A new humanitarian crisis could be imminent in Afghanistan, as the World Food Programme of the United Nations has already warned of an acute food shortage facing the country.
However, Prime Minister Imran Khan on Saturday assured United Nations Secretary General Antonio Guterres of Pakistan’s support for the continuation of UN’s humanitarian work in Afghanistan.
A readout of the telephone conversation between PM Khan and Secretary General Guterres said: “Prime Minister reaffirmed Pakistan’s full support for the smooth operation of United Nations’ humanitarian mission for Afghanistan.”
Meanwhile, Executive director of the United Nations’ World Food Programme (WFP) David Beasley has acknowledged Pakistan’s support for repairing damaged planes returning from Kabul and establishing a “humanitarian air bridge” to the war-torn country.
And in a development that can only be described as calamitous the World Bank has suspended disbursements for dozens of projects in Afghanistan after the Taliban took control of the country, as, according to international media reports, it is “deeply concerned about the situation in Afghanistan and the impact on the country’s development prospects.”
The Washington-based institution had committed more than $5.3 billion for development projects in Afghanistan since 2002.
The World Bank’s decision came after the IMF also announced that it would block Afghanistan from receiving about $460 million in special drawing rights. The moves by the two multilateral financial institutions, over which the US holds considerable influence, came after the US had frozen nearly $9.5 billion in funds belonging to the Afghan central bank and halted shipments of cash to the country.
The US is also apparently trying to use economic sanctions to drive the Taliban into a corner so as to retrieve some face over its self-inflicted Afghanistan debacle. Many experts have expressed concern over the consequences that may come from the US’ freezing reserves and foreign aid for one of the world’s poorest nations.
Meanwhile, it is said that there is still hope for Afghanistan to address its financial difficulties. But it would depend on whether Afghanistan could receive a crucial lifeline for its economy from other countries such as China, Russia, the EU, and Saudi Arabia. The question is: can these countries establish other international funds for assisting the reconstruction of Afghanistan? Taliban believe China would be forthcoming soon with generous assistance as well as investment plans.
While the country’s economy has been stagnant for years mainly due to political turmoil, it is undeniable that Afghanistan has strong development potential. Afghanistan is rich in mineral resources like copper, gold, lithium and rare earths, with other natural reserves like oil, natural gas, coal and iron ore. All these will play an important role in its cooperation with other economies.
The US is likely to sanction Afghanistan by waving the stick of its dollar dominance, which will accelerate the damage to the dollar’s credibility.
Many, however, believe that Afghanistan’s reconstruction may also accelerate the global de-dollarization push.
According to Global Times (Afghan reconstruction may boost de-dollarization push, published on August 25, 2021) as the US seeks to impose sanctions against Afghanistan and stop much-needed global assistance to the country, the already-emerging global de-dollarization push could further accelerate with countries increasingly adopting alternatives to the US dollar.
To avoid the potential risks and pressure, relevant countries may also choose other currencies of payments to circumvent the traditional dollar. That has already been attempted with success. After the US imposed unilateral sanctions on Iran, European countries established what’s known as the INSTEX barter system to continue trade with Iran while dodging US sanctions.
If Afghanistan’s reconstruction sets the stage for the increased presence and usage of other currencies like the euro and the yuan, the dollar’s status could be further diminished. In fact, the de-dollarization trend has already emerged in a number of countries and regions including Russia and Saudi Arabia. According to the IMF, the share of US dollar reserves held by global central banks fell to 59 percent during the fourth quarter of 2020, marking its lowest level in 25 years.
In this sense, the reconstruction of Afghanistan may be an opportunity for global de-dollarization push.
In the past few years, the trend toward the de-dollarization of economies in the world has become increasingly apparent. One sees how some countries are seriously thinking about diversifying their foreign exchange reserves, increasing investments in other currencies, and switching to settlements in national currencies between partner countries. The main task is to reduce its dependence on the world’s main reserve currency – the US dollar.
Indeed, more and more countries striving to switch to settlements in national currencies.
Perhaps the most active participant in the process of de-dollarization is Russia.
According to the Kremlin’s calculations, the de-dollarization process has achieved significant success within the framework of the Eurasian Economic Union – 72 percent of settlements are carried out in national currencies.
However, it is important to note that the process of de-dollarization has gained even greater momentum with the onset of the trade war between the United States and China.
According to Seymur Mammadov (Why the trend of de-dollarization is inevitable, telecast on 21-Nov-2019 by China Global TV Network) today, some countries are taking real practical steps to reduce dependence on the dollar.
In this regard, it is appropriate to recall the interesting proposal by the Prime Minister of Russia Dmitry Medvedev, voiced in November 2019 at a meeting of the SCO Council of Heads of Government in Tashkent.
He invited Russia’s allies to develop mechanisms for switching to settlements in national currencies between the countries of the Shanghai Cooperation Organization (SCO) and invited SCO financiers and banking experts to participate in a round-table on this topic in Moscow.
The process of de-dollarization in settlements between Russia and China is also gaining momentum. On June 28, 2019, the countries agreed to switch to trade in national currencies. First, the ruble and yuan will be used by large companies with state participation, such as producers of energy resources and agricultural products.
Another large global market—India, together with Russia—is switching to settlement in national currencies. The central banks of Russia and India have concluded an agreement on settlements in national currencies under arms contracts. Now both parties are working on the issue of switching to settlement in national currencies when making international transactions.
Previously, India has always been very restrained in such a matter, but now it is showing interest. The reason for this was the fact that in recent years, relations between India and the United States have not developed in the best way.
First, Trump terminated preferential trade status for India, which led to problems in foreign trade between the two countries, and then the U.S. government rebuked India for the purchase of Russian S-400 air defense systems.
Today, Russia, China and India are united against the dollar and have come up with a way to organize settlements in case of disconnection from SWIFT. As its analog, it is proposed to link the Chinese and Indian payment systems with the Russian financial message transfer system.
Besides, the Trump administration had constantly threatened to impose sanctions on its strategic ally, the European Union. Therefore, it is not surprising that some European countries are looking for ways to circumvent US sanctions so that their business with Russia, China and Iran does not suffer.
For example, the EU and Iran use a new financial mechanism to circumvent US sanctions. The first transactions on the Instex financial mechanism between Iran and the EU have already begun, but so far, it is used only for humanitarian needs.
In addition, the EU plans to expand cooperation with Russia in rubles and euros. In the summer of this year, Russian Minister of Finance Anton Siluanov held talks with the Vice President of the European Commission for the Energy Union Maros Sefchovich.
They agreed to create a working group to promote the issue of transferring mutual settlements into rubles and euros.
It seems that in England, a strategic ally of the United States, people gradually come to understand the need to abandon the dollar.
Back in August of that year, the head of the Bank of England Mark Carney said that in order to stabilize the global financial system, it is necessary to abandon the dollar as a reserve currency and replace it with electronic means of payment, as trade wars adversely affect the global economy. Indeed, trade and tariff wars have a negative effect on business around the world and the negative consequences of this are felt not only by direct, but also by indirect participants.
The US is gradually losing its advantage and position in world markets. Trade, tariff wars and the application of sanctions by the US hinder the development of the countries themselves, the world economy as a whole.
“In a multipolar world, a multipolar currency is needed. The only way out of this situation is negotiations. Is the U.S. ready for negotiations?” CGTN asks.
Copyright Business Recorder, 2021
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