Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

ISLAMIC REPUBLIC OF AFGHANISTAN

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of December 31, 2006)

Status under IMF Articles of Agreement
Article XIVYes.
Exchange Measures
Restrictions and/or multiple currency practicesThe staff report for the seventh review under the staff-monitored program and request for a three-year arrangement under the Poverty Reduction and Growth Facility states that as of May 15, 2006, based on information available to the staff, no exchange restrictions and multiple currency practices were currently in place. (Country Report No. 06/251)
International security restrictionsNo.
References to legal instruments and hyperlinksn.a.
Exchange Arrangement
CurrencyThe currency of the Islamic Republic of Afghanistan is the Afghani.
Exchange rate structure
UnitaryDa Afghanistan Bank (DAB), the CB, maintains a daily official Afghani-U.S. dollar rate based on the average early morning rates in the free market of the money changers.
Classification
Managed floating with no predetermined path for the exchange rateThe CB follows a policy of regular intervention in the market in the form of a foreign exchange auction twice a week with a view to smoothing fluctuations in the exchange rate and in the growth of the money supply.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketThere are no arrangements for forward cover against exchange rate risk.
References to legal instruments and hyperlinksLaw of Da Afghanistan Bank, 2003 (Article 35).
Arrangements for Payments and Receipts
Prescription of currency requirements
Controls on the use of domestic currencyThe Afghani must be used for all transactions and settlements of accounts unless the use of another currency is specified by the parties concerned. In practice, foreign currency is widely used.
For current transactions and paymentsn.a.
For capital transactionsn.a.
Use of foreign exchange among residentsYes.
Payments arrangements
Bilateral payments arrangements
OperativeYes.
InoperativeFollowing the Paris Club rescheduling agreement on July 31, 2006, the agreement with the Russian Federation has been superseded and the authorities are in the process of concluding agreements with Paris Club members.
Regional arrangementsn.a.
Clearing agreementsn.a.
Barter agreements and open accountsn.a.
Administration of controlThe DAB is solely responsible for the formulation, adoption, and execution of the exchange rate policy and the exchange arrangements of the Islamic Republic of Afghanistan. Before adopting an exchange rate policy or an exchange arrangement, the DAB is required to consult with the MOF. The DAB acts as the agent for the Islamic Republic of Afghanistan in the administration of all laws relating to exchange control. All returns, statements, accounts, and information required by the provision of any such law are transmitted through the DAB (Article 71, DAB Law).
Payments arrearsn.a.
Controls on trade in gold (coins and/or bullion)
On external tradeImports and reexports of gold are permitted, subject to regulations. Exports of gold bullion, silver, and jewelry require permission from the DAB and the MOF. Commercial exports of gold and silver jewelry and other articles containing small quantities of gold or silver do not require a license. Customs duties are payable on imports and exports of silver in any form, unless the transaction is made by, or on behalf of, the monetary authorities.
Controls on exports and imports of banknotesAny person who (1) leaves or arrives in the Islamic Republic of Afghanistan with, or (2) imports or exports by mail, courier, or otherwise more than Af 1 million in cash or negotiable bearer instruments without first having reported the fact in writing to the relevant authority is guilty of an offense and is punishable on conviction by a fine of an amount equal to the cash held.
On exportsYes.
On importsYes.
References to legal instruments and hyperlinksAnti-Money Laundering Law (2005); Supreme Council Resolution on Usage of Foreign Currency under DAB Law.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyYes.
Approval requiredYes.
Held abroadYes.
Approval requiredYes.
Accounts in domestic currency held abroadNo.
Accounts in domestic currency convertible into foreign currencyNo.
References to legal instruments and hyperlinksn.a.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Approval requiredYes.
Domestic currency accountsYes.
Convertible into foreign currencyNo.
Approval requiredn.a.
Blocked accountsNo.
References to legal instruments and hyperlinksn.a.
Imports and Import Payments
Foreign exchange budgetAlthough the government projects future foreign exchange requirements, there is no mechanism in place for allocating actual foreign exchange holdings.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsNo.
Import licenses and other nontariff measuresTrading licenses are issued by the Ministry of Commerce.
Positive listn.a.
Negative listn.a.
Open general licensesn.a.
Licenses with quotasn.a.
Other nontariff measuresn.a.
Import taxes and/or tariffs
Taxes collected through the exchange systemn.a.
State import monopolyn.a.
References to legal instruments and hyperlinksn.a.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsn.a.
Documentation requirementsn.a.
Export licensesAll exporters must obtain a license from the Ministry of Commerce to engage in export trade.
Without quotasn.a.
With quotasn.a.
Export taxesn.a.
References to legal instruments and hyperlinksn.a.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersForeign exchange for most private purposes may be acquired in the money bazaar from money changers licensed by the DAB or from licensed commercial banks.
Trade-related paymentsn.a.
Investment-related paymentsn.a.
Payments for traveln.a.
Personal paymentsn.a.
Foreign workers’ wagesn.a.
Credit card use abroadn.a.
Other paymentsn.a.
References to legal instruments and hyperlinksn.a.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsn.a.
Surrender requirementsn.a.
Restrictions on use of fundsn.a.
References to legal instruments and hyperlinksn.a.
Capital Transactions
Controls on capital transactionsControls are applied based on the Anti-Money Laundering Law.
Repatriation requirementsNo.
Controls on capital and money market instruments
On capital market securitiesn.a.
On money market instrumentsCapital Notes (issued by the DAB) auctions are restricted to commercial banks and licensed money changers.
Purchase locally by nonresidentsYes.
On collective investment securitiesn.a.
Controls on derivatives and other instrumentsn.a.
Controls on credit operations
Commercial creditsn.a.
Financial credits
By residents to nonresidentsn.a.
To residents from nonresidentsFor these transactions, banks need prior DAB approval.
Guarantees, sureties, and financial backup facilitiesn.a.
Controls on direct investmentn.a.
Controls on liquidation of direct investmentn.a.
Controls on real estate transactionsn.a.
Controls on personal capital transactionsn.a.
References to legal instruments and hyperlinksInvestment Law; Transfer of Property Law; Banking Law; Anti-Money Laundering Law.
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutions
Borrowing abroadThese transactions require prior approval of the DAB (based on the Banking Law).
Maintenance of accounts abroadYes.
Lending to nonresidents (financial or commercial credits)Yes.
Lending locally in foreign exchangeYes.
Purchase of locally issued securities denominated in foreign exchangen.a.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsYes.
Liquid asset requirementsn.a.
Interest rate controlsn.a.
Credit controlsn.a.
Differential treatment of deposit accounts held by nonresidentsn.a.
Investment regulationsn.a.
Open foreign exchange position limitsIndividual currency limitations are ±20% of regulatory capital for convertible currencies and ±5% of regulatory capital for nonconvertible currencies. The overall limitation is ±40% for all currencies and ±10% for nonconvertible currencies.
Provisions specific to institutional investors
Insurance companiesThe Insurance Law passed by the Cabinet in December 2005 does not contain any currency-matching regulations.
Limits (max.) on securities issued by nonresidentsn.a.
Limits (max.) on investment portfolio held abroadn.a.
Limits (min.) on investment portfolio held locallyn.a.
Pension fundsn.a.
Investment firms and collective investment fundsThe DAB is exclusively responsible for the regulation and supervision of securities service providers in accordance with the objectives specified.
The DAB may supervise securities service providers and may according to regulation (1) subject securities service providers to prudential conditions and requirements under which securities services or any category of such services may be provided, including conditions and requirements designed to facilitate supervision by the DAB of securities service providers and to preserve the safety of the assets entrusted by the public to their care; (2) require securities service providers to report transactions exceeding in value a minimum amount set by the regulation to the Department of Agency of the State, designated by the regulation for that purpose; and (3) require that the funds and securities owed by a securities service provider (other than a bank) to its customers be segregated from the funds and securities credited to the accounts of other customers and from the assets and liabilities of that securities service provider. No such funds or securities may be used to discharge liabilities of other customers or liabilities of that securities service provider.
Limits (max.) on securities issued by nonresidentsn.a.
Limits (max.) on investment portfolio held abroadn.a.
Limits (min.) on investment portfolio held locallyn.a.
Currency-matching regulations on assets/liabilities compositionn.a.
References to legal instruments and hyperlinksInsurance Law (2005); DAB Law, Chapter 10; Banking Law.
Changes during 2006
Arrangements for payments and receiptsJuly 31. The inoperative bilateral payments arrangement with Russia has been superseded following the Paris Club rescheduling agreement.

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