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Pakistan: Afghan Currency Blown By Political Winds

As U.S. strikes continue in Afghanistan, the ruling Taliban continues to bar Western journalists from the roughly 90 percent of the country that it controls. That makes it difficult for outsiders to judge how ordinary Afghans view the crisis. But as RFE/RL correspondent Charles Recknagel reports from Pakistan, one barometer can be found at the currency-exchange market in Peshawar, where exiled Afghans buy and sell the Afghan currency.

Peshawar, 29 October 2001 (RFE/RL) -- In this northwestern Pakistani town, just beside the Afghan border, speculators gather daily to buy and sell Afghanistan's currency -- the afghani -- and determine its value against the Pakistani rupee and the U.S. dollar.

The buying and selling goes according to how positively or negatively the traders -- almost all of whom are Afghan refugees or exiles -- see the country's future.

The money-exchange offices are a row of shop windows stretching at waist-level down a narrow and crowded lane. The alley is deep in the warren of Peshawar's ancient bazaar and is dedicated to no activity other than currency speculation. Here the buyers and sellers cluster close enough to the traders to discreetly make offers and counter-offers over huge stacks of bills, keeping their voices low. As quickly as the two sides agree on a rate by bargaining, all the money disappears into the trader's till or the customers' pockets and they part ways.

Sitting in his exchange window as serenely as a Buddha is moneyman Jahan Shah, whose profits from anticipating the rise and fall of Afghanistan's currency depend largely on his ability to read the winds of its politics. He is middle-aged and has a portly stomach that indicates he has seen more success than failure over the years.

Shah says that since the U.S.-led strikes in Afghanistan began on 7 October, the afghani has appreciated sharply. He says the jump in value reflects widespread optimism in this money market that things will be better after the U.S. campaign than they were before. Jahan Shah says: "Before the war [started on 7 October], the afghani [sold at the rate of] 100,000 afghanis for 80 Pakistani rupees. There was a sudden increase after the [air strikes began] which reached the rate of 100,000 afghanis for 300 rupees. Now the rate is [down again] to 130 rupees. The situation [of the exchange rate] depends on the situation in Afghanistan. When good things come, when there is talk about trying to solve the Afghanistan problem, the afghani rate increases." (One U.S. dollar=62 Pakistani rupees.)

Shah says that there was a surge of optimism among the traders when the strikes began, because many hope for a return of former Afghan King Zahir Shah. The king has received a strong endorsement from the U.S. and other Western powers as the best solution for bringing a broad-based government to Afghanistan should the ruling Taliban regime collapse under the military pressure. As the U.S.-led strikes enter their fourth week with no immediate resolution in sight, optimism has settled somewhat, but the afghani still remains almost twice as strong as before.

As one measure of the pro-king sentiment in the afghani money market, the traders have begun snapping up currency printed before Zahir Shah was deposed in 1973 following a 40-year reign. That currency, which bears the king's portrait, is still legal tender. But in the decades since the king left, it has long been submerged in a sea of newer versions of afghanis printed by later governments and even rival warlords.

Money trader Jahan Shah expresses the pro-king sentiment this way: "The government of Zahir Shah was very good in the past, so [people] want it back, they need Zahir Shah. Now the Zahir Shah currency is buying and selling at 150 [rupees for 100,000 afghanis]. This is stronger than the other Afghan currencies."

Those other Afghan currencies are of two kinds. One, the most widely used in Afghanistan, is printed by the still UN-recognized Afghan government of President Burhanuddin Rabbani, which was expelled from Kabul by the Taliban in 1996. Since losing Kabul and more than 90 percent of Afghanistan -- along with the Treasury's printing presses, which were destroyed in fighting -- Rabbani's government has had its afghanis printed in Moscow. The bills are used throughout the parts of northern Afghanistan under the control of the anti-Taliban Northern Alliance opposition and are equally accepted in Taliban-ruled areas.

A second currency is printed by ethnic Uzbek General Rashid Dostum. He has a loose allegiance with the Rabbani camp and other factions in the Northern Alliance, but is also a highly independent rival in the quest for power. Dostum's afghanis, also printed in Moscow, look identical to those printed by Rabbani in almost every respect except for variations in color and serial numbers. The Dostum afghani usually trades at a rate of two-to-one against the Rabbani afghani and is in limited circulation.

Unlike the opposition factions, which are backed by Moscow and Tehran, the ruling Taliban has never been able to find a foreign government willing to print currency for it. Those governments include the only three countries which ever recognized the Taliban diplomatically: Pakistan, Saudi Arabia and the United Arab Emirates. Of those, only Pakistan continues to recognize the militia as Afghanistan's government, though Islamabad has given its support to Washington in the war on terrorism.

But if the Taliban has no currency to call its own, the value of all the Afghan money depends heavily on the militia's actions. Money trader Jahan Shah says that the value of the afghani dropped slightly in the two days after the militia dealt a setback to its opponents by capturing and executing on 26 October a former battlefield commander who had returned to Afghanistan to raise a rebellion in the south. The commander, Abdul Haq, was highly popular during the Soviet-Afghan war that ended in 1989. He was widely believed to be one of the best hopes for sparking military resistance to the Taliban within the Taliban's own base of support among Afghanistan's majority Pashtuns.

Shah, speaking the day after Haq was reported executed, said the market responded immediately by evaluating the afghani at a weaker rate: "Yesterday the Taliban murdered some Afghan people which were related to the U.S. So, in this way, the afghani rate has dropped down."

As the value of the afghani rises and falls on Afghanistan's political tides, the currency has long been relegated to a distant third place behind the dollar and rupee within Afghanistan itself. The currency today is used mostly for buying food and small items such as cigarettes. More valuable goods are sold for Pakistani rupees or U.S. dollars.