Banking agreement strengthens Afghan economy

Source: US Department of Defense Press Release

By Army Sgt. Timothy Dinneen
COMBINED JOINT TASK FORCE- 82
COMBINED PRESS INFORMATION CENTER
BAGRAM AIRFIELD, AFGHANISTAN APO AE 09354

July 8, 2007

KABUL, Afghanistan - The commander of Task Force Cincinnatus signed a memorandum of understanding with the governor of DA Afghanistan Bank July 7, signifying a maturing fiscal relationship between the Islamic Republic of Afghanistan and U.S. forces.

The signing at DAB is a renewal of their original March 2003 agreement to continue an exclusive banking relationship in the hopes of further stimulating a growing Afghan economy.

The MoU is also intended to move Army accounts to the commercial banking industry that has grown from zero to 17 private branches. The understanding deals mostly with DAB Bagram branch operations but also extends the fee schedule and physical cash supplies to all U.S. Army accounts operated by DAB.

"This agreement will have a positive effect on the [Afghan] economy by continuing to bring in U.S. dollars and exchange them for Afghanis, which will be used in the marketplace," said DAB Gov. Noorullah Delawari. "This will also help [IRoA] armed forces as Afghan National Security Force accounts will be stabilized and accountable."

The agreement is designed to be mutually beneficial for both parties. The continuing influx of U.S. dollars into the Afghan central banking system will strengthen Afghan currency (Afghani), give credibility to private commercial banks enticing personal account growth and reduce inflation by removing U.S. dollars from the market in exchange for Afghanis. Furthermore, the U.S. gains from DAB's expertise at Bagram Airfield enabling U.S. forces to draw funds safely from their accounts, allows contractors working on BAF to cash their checks at a convenient location, and provides the U.S. a competitive exchange rate fee.

"Our actions here today will further support Afghanistan's economic goals and national debt relief sponsored by the International Monetary Fund and World Bank," said Army Col. Jonathan Ives, TF Cincinnatus commander. "The key aspect of the debt relief program is assurance of a stable Afghani as a national currency in the eyes of the international community."

According to DAB's press release, approximately $40 million U.S. dollars is converted to Afghanis every month and credited to U.S. Army bank accounts with DAB. By operating exclusively in Afghani currency, U.S. Army transactions have helped build a stable Afghani by increasing foreign reserves.

The agreement will directly help the Afghan people by building faith in the commercial banking system, hopefully they will take their money from the mattresses and open bank accounts increasing the wealth of the country, explained Army Maj. Julie Winston, 726th Finance Battalion executive officer.

The IRoA and U.S. banking relationship has seen an Afghan economy grow at rates greater than 10 percent on average during the past five years, according to Alastair McKechnie, the director of the World Bank.