government's bid to raise funds for Afghanistan's cash-strapped government has been shot down by the suddenly autonomous State Bank of Pakistan (SBP), due to concerns that financing the Taliban regime could trigger international sanctions.

The SBP has advised against domestic and foreign donations to the government's Afghanistan Relief Fund, telling the finance ministry that funneling funds to the Afghan government without involving“international organizations of repute” could result in sanctions from the Financial Action Task Force (FATF), an international anti-money laundering and terror finance watchdog.

Pakistan has been on the FATF's“grey list” since June 2018; the Paris-based watchdog is set to review Pakistan's performance on various metrics next month. Pakistan has not yet met two key FATF action items, including the prosecution and confiscation of assets of UN-designated terrorists, to be removed from the grey list.

The SBP's stand against the government's relief fund plan marks perhaps the first time the central bank has flexed its autonomy since legislation was tabled towards making it more independent. The SBP is undergoing some autonomy-enhancing reforms under a deal with the International Monetary Fund (IMF) for a US$6 billion extended fund facility.

The government's cabinet has already approved the SBP Amendment Bill 2021, but the parliament has yet to pass the legislation. The SBP autonomy bill legislation has drawn mixed reactions from politicians and specialists, with opposition parties reportedly opposing the bill on concerns the amendment would make the bank more powerful than the parliament.

Economists and experts, on the other hand, say that greater SBP autonomy is in line with international banking practices and would serve as a bulwark against fiscal irresponsibility and politically motivated financial decisions. That's already starting to happen in the eyes of certain local observers.

Dr Kaiser Bengali, a leading local economist, tweeted on January 23,“Three cheers for“autonomous” SBP. First, it rejects the Government plan for Afghanistan {relief} Fund. Now, it has warned private banks of the risk of the Federal Government defaulting on its loans. Remarkable! SBP is treating Federal Government like a juvenile delinquent.”




A money changer counts Pakistani Rupee notes in Karachi in a file photo. Photo: Agencies

“In the past whenever they [the government] overdrew the budgetary ceiling and expended excessively without having fiscal space, they needed to go to the central bank for borrowings,” said Farrukh Saleem, an Islamabad-based Pakistani political scientist, economist and financial analyst.“Now the government cannot do this and would need to be fiscally disciplined or take loans from the private banks on market rates,” he said.

The government's desire to funnel relief funds to Afghanistan to mitigate a humanitarian catastrophe that could quickly and massively redound on Pakistan through new waves of refugees, economic migrants and Islamic militants has put it on a collision course with the SBP.

An International Labor Organization (ILO) report released on January 19 said that a downward economic spiral has thrown more than half a million people out of work in Afghanistan, with women chiefly hit by the rise in unemployment. (Afghanistan's population is recently estimated at 39 million.)

The ILO report said that Afghan companies were struggling to stay afloat and that thousands of Afghans were fleeing the country each day. It predicted more dire prospects in 2022.

With many of those fleeing headed for Pakistan, in late December the government approached the SBP through its finance division to open a collection account for its Afghanistan Relief Fund. It proposed that disbursements from the new fund to the Taliban could be made through banking channels.

The SBP countered that the transfer of funds directly to Afghanistan“through banking channels could be challenging.” It proposed instead that disbursements from the fund could be made through international relief organizations or extended by the government as“in-kind” support to help Afghans who now face acute food shortages.

The central bank asserted that opening fund accounts at overseas bank branches would require the authorization of foreign regulatory bodies, a time-consuming and cumbersome process – particularly in light of Pakistan's FATF“grey list” designation.

Prime Minister Imran Khan's Pakistan Tehreek-e-Insaf (PTI) government has tried to soften the world's stance on the Taliban, which most countries have declined to give formal recognition as the country's government, and restore badly needed foreign assistance that contributed the lion's share of the previous, US-backed Ashraf Ghani government.




A handout picture made available by the Iranian Red Crescent on August 19, 2021, shows Afghan refugees gathered at a border region. Photo: Mohammad Javadzadeh / Iranian Red Crescent / AFP

The international community, including the US, has responded to the Taliban's takeover and Ghani's ouster by force by freezing its overseas assets, cutting aid and offering only limited relief for humanitarian purposes.

In early December, Pakistan engaged various Muslim countries by hosting the Organization of Islamic Cooperation's (OIC) Council of Foreign Ministers meeting in Islamabad, but the summit did not generate meaningful humanitarian assistance to Afghanistan.

Saudi Arabia pledged US$365 million to establish by March a Humanitarian Trust Fund and Food Security Program managed by the Islamic Development Bank (IDB). This was in addition to the $30 million Pakistan had already committed for humanitarian assistance in Afghanistan.

Pakistani pundits believe that the Taliban's revenue from various sources will exceed $3 billion per year but the insurgents-cum-rulers seem reluctant to expend their resources to minimize the sufferings of the Afghan population.

The United Nations also estimates that the Taliban has increased their revenues in the five months of their rule. Deborah Lyons, head of the UN Assistance Mission in Afghanistan, said that the Taliban collected a surprising $1 billion in exports in the last five months.

The Khan government's relief fund plan, already stymied by the SBP on regulatory grounds, is also under political fire for raising donations that the Taliban would likely pocket rather than distribute to suffering Afghans.

“[The Taliban] are neither a state nor a government but are a mob who occupied Afghanistan by force,” Mohsin Dawar, chairman of the National Democratic Movement (NDM), a Pakistan National Assembly member and a Pashtun Tahafuz Movement activist, told Asia Times.

“You cannot expect from such a crowd that they would perform as a government and make budgeting for the uplift of the population.” 

Follow FM Shakil on Twitter at @faq1955

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