Afghan currency slides, prices surge as economy worsens

Afghan money changers argue at Khorasan market in Herat, Afghanistan, Wednesday, Dec. 15, 2021. (AP)
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Updated 17 December 2021

Afghan currency slides, prices surge as economy worsens

  • The afghani lost more than 11 percent of its value against the US dollar in the space of a day earlier this week

HERAT: The value of Afghanistan’s currency is tumbling, exacerbating an already severe economic crisis and deepening poverty in a country where more than half the population already doesn’t have enough to eat.
The afghani lost more than 11 percent of its value against the US dollar in the space of a day earlier this week, before recouping somewhat. But the market remains volatile, and the devaluation is already impacting Afghans.
Afghanistan’s economy was already troubled when the international community froze billions of dollars’ worth of Afghanistan’s assets abroad and stopped all international funding to the country after the Taliban seized power in mid-August amid a chaotic US and NATO troop withdrawal. The consequences have been dire for a country heavily dependent on foreign aid.
Afghanistan was also slated to access about $450 million on Aug. 23 from the International Monetary Fund, but the IMF blocked the release because of a “lack of clarity” about the country’s new rulers. Since then, international envoys have warned of a looming economic meltdown and humanitarian catastrophe.
“People have no money and the prices have gone up,” said Sayed Umid, a 28-year-old shopkeeper selling basic food items such as rice, beans and pulses in a main shopping street in the western Afghan city of Herat.
“Since this morning I haven’t had a single customer,” he said. With rent to pay on his shop and home expenses, he worries he can no longer make ends meet.
Khan Afzal Hadawal, former acting governor of Afghanistan’s central bank, said that the sanctions on the Taliban and the freezing of Afghanistan’s reserve funds “have put the country’s aid-dependent economy on the verge of full economic collapse, leading to historic depreciation of currency,”
“The development agencies, donors, the international community, the US, all these should help in this crisis,” he said. “We do understand the concerns of the international community but there are mechanisms (that) can help to manage the crisis and to assist the Afghan people.”
According to the United Nations’ World Food Program, 22.8 million of Afghanistan’s 38 million people already face acute food insecurity, and malnutrition in the country is increasing. A combination of the coronavirus pandemic, a severe drought and the Taliban takeover have left many without jobs, and the currency’s sliding value has been pushing up food prices.
Shopkeeper Jafar Agha said the price of a large container of cooking oil was about 700 afghanis three months ago (roughly $8 at the time), but now costs about 1,800 afghanis (around $18).
“My business has fallen to zero,” he said. “I’m not selling because people have no money. ... We don’t have any hope for the future.”
In the bedlam of the Herat Money Exchange market, traders frantically check the ever-changing currency rate on their mobile phones as they jostle through the crowd shouting out prices and waving wads of cash.
A taser-wielding guard keeps the entrance free from the crush, the sound of its sharp clicks enough to send money changers scurrying past into the exchange.
Wednesday wasn’t a good day for trader Said Nadir. He sold US dollars at a rate of 105 afghanis, but then bought at 113 afghanis to the dollar as the currency began to slide and he worried it might fall further.
“The situation is very bad. When the price increases, we cannot find dollars,” he said.
In early August, the afghani was trading at around 80 to the dollar, jumping to around 90 in October. It briefly spiked from 110 on Sunday to 123 on Monday, before recouping somewhat. On Thursday it was trading at around 100 afghanis to the dollar.
For Farzad Haidari, a 34-year-old who imports and sells women’s shawls and scarves, the currency fluctuations have wreaked havoc on his business.
Importing many of his goods from neighboring Iran and with rent on his store in a shopping mall in central Herat set in dollars, he’s seen much of his income evaporate. If the situation continues and prices keep increasing, he said, he could be forced to close his shop.
“Before, when there was uncertainty because of war, we had our business,” he said. “Now there is security, but we’re losing our business.”

Banks in GCC benefiting from strong operating conditions: Fitch Ratings  

Updated 4 sec ago

Banks in GCC benefiting from strong operating conditions: Fitch Ratings  

RIYADH: Banks in the Gulf Cooperation Council are currently reaping the benefits of robust operating conditions, driven by factors such as high oil prices, contained inflation, and rising interest rates, according to Fitch Ratings.  

In its latest report, the US-based credit rating agency pointed out variations in bank performance across the GCC markets, with financial institutions in the UAE demonstrating signs of improvement compared to their counterparts. 

“We expect this improvement to be overall sustained, which, along with other solid financial metrics being maintained, could lead to positive rating actions on some UAE banks’ Viability Ratings,” said Fitch Ratings.  

The report highlights that banks in Saudi Arabia, Qatar, and the UAE are well-positioned to benefit from rising interest rates, primarily due to the swift repricing of loan books and substantial funding from low-cost current and savings accounts. 

UAE banks, in particular, have seen significant gains from rising rates, with average net interest margins increasing by 100 base points in the first half of 2023 compared to 2020.  

NIMs in the UAE are anticipated to stabilize in the second half of 2023 before experiencing a slight dip in 2024, the report added. 

Conversely, Qatari banks have experienced only modest NIM improvements due to weak credit demand and ongoing public sector repayment of overdraft facilities. 

Strong operating conditions have contributed to robust asset quality metrics in the UAE and Saudi Arabia during the first half of 2023.  

“UAE mortgage portfolios could be pressured given their high proportion of variable-rate loans, but the rise in property prices should keep losses-given-default close to nil,” added Fitch.   

Saudi banks are projected to outpace the GCC average in financing growth for both 2023 and 2024, driven by increased corporate credit demand and persistent high interest rates. 

With oil prices expected to average $80 per barrel in 2023 and $75 per barrel in 2024, the region’s banks can anticipate continued support for their operating conditions, as per the report. 

Saudi endowment investment funds exceed $133m in net assets 

Updated 38 min 38 sec ago

Saudi endowment investment funds exceed $133m in net assets 

RIYADH: Saudi Arabia’s endowment investment funds have experienced significant growth, with the number of licensed funds increasing by 13 in 2023, reaching a total of 24, as reported by the General Authority of Awqaf. 

In a newly released report, the authority revealed that this expansion has pushed the net assets of endowment investment funds in the Kingdom beyond the SR 500 million ($133 million) milestone for the current year. 

This aligns with the government’s strategic objectives to advance the financial sector and streamline the licensing processes for various products.  

Saudi Arabia to grant premium residency for regional HQ executives 

Updated 01 October 2023

Saudi Arabia to grant premium residency for regional HQ executives 

RIYADH: As part of Saudi Arabia’s ongoing efforts to enhance its business environment, the Ministry of Investment has developed a mechanism to grant premium residency to executives based at regional headquarters. The initiative is being undertaken in collaboration with the country’s Premium Residency Center, according to an official release. 

In its pre-budget statement for 2024, the Ministry of Finance highlighted the collaborative work between the Ministry of Investment and various government entities to remove obstacles for investors.  

This includes cooperation with the Ministry of Municipal and Rural Affairs and Housing to establish an exception mechanism and permissions for companies looking to set up their headquarters within one of their branches in the Kingdom. 

Furthermore, the Ministry of Finance revealed that the Investment Ministry is working closely with the Ministry of Human Resources and Social Development to implement incentives for employees at regional headquarters. 

These incentives include granting visas based on the company’s requirements, enabling spouses under the family residency to work, and extending the age limit for dependents allowed to stay with regional headquarters employees to 25 years. 

Saudi Arabia continues to make strides in improving its business climate, attracting investments and fostering a more accommodating environment for foreign companies.

S&P upgrades Oman’s credit rating to BB+ with stable outlook  

Updated 01 October 2023

S&P upgrades Oman’s credit rating to BB+ with stable outlook  

RIYADH: In a new development signaling a shift in Oman’s economic landscape, global credit rating agency Standard & Poor has upgraded the nation’s long-term credit rating from “BB” to “BB+.”  

S&P Global's assessment underscores a transformation in Oman’s non-oil sector, promising substantial growth in the years ahead, particularly between 2023 and 2026. This shift is poised to play a pivotal role in enhancing the country’s economic prosperity. 

Additionally, positive signs within the oil sector are expected to further fuel Oman’s economic expansion.  

PIF-owned real estate firm ROSHN launches sales for SEDRA Phase 3  

Updated 01 October 2023

PIF-owned real estate firm ROSHN launches sales for SEDRA Phase 3  

RIYADH: Saudi real estate developer ROSHN has announced expanding its footprint in the Kingdom with the launch of sales for the third phase of its flagship development, SEDRA, located in Riyadh. 

The Public Investment Fund-owned company has introduced 3,438 new residences and a wide range of amenities within this 20 million sq. meter residential project. 

Prospective residents of SEDRA Phase 3 will be able to choose from a wide array of floor plans and facades, the Saudi Press Agency reported. These options encompass single or multi-family configurations, three- and four-bedroom townhouses, duplexes, and spacious four- and five-bedroom villas. 

With the introduction of the project, ROSHN Group is poised to meet the surging demand for modern, sustainable living spaces in the Kingdom. 

David Grover, CEO of ROSHN Group, emphasized the significance of launching the sales of the new offering, underscoring the company’s commitment to enhancing living standards in alignment with Saudi Vision 2030. 

The new development is equipped with advanced insulation, solar-powered water heaters, and energy-efficient air-conditioning systems, all contributing to substantial energy and water conservation. 

Furthermore, the project boasts that 12 percent of its total area is dedicated to open and green spaces, enabling residents to enjoy the natural beauty of the community, including a wadi and acacia forest. 

Located in the northern part of Riyadh, SEDRA offers easy access via Kaden Road, with nearby metro stations F2 and A7, along with key landmarks such as the SAR railway station, Princess Nourah University, Imam Mohammed Ibn Saud University, and King Khalid International Airport. 

The development also provides direct access to ROSHN Front’s shopping, leisure, and business areas, delivering an integrated “live, work, play” lifestyle. 

SEDRA is planned in eight phases, with a scope of adding over 30,000 residential units to Riyadh’s housing stock. Each phase will incorporate elements of nature and local heritage into its design, reflecting a blend of tradition and modernity. 

This development aligns with the objectives of Saudi Vision 2030, aiming to elevate living standards across the Kingdom. 

By 2030, ROSHN’s ambitious plans include the development of over 400,000 homes, along with the establishment of 1,000 kindergartens and schools, and over 700 mosques. 

In a recent move, ROSHN launched MARAFY, a mixed-use development in northern Jeddah, featuring the Kingdom’s first canal project linked to the Red Sea. It encompasses more than 300 sq. km of waterfront promenade, covering a total area exceeding 2 million sq. meters.