In a surprise announcement on 14 September 2022, the Federal Department of Foreign Affairs (FDFA) unveiled the creation of a foundation called "Fund for the Afghan People" in Geneva, supported by the US and Switzerland. Despite the somewhat misleading name, it is a foundation under Swiss law (and not a fund) that will manage foreign assets belonging to the Central Bank of Afghanistan (DAB), worth USD 3.5 billion and frozen in the USA. When the Taliban retook Kabul in August 2021, Washington sequestered the USD 7 billion being held by the Afghan Central Bank in the USA. The basis for this was a law passed by Congress allowing for the freezing of assets belonging to countries that support terrorism. Half of this amount is being retained for the families of 9/11 victims; it is not clear whether this sum will actually be disbursed. As long as the Taliban's involvement in the attack is not proven, the money is unlikely to be released.
That leaves the 3.5 billion that must be returned to the DAB over the long term. The sum is currently being held in an account with the Basel-based Bank for International Settlements. The foundation, or "Afghan Fund", envisages returning the money bit by bit. It is not meant to fund humanitarian aid, but to shore up Afghanistan's macroeconomic stability, pay for the printing of new banknotes, clear up arrears allowing it to retain its seat in international financial institutions to receive humanitarian aid or finance electricity imports.
Possible USA veto
The Board of Trustees comprises four persons: on the Swiss side, Ambassador Alexandra Baumann, head of the FDFA's Prosperity and Sustainability Division; on the Afghan side, two economists, Anwar-ul-Haq Ahady, former head of the DAB and former Minister of Finance, and Shah Merhabi, a professor at Montgomery College; on the American side, a representative of the Treasury Department, Andrew Baukol. Decisions are made unanimously; if one of the four members opposes a proposal, nothing happens.
But time is passing and Afghanistan has not yet seen a cent. The Board of Trustees met for the first time on 21 November in Geneva, when it decided to hire an external auditor and appoint an Executive Secretary. No disbursement decisions were made, however, and none is expected for the foreseeable future. A second meeting was held virtually on 16 February, where no decision on disbursement was taken either. The fund decided to look for external funding to cover operational costs, which seems to us to be the least it can do.
Economics Professor Dr. Merhabi is beginning to lose patience. He told the online newspaper "In These Times" that given the catastrophic situation in Afghanistan, at least USD 100 million per month are urgently needed to curb inflation, stabilise the exchange rate and pay for imports. The USA, however, insists on very stringent guarantees: the DAB must prove its independence from political authorities, enforce adequate anti-money laundering and anti-terrorism controls, and conduct an external audit.
Switzerland at one with the USA
Where does Switzerland's stand? At a meeting with Alliance Sud in September, the FDFA had given assurances that the foundation would be managed in a fully transparent manner. Alexandra Baumann recently confirmed that the minutes of meetings were to be published and that a website was under construction.
On the matter of whether or not the Fund should start repaying the money, the Ambassador fully endorses the Fund's official position – and seemingly that of the USA by extension. "The Board of Trustees is pursuing the purpose of the foundation, which is to receive, protect, preserve for the future, and partially disburse a portion of the DAB assets currently sequestered in the USA. The long-term aim is to transfer the unused funds to the DAB," Baumann said. She added that this would occur only if the DAB could credibly demonstrate that it was independent and had introduced adequate controls. "The foundation and its Board of Trustees act independently according to Swiss law. I can confirm my commitment to the above objectives," Alexandra Baumann concluded.
“Morally dubious” sequestration
The issue is nonetheless beginning to inflame passions in civil society. Norah Niland, Chair of the Internal Task Team on Afghanistan of United Against Inhumanity (UAI), an international movement of personalities working to counter wartime atrocities, says: "It is rather disturbing that the Afghan Fund remains inactive and also seems uninterested in recapitalising the DAB. If it is to solve the liquidity problems and help rebuild the collapsed economy and banking system, the DAB must be able to function. We agree with Dr. Mehrabi that a relatively small monthly amount – USD 150 million for example – should be disbursed in a controlled manner as the bank is able to dispel concerns over the fight against money laundering and the funding of terrorism."
The seasoned humanitarian aid worker, who has worked in Afghanistan, adds that humanitarian measures, however effective, are no substitute for a functioning economy. And that the "immoral" sequestration of Afghan foreign reserves also collectively punishes Afghans who are not responsible for the Taliban's return to Kabul. "UAI expresses grave concern over the growing poverty, indebtedness, loss of livelihoods, hunger and the very harsh winter, all of which are compounding the suffering of the Afghan people and forcing them to take adaptation measures that are worsening their plight."
Switzerland must commit to starting the restitution of the funds
This is also the view of Unfreeze Afghanistan, an international campaign by women calling on President Joe Biden to release Afghan funds frozen in the USA.
Alliance Sud commends the endeavour to get at least a portion of the funds "to safety". But this, only if the funds can be used for the benefit of Afghanistan’s people. As it is well-nigh impossible to fulfil the conditions for restitution – the DAB has never been independent of State power, including even before the Taliban took power –, flexibility is needed in negotiations with the Afghan Government. Alliance Sud urges Switzerland to work prudently for the speedy return of sufficient funds to Afghanistan to enable the economy to start functioning again in the interests of the population.