A Year on, Billions in Afghan Assets Linger in Switzerland 

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A Year on, Billions in Afghan Assets Linger in Switzerland 

More than a year after the Afghan Fund was created to disburse $3.5 billion in frozen assets for the benefit of the Afghan people, no disbursements have been made. Why?

A Year on, Billions in Afghan Assets Linger in Switzerland 

Men wait in a line to receive cash at a money distribution organized by the World Food Program in Kabul, Afghanistan, Nov. 3, 2021.

Credit: AP Photo/Bram Janssen

Billions of frozen assets from Afghanistan’s Central Bank, Da Afghanistan Bank (DAB), face an uncertain future in Switzerland, over a year after a fund was established to disburse them. In September 2022, the Fund for the Afghan People was created with a mandate to disburse $3.5 billion in DAB’s assets in support of Afghanistan’s macroeconomic stability. But since then, no disbursements have been made. 

The future of the assets will be decided by two Afghan economists and a pair of representatives from the U.S. and Swiss governments. The U.S. government maintains that DAB has not met the conditions for disbursements, but has not shared the results of a U.S.-funded audit of the bank with the Fund’s board. “We should be able to see that,” said Dr. Shah Mehrabi, a board member of the Fund and member of the Supreme Council of the Central Bank of Afghanistan, in an interview with The Diplomat. 

On August 15, 2021, the day the Taliban seized power, the Biden administration froze over $7 billion in Afghan government funds held in U.S. bank accounts. In February 2022, the administration issued Executive Order 14064, which blocked the reserves and consolidated them into a single account. 

The order set aside half of the funds for the families of 9/11 victims, a decision later rejected by a federal judge in New York. The other half was designated “for the benefit of the Afghan people,” the White House stated. The Fund for the Afghan People was subsequently established in September 2022 to undertake this mission. 

Registered in Geneva, the Afghan Fund oversees $3.5 billion in assets now held in the Bank for International Settlements (BIS). The amount is equivalent to over a third of Afghanistan’s gross international reserves, which stood at $9.4 billion as of April 2021, according to the International Monetary Fund. 

In its first year, the Afghan Fund’s work has largely been administrative. They established an account at BIS, facilitated the transfer of the funds, hired an executive secretary, approved bylaws, and secured an insurance provider. The Afghan Fund outlined these activities in statements published on its website in November 2022, February 2023 and June 2023. Mehrabi, who is currently a co-chair of the Afghan Fund, said that these processes involved lengthy negotiations. 

But others see the hurdles in a different light: Arash Azizzada, co-founder and co-director of Afghans For a Better Tomorrow (AFBT), has advocated for the funds to be released gradually to DAB since March 2022. “Our sense is that the [Biden] administration is trying to move as slowly as possible,” Azizzada said. 

The release of the assets introduces the risk that funds could be diverted to the Taliban. 

“There is real concern around what’s happening on the Taliban side,” Azizzada acknowledged in an interview with The Diplomat. In addition to AFBT’s efforts to push for the release of the funds, a group of family members of 9/11 victims have also advocated for the release of the assets. 

The Afghan Fund’s disbursements – when and if they do occur – will not be used for humanitarian aid. Instead, the money will be used to support Afghanistan’s macroeconomic stability. Nevertheless, the assets have the potential to impact the day-to-day life of Afghans by creating price stability. 

Mehrabi said that the reserves need to be readily available to achieve that goal. He previously argued that DAB should be allowed conditional access to auction off $150 million each month from Afghanistan’s foreign reserves, a process the bank used in the past to keep inflation low. 

Given the contractions in Afghanistan’s economy, he believes that a $60-$70 million monthly disbursement could achieve a similar outcome. “The poor, women, and children are really affected by higher prices. They are not going to be able to buy bread, a staple,” Mehrabi said. The inflation rate in Afghanistan soared after August 2021, only to decline into deflation in April of this year. Despite deflation, two-thirds of households still struggle to buy basic items. 

While the assets currently held in Switzerland could shape economic conditions in Afghanistan, all four of the Afghan Fund’s board members must agree before a decision is made. Mehrabi told The Diplomat, “Each one of us has the final say, it’s like the United Nations.”

In addition to Mehrabi, the board’s members include Dr. Anwar ul-Huq Ahady, Dr. Jay Shambaugh, and Alexandra Baumann. Ahady previously served as Afghanistan’s minister of finance and minister of commerce, while Shambaugh is the current under secretary for international affairs at the U.S. Department of the Treasury. Alexandra Baumann is the head of the prosperity and sustainability division at the Swiss Federal Department of Foreign Affairs (FDFA).

According to a spokesperson from the U.S. Department of State, the disbursement of funds depends on the following conditions: at a minimum, DAB must show its independence from political interference, demonstrate it has implemented controls to counter both money laundering and the financing of terrorism, and onboard a third party monitor. 

Mehrabi, who was first appointed to DAB’s Supreme Council in 2003 and has since been reappointed, insisted that the institution remains independent. He pointed out that the laws governing DAB have not changed since August 2021. Like other Central Banks, DAB controls the money supply, oversees the banking and financial sector, and issues domestic currency. “The Central Bank is supposed to be evaluated based on these particular functions,” said Mehrabi. “There has been absolutely no interference.”

In February 2023, USAID supported a third-party assessment of DAB. But Mehrabi has yet to see the audit, despite his requests since March. He was told it is in legal review.

In comment to The Diplomat, the U.S. Department of State said that it planned to share the findings with the board members, but did not offer a timeline. Switzerland was neither involved in the audit nor aware of its conclusions, said the Swiss Federal Department of Foreign Affairs. 

“By continuing to slow roll and mire the Fund in bureaucracy, the administration is contributing to a worsening situation,” said Azizzada. He continued, “Afghans can’t afford that kind of patience.”

In February 2022, the U.S. Treasury changed its regulations to allow aid organizations and private firms to conduct transactions with Afghan government institutions. “The general licenses were helpful in allowing lifesaving aid to reach a critical mass of Afghans,” said Azizzada. With winter fast approaching, the threat of famine looms once again in Afghanistan. This year, the World Food Program has been forced to scale back its programs in Afghanistan. “The [Biden] administration can and should play a constructive role,” said Azizzada. 

There is a diversity of opinion regarding how the Afghan Fund should operate. Metra Mehran, an Afghan human rights activist, is against the unfreezing of the assets. Mehran recently spoke at a side event at the U.N. General Assembly about gender apartheid in Afghanistan. In an interview afterward, she said that sees the release of the assets as a recognition of the Taliban. “Even if you release the funds, we will not get to stability,” she said. 

The Fund has plans to create a new channel for public input through an international advisory committee, which will be made of Afghans and citizens of other countries. Mehrabi said the committee will provide advice and independent analysis with the regard to how they see the disbursement should work. 

Ultimately though, Afghans alone will not decide the future of the country’s assets. The fate of billions of dollars seemingly lies with just four people, but it also depends on the cooperation of governments in Washington D.C., Bern, and Kabul before any money can leave Switzerland.