REBUILDING AFGHANISTAN
January 14, 2003

As a part of the effort to rebuild a nation torn by decades of conflict, Afghanistan has established a new single currency. Torek Faradi, special adviser to the governor of Afghanistan's central bank, discusses the new currency and the struggle to rebuild the Afghan economy.

 

Online NewsHour Special Report: Rebuilding Afghanistan Nov. 21, 2002: The Turkish commander of the international peacekeeping force in Afghanistan discusses the shaky state of security in Kabul. Sept. 5, 2002: Assassination attempt on Hamid Karzai Aug. 20, 2002: An update on efforts to bring stability to the war-torn nation July 25, 2002: Afghan Foreign Minister Abdullah Abdullah on bringing stability to his nation June 11, 2002: Afghanistan's grand council, or loya jirga, meets to compose the new Afghan government. April 24, 2002: Afghanistan's minister of women's affairs talks about the emerging role of women after years of harsh Taliban rule. More NewsHour coverage of: International Issues and Asia   News for Students: Rebuilding Afghanistan     Afghan Transitional Government	MARGARET WARNER: Twenty years of occupation and civil war left Afghanistan with a shattered economy and no functioning banking system or currency. When the U.S.-led war against the Taliban ended, there were no fewer than four different currencies in circulation: An official currency called the Afghani; at least two others printed by rival warlords; and the Pakistani currency, the rupee. The situation was so chaotic that at a Bonn organizing conference in late 2001, the international backers urged the new Afghan leaders to move quickly to fix the currency mess. Last September, Afghan President Hamid Karzai announced a campaign to replace all the old currencies with one new one. PRESIDENT HAMID KARZAI (Translated): This is an important issue for Afghan independence, for Afghan pride, for Afghan unity, and for Afghan political and economic development. The Afghan nation should have a single consistent currency, which will have a steady value. MARGARET WARNER: At first, the announcement created some dismay among the Afghan people over the status of their soon-to-be worthless notes. The value of the Afghani against the dollar seesawed wildly. But in October, the government began exchanging brand-new notes, also called the Afghani, for the old ones: 1,000 old Afghanis bought one new one. One warlord's currency was exchanged at half that rate. Government officials destroyed the old notes-- some $360 million worth-- by shredding and burning them. The deadline for Afghans to exchange their money was Jan. 2. Since the exchange was completed, the value of the new currency has stabilized to fewer than 50 Afghanis to the dollar.
	New currency helps eliminate confusion
	MARGARET WARNER: For more on how Afghanistan pulled off this money exchange and what the new currency will mean for the country, I'm joined by Torek Faradi, a senior advisor to the governor of Afghanistan's central bank. Born in Afghanistan and educated in France, Faradi came to the United States in 1990. He's been a vice president at a number of U.S. Banks, including Wells Fargo Bank and Bank of the West. And welcome, Mr. Faradi. TOREK FARADI: Thank you. Good evening. MARGARET WARNER: Good evening. When you think about all the things that this new government had to do, why was replacing the old currency so high on the list? TOREK FARADI: It was high on the list because there were at least four types of currency in circulation in Afghanistan, and as a result of the civil war, the regional leaders had issued their own currencies, and they didn't know how much they had issued. And for the new government to conduct economic policy, this was a very difficult situation. Also for the people it was a confusing situation. The currency kept losing its value. Twenty-five years ago, 35 Afghanis were equivalent to a dollar, and recently, 50,000 Afghanis and sometimes 65,000 Afghanis were equivalent to a dollar. So the currency had lost its value. We needed something credible that the Afghans could use as means of transaction. MARGARET WARNER: So in other words, if people wanted to go out and buy something, they had to take an awful lot of money with them. TOREK FARADI: Yes, exactly. To go out and buy something or to pay your rent-- because there are no checks and credit cards in Afghanistan; everything is cash-based-- you needed to transport sacks of money with you. And people had abandoned the currency for large purchases to the benefit of foreign currencies, actually, because of ease of transaction.
	Creating the currency
	MARGARET WARNER: So how did you get ready for this big exchange? TOREK FARADI: Well, it was a challenge because many other countries that have done such operations have had the luxury of time to prepare it. In this case, things started in March-April to print the currency, which takes quite a bit of time, and to transport it to Afghanistan and then to distribute it to different areas of Afghanistan, despite all the lack of transportation and logistics. So it was, I think, an act of enthusiasm by all the Afghans that made us successful in this. The Afghans really welcomed this currency because it was going to be a credible currency. MARGARET WARNER: Now you had Germany print the money. Why? TOREK FARADI: Well, you know, there are so many printers that could print the money, but the German Bundesbank also helped us in the logistics of this early on. They had the experience of taking the deutsche mark to East Germany some 12 years ago. That was a situation where people didn't believe in the banks. And here in Afghanistan people didn't believe in the banks because the banking sector has been paralyzed in Afghanistan in the last decades of civil war. MARGARET WARNER: So as you explained, you have no real functioning banking system. Most people just kept their cash at home. How did you pull off this huge exchange? What did you have people do? TOREK FARADI: We... the bank is not doing any banking, but it has branches. And we asked people to go to the branches, take their old money, and we would give them new money against their old money. We also asked people to go to the money exchangers because the money exchangers have developed to be a formidable network of money distribution throughout the country, and we used them as our agents or proxies to do the exchange for us, and we gave them a small commission. So people had a lot of outlets, and they could go and get hold of this new money against the old money. MARGARET WARNER: Now... TOREK FARADI: And the money... MARGARET WARNER: Go ahead. TOREK FARADI: The new money has three zeros less, so it's... with a few bills, you can make your purchases, and people are happy with that. MARGARET WARNER: Now, we have a graphic actually showing some of these new bills. And just explain to us for instance, what's the significance of these various buildings and landscapes that we see on the currency? How were they chosen? TOREK FARADI: Well, they were chosen because they represent nice buildings and the historical monuments throughout Afghanistan. After so many years of civil war and so many years of several currencies being in circulation in Afghanistan, the task was to come up with a national currency. And this was really President Karzai's young government's... it's a sign of statehood for Afghanistan. We needed to have pictures of places throughout Afghanistan to give the message that this is a national currency. In all four corners of Afghanistan, people are now using one unique currency. MARGARET WARNER: But most people have... most countries have former leaders, former presidents, whatever, on their currency. There are no individuals on this money. TOREK FARADI: Given the special situation in Afghanistan, we thought that it was easier... everyone agrees on monuments rather than people.
	A sign of progress in rebuilding the country
	MARGARET WARNER: Now, was there any resistance to this new currency? You mentioned various warlords have been printing their own currency. I'm thinking for instance of Rashid Dostum in the North. His printing presses were about to become valueless. Did he resist this? TOREK FARADI: Well, I think the warlords-- or now we call them "regional leaders"-- are choiceless because this is a sign of progress. And I think if they have to be part of the future in Afghanistan, they have to accept the reforms that this Karzai government is bringing. And they are survivors and they adjust to the future. MARGARET WARNER: You explained what you thought was the political significance of this national currency, but what about the economic impact? You're trying to build, rebuild a thriving economy in Afghanistan. You have a long way to go. What impact does having this national currency have on that effort? TOREK FARADI: Well, first of all, because the Central Bank... this will be currency registered with the Central Bank, the central bank will exactly know how much money is out there. So it allows us to reclaim the economic space of our country and conduct proper monetary policy. And I think for the year 2003, our plan is to build a strong banking system in Afghanistan that could start lending money out to people to build homes. The refugees who are coming back need shelter. People who would like to start factories need commercial loans, and we need to work in building a sound banking system in Afghanistan. And I think that is one of the ways to alleviate property: Fair access to credit, to minorities, women, small businesses -- these are some of the values that we need to take there and apply. MARGARET WARNER: And having this single currency, you think, is essential to that? TOREK FARADI: Yes. It's part of that. But a lot more remains to be done: the absence of credit, for instance, or credit card or checks in Afghanistan. And some of the impediments are the lack of telecommunications. You can't easily pick up the phone and call a certain other city in Afghanistan. So once the telecommunications are in place, then you can do a lot of electronic banking that will expedite our task. MARGARET WARNER: Mr. Faradi, thanks very much and good luck. TOREK FARADI: Thank you.