Pakistan Considers Extending Financial Support to Stabilize Afghanistan’s Banking System

The Pakistani government is discussing ways to support Afghanistan’s struggling banking system and energy sector, according to a notice published by the Ministry of Economic Affairs.

Pakistan has been considering offering financial assistance to Afghanistan every since the Taliban’s takeover to support it through a rocky political transition.

Since the takeover, the international community has ceased the provision of aid to the country, and the US has frozen $9 billion worth of foreign exchange reserves.

Governor State Bank of Pakistan (SBP), Dr. Reza Baqir, suggested several options to regain stable operations at the Da Afghanistan Bank, and achieve price and economic stability.

These proposed options included Pakistan offering to print Afghan currency, extending credit lines, and providing technical assistance.

However, Baqir raised the concern that Pakistan has still not formally recognized the Taliban government as it is holding back formal recognition until other international countries are willing to do the same.

The government has been advocating for international support for the Taliban government, based on concerns that instability across the border could trickle over to Pakistan.

For example, the Pakistani Rupee (PKR) has depreciated sharply over the past couple of months, partly driven by an outflow of dollars from Pakistan to Afghanistan.

The meeting also discussed how Afghanistan needed support with maintaining transmission lines and other power and energy services.

In addition, ways to prevent a food crisis in Afghanistan were suggested, with officials explaining that Pakistan is already fulfilling the country’s food requirements.

Minister for Economic Affairs, Omar Ayub Khan, chaired the meeting. It was attended by Minister for National Food Security and Research, Syed Fakhar Imam, SAPM on National Security and Strategic Policy Planning, Moeed Yusuf, and WAPDA Chairman, Lt Gen (R) Muzammil Hussain.