Odd Lots - A Conversation With Ajmal Ahmady, Afghanistan’s Former Central Bank Chief

Episode Date: August 23, 2021

Over the last week and a half, the world has watched in shock at the dizzying speed of the collapse in Afghanistan. Events are still unfolding, so the future remains extremely uncertain. One former official who has been outspoken in recent days is Ajmal Ahmady, who was running Afghanistan's central bank on an interim basis right up until the government fell. On this episode, we speak with Ahmady about what operations at the bank looked like in relatively normal times, how events transpired in the government's final days, and the future of Afghanistan's economy under Taliban rule.See omnystudio.com/listener for privacy information.

I'm June Grasso, inviting you to join me for the Bloomberg Law podcast. Every weekday, we help you make sense of the legal stories that shape the nation and the world. Listen for complete analysis of the biggest court cases, the latest actions from Congress and regulators, and the legal moves driving the markets, from corporate law to constitutional law, and from state courts to the Supreme Court. At Bloomberg Law, we go beyond the day's headlines. We speak with top attorneys, judges, scholars and policy experts to break down what the rulings really mean. We do this every weekday,

then bring you the best conversations in our daily podcast. Search for Bloomberg Law on YouTube, Apple, Spotify, or anywhere else you listen. On the East Coast, listen as you start your day, and on the West Coast, catch up in the evening. That's the Bloomberg Law podcast with me, June Grosso. Subscribe today wherever you get your podcast. Hello, and welcome to another episode of the Odd Lots podcast. I'm Tracy Alloway. And I'm Joe Wisenthaw. So Joe, clearly one of the top news stories, probably the top news story at the moment is the situation in Afghanistan and the very, very swift change in the direction of events there. So just a week ago, things were, I guess I want to say relatively normal. Obviously, the Taliban had advanced throughout the country,

but Kabul was still operating on a fairly normal basis. And then fast forward, just seven days or so. We're recording this on August 20th. Everything has changed. I think it was last Saturday or last Sunday. I'm sort of losing track of the dates. There was clearly a very rapid advance of the Taliban. But then there was some question as like, oh, how many days or weeks will there be pressure on Kabul and then it seemed to happen in basically an instant? So clearly there are a lot of questions swirling around the situation in Afghanistan right now. But given that this is all thoughts, we're going to focus on one question in particular,

which is what exactly happens to the Afghani economy. And we have the perfect person to talk about it. We're going to be speaking with Ajmal Ahmadi, who has been the, central banker in Afghanistan since the middle of last year. Before that, he was the Minister of Commerce and Industry. He has left the country under very, very chaotic circumstances, but he's been very gracious in his time and agreed to come on odd lots. So, Ajmal, thank you so much for joining the show. Thank you very much for having. So I guess my first question has to be, what was your experience like of actually getting out of?

of the country because the scenes that we saw in Capitol over the weekend, people desperately trying to get to the airport and leave on a very limited number of planes were very, very upsetting and disturbing and memorable as well. So how did you manage to get out? Well, thank you again for having me. On the day of the fall, which was last Sunday, I was in my office conducting work. Obviously, the situation was rapidly deteriorating. And so as new information came in, we found out that Pulicharhi prison, which is just slightly west of Kabul, had fallen and that there were reports that Taliban had entered the city. At that point, I decided to go for the airport. I didn't have a ticket for that day, but I thought it perhaps would be the safest place to go, to be.

And so we drove there. The airport road, which now you can see on CNN, was crowded, but yet had not become as chaotic as you've seen now. We were able to make it in. And what I attempted to do was try to find a ticket for that evening. And I was able to secure a ticket for that evening on a flight, which subsequently was canceled. It's plain that you see on the tarmac everyone is trying to scramble upon. We went on that flight, but I think around 4 p.m., we received the notice that the president himself had already left. And at that point, I think I kind of instinctively knew that chaos would begin at that point.

So everyone tried to fight on the plane. I got on the plane for a little while, but realized it wasn't leaving, at which point went on the tarmac and there were already hundreds of people there, It was a bit of a surreal scene where helicopters were taking off. A military plane was taking off. I think anyone who had access to any type of aircraft were just scrambling to jump on a plane. There was one military plane, not from the U.S., from a third country, and people were scrambling to get on board that. It was, I believe it's called a C-17 where the back comes down and up. and that was going up and my friends helped me push me on that plane and they were evacuating

their own embassy staff so I was not supposed to be on that plane but I think they felt or they probably believed that I was embassy staff and they let me on that plane and I'm very fortunate to get out wow incredible you know you've been tweeting these pretty these threads about the sort of the situation right now and including the last several days. Given the intensity of the moment and the chaos in general, there's, you know, they're incredibly lucid and clear and helpful. Can you talk about those few days earlier? Like, what was your expectation? You're running the central bank and we'll get into what management of the central bank looks like. But obviously it was sort of a split second

decision, it sounds like, to actually get to the airport and leave. Where was your head at, say, three or four days earlier as you're thinking about, okay, there is this rapid advance of the Taliban, but your job is to keep the banking system running? I think I was still trying to run the bank in a normal everyday fashion while trying to mitigate risks. So it was Thursday that a number of important, very important provincial centers fell, including Kandahar, Herat, I believe, Ghazni, Bhaktis, maybe Logar fell on the same day. And at that point, I called some people, I don't want to name, but I called some people in to have some discussions as to what our plans should be. And I think one, we worried about our staff.

We have had some staff killed in Logar. So worried about what we would do with staff if we need to bring them into the capital. If the banks and the central bank would continue to operate in Taliban health areas. I think secondly, yeah, so I think the second was in terms of operations, what would we do? And then third, sort of risk mitigation at the center. So as we saw the situation deteriorate, what else did we need to think about and do to take care of staff operations and contingency plans? So would the central bank operate or continue operating in Taliban-controlled areas? Or I guess maybe it would be good if you talked a little bit about what the central

Bank does in a normal situation versus what ended up happening over the past couple of months or so. Sure. So the central bank is, I think, as in any country, the core mandate here is inflation to make sure that inflation doesn't rise. And we provide banking services to commercial banks. So I'd say those are the key operations that we in a day-to-day environment typically move forward. And during the last. Last week or last month, even, we began to focus more on provincial activities. We have provincial activities, so a bank branch, the central bank branch in every single province of Afghanistan. And we came up with a color-coded map where we would see the risk to a certain province.

We would rate it based on risk. And then, you know, in terms of cash management, bringing cash in from the province or sending it out, we would manage it based on the risk seen in that province. If a province was expected to fall, we would try to bring in all the cash to the center. I think here we were worried about dollars because we get supplied internationally. And so that was a key concern of our international partners. So any place where the Taliban came close to, we made sure that we withdrew dollars and tried to repatriate most of the Afghanis as well.

In terms of the banking sector, the decision. we came to was that we did not allow banks to utilize dollars in the provinces where Taliban were operating, but we left it up to the banks themselves, whether they wanted to operate using Afghanis based on their own risk plans and contingency plans. Can you just describe a little bit about how the currencies are used? So obviously, the dollar is important. To what degree is activity dollarized? What is the role of the, Afghani, the currency, and what degree, to what degree did you see your job is to achieve the inflation goals by maintaining a stable relationship between the two?

So, Afghanistan is a heavily dollarized economy. About 70%, maybe 65% of all deposits are maintained in dollars. Secondly, we run a very large current account deficit, which means that we have to be supplied with dollars from our international partners. And so the dollar plays a very important role in the Afghan context. The Afghani is utilized on a day-to-day basis for most transactions. And there's a significant pass-through of inflation where we have an inflation targeting mandate. But I think the key thing, although we don't target a specific currency rate, is that we worry about the currency because there's a high inflation passed through. So during this period, we were, even as provinces were falling, we were able to maintain Afghanistan around between 78 to 81 to the

dollar, which was a success in my view. And inflation remained within the single digits, low single digits. Yeah, I think during your tenure, most people recognize your success on that front. So single digit inflation and also effects depreciation of only about 5% or so, which is pretty amazing in the context of the situation now. Now, you mentioned the current account deficit. And here I kind of have to ask maybe a sensitive question, but what role does opium play in the economy? Because I cannot imagine that drug proceeds show up as exports in the current account. and yet most people would say that they are an important, although not necessarily desirable part of the economy. So I think they finance a portion of the current account deficit.

If you take a look at opium, I believe the U.S. The recent UNODC reports states where there are about 200,000 hectares of opium being produced. Each hectare produces about 27 kilograms, and the price is about. 200. So when you multiply all this together, it ends up being roughly about a billion dollars in Farmgate receipts. And when you take a look at our current account deficit, the current account deficit X-Aid, because aid is included in it, but X-Aid, so the trade deficit we can say, is roughly around $6 billion, $7 billion. Of the $7 billion, we auction off or provide blood liquidity around $2.5 billion or $3 billion. So there is a significant

part of the current account deficit, which is also being financed through other means. But there's obviously a portion that's probably being financed through opium receipts, although we don't have formal data on receipts. Now, one thing I'm interested in, in terms of your perspective at the central bank, is I know Afghanistan is not a heavily banked country. And I'm sort of, there's actually, I was reading a Bloomberg article today about, you know, there's the informal money changers. and that is a big part of how people do day-to-day finance,

not through a formal banking system. To what degree does that complicate the job of the central bank? That's so much activity or day-to-day activity is just not through the sort of traditional regulated entities. So we call them Saraphas. Saraphas play a large role in terms of even accepting deposit services for individual Afghans or transferring money. They've been forever.

And so they were able to operate and money. Even now, if someone, if I wanted to send money to a certain province, I would call a Sarafan. And he would be able to send that money immediately there. So they do play a key role. I think over the past year, what we tried to do was corporatize them. So they had individual licenses. We went through this process where we provide them corporate licenses so they could be more normally regulated. They participate in what we have a dollar auctions.

So we provide liquidity to the market. And they play a very important role in terms of money transfers throughout the country. And I think the reason is what we're seeing today is the financial inclusion or banking coverage is around 12% in Afghanistan. And so 88% of people rely these informal money exchangers to be able to send money throughout the country. I'd make one last point here is that the central bank actually made significant progress. and you wouldn't believe it in Afghanistan. We digitalized all the payment stream. So we connected all the banks, all of the telecom companies to the central bank.

And we launched just last month a new service through which a person could send money using a short code, star 246, and you could check your balance and you could send money anywhere in Afghanistan. And we were expecting to create a bank account for everyone in Afghanistan through that mechanism. of course, didn't move forward. Hi, I'm PJ Vote. My podcast search engine has a new two-part series for you.

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and we cover the fights brewing in blue cities, where unions and politicians are working to keep those cars off the streets. Listen to search engine wherever you get your podcasts. What's your impression of how the Taliban has been financing itself? So there's obviously a lot of speculation about illegal activities, such as opium money, possibly donations from entities abroad. But I think a lot of people don't necessarily appreciate that the Taliban was already extorting a lot of money from people in the provinces.

Basically a form of taxation, I think there were. was a UN report from last year that said the Taliban was collecting as much as $1.5 billion, which is something like a quarter of the official budget of Afghanistan. But I'd be curious to get your views on this. Where was the money actually coming from? I think you could say from a few different sources. One is through opium receipts. So they would tax opium production, go to the farmers and receive a certain amount of tax.

I think that was quite well known. I think secondly, in the mining sector, there's significant areas that were controlled by the Taliban, and they were able to tax mining production as well. Third, it was relatively well known that even transport or transit through Afghanistan was being taxed by the Taliban. Typically, a trucker would come. They pay at the customs facility, and then especially last year, it's a situation deteriorated, a Taliban checkpoint. and they would pay them, I can't remember the exact amount, but it was actually well-known, maybe 30,000 apps per truck to go through. And so they were taxing people even prior this past week.

And then, of course, the international donations that flowed to them as well. I'm actually curious about official taxation infrastructure. And, of course, efficacy of taxing, of taxation is something that varies pretty greatly across the country, or across countries. Can you talk through a little bit about how the government of Afghanistan pre-Taliban engaged in tax collection and how tax revenues matched up with revenue goals? We collected, if I remember correctly, roughly our target crisis was roughly around 200 billion apps.

So let's call that about $2.7 billion of domestic generation. and most of the revenue would come from either tax receipts, so businessmen and individuals who are taxed, or through customs. And so I believe the split was perhaps, you know, maybe let's say 40, 50% taxes, 40% customs, and then 10% other one-off type revenues as well. So why don't we forward a little bit to current or recent events? Because I have so many questions about what has been going on and how you see things unfolding in the future. But, you know, Joe asked you about the importance of dollarization in the economy. And one of the things that you wrote on Twitter was that on Friday, August 13th, you had received a call saying that Afghanistan wouldn't be

receiving dollar shipments due from the IMF. So I guess I'm curious, you know, who made the call? What was their reasoning, what was your response, and how big a deal was that from your perspective? It was a very, very big deal. So as I mentioned, on Thursday, a number of provincial capitals fell. And I thought that was a bad situation. And that on Friday morning, we received a call that an expected shipment, which was due to arrive on Sunday, would be canceled. At this stage, we're still thinking even medium term, we're not thinking that the government will fall on Sunday. And so I met with some people and we thought through various strategies of how we would deal with the situation without dollar inflows. Remember that we have a very large amount of international reserves,

the $9 billion that I've stated. And so by any typical metric, that's a large amount. So when you look at import coverage ratio, it's more than 14 months. If you take a look at, percentage of external debt, it's a very large amount. So we have the sufficient resources, but again, we were depending on physical shipments to arrive so that we can supply the market. So without that shipment, it was quite surprising. I was taken aback that it was a one-off decision or it wasn't even a process through which they said they would send less.

It was just a complete stoppage, which was very worried. And so we thought through various scenarios, how could we manage this? What would we be doing? How could we, you know, go through the next week without, with the amount of dollars we had? So we ran through various scenarios. But I think at the end, our international partners had good intelligence because they, you know, the shipment was planning come on Sunday. And they said, no, that's when Kabul fell. Can you explain further?

Why is, why were physical shipments so important as opposed to? I mean, you talk about, okay, you had improved the digital shipments. of the banking system during your tenure. Why are physical dollars such an important aspect of bank management? And also, do you have any idea who actually made that call to say, okay, no, no dollar shipments this weekend? I do. I'd rather not say just to not cause any, let's say, political issues on either end. But I think the reason that they're so vital again is because we're importing economy. So we get all of this coming in through.

We have a large current account deficit, so we need cash going out. And a significant portion of that was cash-based transaction. It wasn't all based on digital payments or providing for LC's to another country. And I think that was something that we began to develop, but we were still reliant on the physical fund as well. So given that the Taliban remains on international sanctions lists, it seems very, very unlikely

that the IMF is going to resume those dollar shipments. And I think most people are talking about a scenario where Afghanistan is basically cut off from dollar funding or placed on additional sanctions list, things like that. And I guess I'm curious, how do you feel about economic tools such as sanctions being used against the regime. I mean, the classic criticism of sanctions is that they end up hurting the wider population while not necessarily doing very much to actually impact the ruling class or elite who are still able to extort money in various ways. So do you think sanctions or withholding the reserves is going to be effective against the Taliban and are they ethical in the current situation?

It's a tough question either way. I think both are correct. In the one hand, they do limit the resources to a government. On the other hand, they do hurt. So I think both are right. On the one hand, there's $9 billion in international reserves. And I outlined where they are and, you know, in treasuries and gold and other assets that you would expect. And I think given the current environment, where I think the U.S. has expressed many times that they would have preferred a negotiated settlement and they're worried about women's rights and free media and a number of other aspects of governance from the Taliban. I think it would be tough for, for example, the Treasury to say, you know, here's $9 billion. And I think that would just raise a lot of questions from Congress, from human rights groups, so that there would be, they replaced in a difficult situation, I would expect. I'm not in that side, but that would be my reading of the situation.

But yes, on the other hand, not providing dollars will cause significant economic hardship. And we've seen that in other countries where sanctions have been applied. One of your tweets, you know, again, some of your tweets have a very dry humor about them. but you said that certain Taliban members had been asking about the location of the reserves, and your comment was they need to hire an economist. And so which does raise the question of what options do they, does the Taliban have? And what would an economist tell them? And, you know, okay, presuming, as you surmise, there's not going to be that $9 billion unlocked.

I think you said maybe they only have actual access to maybe 0.1 or 0.1. of the total reserve, so virtually none, what do you expect to happen and what would be, I guess, sound economic management under those extreme conditions? I think the impact, if access isn't received, it's going from, you know, reserves of a country which has $9 billion in reserves and 16 months import ratio to a situation where they have a few million dollars and two days import coverage ratio. And so that's obviously a very different situation. The dollars can't be supplied.

The banks can provide receipts to their customers in AFS. Obviously, the flow of AFS is going to increase. The bid or demand is going to increase. And so what you're likely going to see is a depreciation of the currency. Over a time period, probably a spike and then a continued depreciation. Again, because Afghanistan has a very large current account deficit, the inflation pass through is quite high. So you're going to see that knock on effect on all goods, the price of all goods being increased.

And I think we started this on Saturday. We introduced some limits on the amount of withdrawals, but I think they're going to have to bring those limits significantly lower. And so again, that's going to cause in the situation where you were already facing a triple shock, you're going to create much more economic hardships. Remember, Afghanistan, most countries around the world are facing it challenging to deal with COVID. But Afghanistan, we had a regional drought that wasn't very much talked about. That's significantly impacted. We had internally displaced people just because of the drought.

Then we had the conflict and the fighting and now add on top of it what potentially could be an economic type of crisis. So it's a really challenging situation. We were trying to manage three shocks. and now I think they're going to have to deal with a fourth, which is challenging. So what could they potentially do in that scenario? I think the response is, you know, just taking a typical macro response is one, the revenues have significantly declined. So again, it's the stock that's come down, but also the flows, right?

The donor inflows with significant decline. And so you're going to have to scale back your spending significantly. So donor programs or social spending or those 300,000 military that were there or teachers that were there, that civil service is going to have to come down. And of course, again, that's going to cause hardship in such a climate. I think secondly, they're going to have to put some level of capital controls or limits on withdrawals from the banking sector. They're going to have to find additional revenue sources or wherever that may be. They'll probably try to go out to other countries to replace the U.S. and maybe China, Pakistan, or other regional countries to find some sources of financing.

But it's a tough situation. If people think that getting everyone out of the airport is going to, you know, resolve this, I think the economic impact and the human impact is going to continue for a long time. So Joe actually touched on this when he mentioned your tweet where you said maybe the Taliban needs to get an economist. But what's your impression of their understanding or views of finance and how the economy works and what role something like a central bank should play in it? And do their views differ from, I guess, traditional conceptions of monetary policy? Well, you know, I think that's one of the things that was never pushed by anyone,

which is they simply always. had one response, which is we won Islam in formal governance, but they never once talked about what their social policy would be, what their economic policy would be, what their macroeconomic stances. Those type of questions were never asked and never considered. And so it's really difficult to know what their response will be. I can say that in the provinces where they took over, as they were taking over certain provinces, that they went to some banks and said, you know, paying interest, stop lending or obtaining interest. So I think that portion would be probably implemented, or probably one aspect of financial policy. But beyond that, I've never

heard of an economist on their team. I'm sure they can identify it or they have foreign backers and I'm sure they'll introduce them to some. But anyone you put in that position is going to be facing us and circumstances. Could you see yourself ever going back to Afghanistan? There was the president who fled had said, and he's reported to be in the UAE, or I think he said he's in the UAE, that he would like to return at some point. Could you see yourself if you were to return going back or are you done? I have now spent eight years working for the governor of Afghanistan seven years in this term. And I worked in ministry of. finance back in 2004 and 5. So I was the economic advisor. I was Minister of Industry and Commerce

now Central Bank governor. And I think in any scenario, eight years of government service is a long time. Given this change, I can't see myself. Not only for the Taliban themselves, but when you implement reforms in a number of these places, we talked about Sarafa or other people, I made a lot of enemies. And to be honest, during a transition phase, one fear is, what is the Taliban's view going to be of me? The other fear is, you know, during a chaotic transition period, someone just says, hey, this person did X, Y, and Z and, you know, who's going to follow up and see if it's true

at that state? They'll just take a decision. So I think not. I'll tell you, it's heartbreaking. not only for me, but for so many people. In 2015, when we came, there was a new government. There were so many people, young people who were coming back to Afghanistan, who were implementing reforms, who were spending days and nights,

as you would expect civil servants anywhere. And people who are giving their heart to implement reforms. And we're all heartbroken. I mean, it's the human impact. It's just, you know, I have women employees that worked for me. And now they're just saying, you know, what are we doing, you know, because they were going to school. They were, they were working. The environment is, you know, quite normal.

And then in a span of a few days, you can't imagine how quickly this transpired. I mean, it was that quick. I was fortunate to make it, but most were not. And so now they're living in this environment where there's a lot of fear. Again, right now the world's attention is on Afghanistan again, but in two months it probably won't be. What's going to happen? Will there be repercussions for actions they take at that time? And I don't think anyone's convinced.

So this is something that I actually wanted to ask you. So the Taliban has been on something of a PR offensive, and they're suggesting that they've changed or evolved over the years. what's your impression of that strategy and more importantly should the international community believe them? I always say I view people's actions, not their words. And the Taliban have been involved in a negotiation process which excluded the government of Afghanistan. And I think most people that you will talk to have our, very upset at the Afghan government, but also at the U.S. government, in particular Khalizad, who negotiated this flawed deal. And under that flawed deal, it was clearly stipulated that the Taliban

had to make accessions. One was an inter-Afghan process where they would negotiate. One was disengaging from al-Qaeda. And I think most intelligence analysts, the reports, I think the UN even came out with the report that said, no, they hadn't disassociated themselves with al-Qaeda. They didn't go through a negotiation process. It was a complete farce. So they put on a good show in Doha, and that gave them international legitimacy where they could hold press conferences and go on foreign trips, but they fought to take over. And so they say one thing there, and they do another thing here. And everyone knew that. And I think I would love it if they They held on to their commitments and there was no reprisal attacks and they allowed women to go to school.

And all of these things that they're saying now are upheld. Do I believe it right now? Absolutely not. The news doesn't stop on the weekends. Context changes constantly. And now Bloomberg is the place to stay on top of it all. Hi, I'm David Gurra. Join us every Saturday and Sunday for the new Bloomberg this weekend.

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Make us part of your weekend routine on Bloomberg television, radio, and wherever you get your podcasts. Are you, I mean, I'm sure, you know, just going back to, you know, what your life was like two weeks ago or even a week a half, week and a half ago now. Like, I'm sure you were having conversations with the IMF. U.S., treasury, et cetera. Are you still engaged with them in any capacity? Is this still a conversation that you're having, or is that those connections basically gone? They reach out for me, both on a personal and professional level, personal level, just to

ask how I'm doing. And, you know, one person from a certain international agency was very helpful to me. I remember at that airport, I was texting him and saying, what should I be doing? Can you put me in contact with someone? As you're hearing about it on other media outlets, people are doing it. That was me trying to contact. So on a personal level, some people were very supportive and helpful, and I'm always thankful for that. On a professional level, I try to provide information and feedback and contacts where a question comes up, but in a formal capacity.

anymore. I mean, we've been talking about how quickly this situation seemed to change from one week to the next, really. And despite the very fast takeover by the Taliban, there are some signs of resistance brewing. So I'd be curious to get your views on what exactly are the chances that the Northern Alliance will be able to effectively counter the Taliban? Well, there are reports that the Vice President Saleh did not leave the country and he's in Panjir. These were Masud's son. They're both there. And they've made various statements to that effect. They were there until, you know, I think most people know the story of how Masu was killed on September 9th, 2011 and September 11th happened. So, you know, they've been resisting the Taliban from prior. to the 2001 invasion.

So it is likely to continue. It will be a tough struggle if they do decide to take that route. I mean, your comment about the women who are working previously under you at the central bank, and then now, obviously, they have no idea what's going to happen. How difficult, I guess I would say national administration of, I think there have been reports of the Taliban telling civil servants, please come back to work. We're going to try and keep things going. But obviously, you know, the continuation of any sort of normal operations would seem to be extraordinarily difficult. How hard will that be? And it's sort of a cliche.

And I say this only, you know, is someone who very ill-informed Western observer, but there's this sort of like cliche about, you know, this sort of how difficult it is to form a concept of nationhood in Afghanistan. So, you know, prior to the 2001 invasion, the Taliban had only been in power, I think, for five years. How hard will it be for them to run something that resembles an operating government? I think it's going to be challenging. And many people have made that comment that until now they've, even in, during that five year rule prior to 2001, and now, you know, what we would think of as typical governance. or central bank policy making, social support or services provision,

I don't think we saw much of that or not at a high level. And so they're going to face challenges because Afghanistan has changed significantly, especially in urban areas. I think the percentage living in urban areas is now above 50%. It's been 20 years. People have gone to university. So I think they will fail challenges when they're, There's already been one or two protests started in Jalalabad and another in Kabul on Flag Day,

where they try to repress people from not putting up the Afghan flags. And so, you know, it's going to depend on how they decide to repress or enforce their own beliefs on people who it's as alien to them as it would be to you. And so how do they manage that? Do they allow for it? Do they enforce their interpretation as they did prior 2001? Are they more lenient? They're making comments to that effect, but will they implement it? And will that be sustained?

And then the second part is on the economic side. So until now they're living in this environment where, you know, for multiple years, they've been fighting and now they've taken over. Well, now that you've taken over, listen, your reserves have been frozen. Donors have frozen you out. What is your fiscal policy? What is your monetary policy? How will you be providing services?

And very quickly, they're going to have to face these. realities, which I'm not sure they are, have considered or are helpful. I have one more sort of econ-related question and sort of the one other factor that we haven't discussed, but there's been a lot of discussion about it, is the potential relationship between China and the Taliban. And of course, it's well known that there's sort of an extraordinary amount of minerals and other natural resources in Afghanistan, including lithium, which is going to be increasingly important. How do you see that relationship going forward the China-Taliban relationship and will they be able to find some sort of potentially mutually agreeable relationship,

perhaps that benefits China from a trade or raw material standpoint, perhaps that solves some of the Taliban's cash problems. What are you watching for there? So China has a very close, they call it an all-weather relationship with Pakistan. And obviously, Pakistan supports the Taliban. So in that sense, they have a new for building an engagement with them. But China's foreign policy tends to be very conservative, especially in a place like Afghanistan. And they've made many overtures and started some processes for investment in Afghanistan,

but I've never really followed through or showed a willingness to execute on. So one example is the INAVAC. copper mine, a contract of which I can believe was signed in 2008. There's an oil contract or investment in northern Afghanistan. There's an oil base in the northern, which was signed by CNPC a number of years ago. Both of those have lagged. And I think there were problems in Afghanistan, but I think it's a carrot that's always shown, but I'm not exactly sure if it'll actually be utilized.

So this carrot of potential investments in Afghanistan. Given the environment, it might be on the agenda over a 20 to 50 year horizon, but not in a one to five year horizon. They're going to wait and see. That would be my expectation. And then secondly, in terms of foreign aid, also that's typically not a component of China's foreign policy. So you don't see them providing such as USA does in countries around the world. And so I wouldn't expect them to see that.

They always want a low footprint of their staff and visibility of their interests. So I wouldn't expect that to also be something that they engage in. I think it will be held out as a potential opportunity, but not to be executed. And so I think in that sense, notwithstanding this close friendship or engagement between all the parties involved, I wouldn't expect anyone to be able to replace the financial contributions of, of the U.S., EU, IMF World Bank. If that doesn't get solved, then you can't replace it with China or another country. Is there anything that you would like to say to the international community?

So, you know, all thoughts. We know that we do have some policymakers who occasionally listen. I imagine there's going to be a lot of interest in this episode. Is there a particular message that you would like to get out to people like them and the broader world? I would say Afghans are very disappointed right now. And let me say in two areas. One is, again, this deal without the Afghan government, which created the framework for them to be legitimized and come back was the wrong approach. It would have been better for the U.S. to simply have left and said, we are no longer here and we are removing our troops.

But instead, there was an agreement that was pursued and signed in which they discredited the Afghan government, which they came and forced the Afghan government to release 5,000 prisoners, some of which who were Taliban, some of which were murders, some of which were major drug dealers. And when the administration in Afghanistan refused, it was said we would draw $1 billion in aid to Afghanistan. So imagine a government trying to defend itself and international partners coming to you and saying, release 5,000 prisoners from Washington, D.C. prisons. Their murders, their drug dealers, remove them. And then we're going to sign a treaty with the people who are backing them. it would have been better simply for the U.S. to have left. So I think that part is an aspect which I would ask people to consider and say, you know, was that necessary?

Could we have, it would have been better to have left without it. That's, you know, it even contributed to the loss of morale amongst the divorce because everyone believed that there was a secret deal for to bring the Taliban back in power. And so in that environment, would you fight? I think that's one aspect of it. And secondly, more immediately is to again consider the humanity, you know, of people in Afghanistan. You know, it doesn't, the two things can be separate. Whichever way you decide to leave or disengage from Afghanistan, you know, consider the humanity of the people who are there,

who have to face these circumstances, who have to face these economic challenges, their personal lives, the uncertainty. and I think perhaps what we're seeing on TV right now, what we're seeing on Airport Road is just an indication that perhaps this could have been done in a better way. Ajma, I'm very conscious of the time and that you have a lot to be doing at the moment. So I think we'll leave it there. And thank you so much for coming on all thoughts. We both really appreciate it. Thank you so much, Jason.

I appreciate it as well. Thank you for having me. Thank you, Ajamal. That was fantastic. So, Joe, I can't possibly say that I enjoyed that conversation, although I did find it interesting, absolutely heartbreaking to consider the situation that Afghanistan now finds itself in. One thing I will say is it was very interesting to compare and contrast the current situation with what Afghanistan looked like just a few months ago from a monetary policy perspective. So, Asimal mentioned that they had had success with the digitalization program. Inflation was relatively low in the single digits. The currency was relatively stable, a little bit of depreciation, but nothing major.

And again, all of that in the context of COVID. And in many ways, I think a lot of people in the West are always going to view Afghanistan as something of a troubled country. But if you think over the past year, you know, in many ways, ways there had been progress. Efforts were being made. And now we're seeing many of them undone. Yeah, I had the comment that he made about the women employees at the central bank reaching out to him and saying like, what now or, you know, what it would be? And that just, it like drives home like, like, like this sort of like unimaginable speed and change of society. And so one day you're a sort of,

you're a professional working at a modern central bank engaged in something that sort of is like recognizably modern finance throughout the world and the next day you're like you don't even know like whether it's safe to go to work or whether you have a job and what it's it's the speed of change I mean it's thinking about it from the perspective of an employee in that situation I think is basically unimaginable to us absolutely all right well um I guess we should should leave it there. Yeah, let's leave it there. Okay. This has been another episode of the All Thoughts podcast. I'm Tracy Allaway. You can follow me on Twitter at Tracy Allaway. And I'm Joe Wisenthal. You can follow me on Twitter at The Stallwart. And our guest, Ajmaa Ahmadi. He's on Twitter. He's at

A. A. A.madi. Follow our producer, Laura Carlson. She's at Laura M. Carlson. Follow the Bloomberg head of podcast, Francesca Levy at Francesca Today. And check out all of our podcast at Bloomberg. on the handle at podcasts. Thanks for listening. I'm Francine Lacquhar, an award-winning journalist, and I've got a new podcast, leaders with Francine Lacqua from Bloomberg Podcasts. I've interviewed everyone from Heads of State to fashion icons about the news of the moment. But I've always been curious, who are these people as leaders? I don't think there's one right way to be a leader.

Make decisions. A poor decision is always better than no decision. Listen to new episodes every other Monday. Follow Leaders with Francine Lacroix wherever you get your podcasts.