Afghan currency market at standstill over exchange rate fixing

KABUL, Feb 3 (AFP) - Afghan dealers have suspended selling hard currency following the introduction of strict exchange-rate fixing in areas held by the Taleban militia, traders said Tuesday. With the militia-run state bank maintaining no control over money supply and fixing trading rates well below the market rate, currency traders warned that the war-shattered economy faced more disaster. "No transactions are taking place from the afghani to other currencies, and everyone is just standing idle," said Haji Sher Agha, who owns a money shop in one of Kabul's two state-approved currency markets. Traders said they were willing to buy foriegn currency at the fixed exchange rate, but would only buy afghanis on the black market despite risking severe penalties. On Tuesday, the state rate was 30,100 Afghanis to the US dollar, while traders said the real market rate had fallen below 32,000 against the greenback. "Already the black market has become very big with people meeting secretly to change money, but it is becoming a crisis," trader Haji Mohammad noted. "But in the main money markets the business has been ruined and will only get worse as the currency continues to fall and the rate is fixed below the market value," he added. He said businessmen will also be hit, as it has now become impossible for them to buy foreign currency legally within Afghanistan, and will instead shift to using Pakistani rupees. The Taliban introduced strict currency control measures two weeks ago aimed at giving the militia greater fiscal control over banknotes they do not print. Violations of the new laws such as trading outside the licensed markets carry tough penalties of up to five years' imprisonment and the confiscation of all assets. The notes in use in the Taliban-held two thirds of Afghanistan are printed by the ousted Kabul government, and find their way into militia territory by crossing the frontlines. "The ex-government are having the money printed in Russia and are reprinting old serial numbers, sending the money into Taliban areas and the Taliban can't do anything about it," Haji Sher Agha said. Money traders said the current standstill in the selling of afghanis was proof that the Taliban were fighting a losing battle on the fiscal front against the ousted Kabul government. "The former regime may have lost Kabul, but they still have a lot of power over the economy including the power to collapse the currency if they want," one trader said.